The Australian Energy Regulator (AER) has approved ElectraNet’s proposal to install four synchronous condensers in South Australia.
The AER estimates ElectraNet will incur $166 million in efficient capital costs to deliver the project, slightly lower than ElectraNet initially proposed.
The decision comes after the Australian Energy Market Operator (AEMO) declared a system strength gap in South Australia in October 2017, and identified the installation of synchronous condensers in South Australia as a priority project in its 2018 Integrated System Plan.
Currently, AEMO directs synchronous generators to be online when required in order to maintain system stability, costing South Australian consumers more than a million dollars per month through compensation payments to these generators.
AER Chair, Paula Conboy, said, “Consumers pay for network investments for years to come and it is our job to ensure they pay no more than they need. But investment is required to maintain a safe and secure supply.
“This investment will help strengthen the electricity system in South Australia, and reduce the amount South Australian consumers are required to pay as a result of market directions.”
The AER’s decision allows ElectraNet to recover an additional $32 million from its transmission customers over the next three years.
The AER estimates this decision on transmission charges will increase average annual bills for residential customers by up to $8 per year by 2022-23, or up to $36 per year for small business customers.
However, ElectraNet has estimated that the four synchronous condensers will help to reduce the annual cost of market directions, more than offsetting these increased transmission charges.
This decision is the final step of the AER’s regulatory approval process that allows ElectraNet to proceed with this priority investment.
Other related transmission investments identified by AEMO’s Integrated System Plan, such as the proposed interconnector between South Australia and New South Wales, remain subject to separate assessment and approval processes in accordance with the National Electricity Rules.
ElectraNet expects to install the four synchronous condenser units by the end of 2020.