Transmission investment in Western Victoria could lead to $300 million benefits

Transmission investment in Western Victoria could lead to $300 million benefits
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AEMO has delivered a series of strategic investment recommendations for Western Victoria’s transmission network, which it says could deliver $300 million of market benefits.

The recommendations would deliver benefits by unlocking future power system capabilities in the state, expanding the diversity and availability of energy supply, and reducing electricity costs for consumers over the long term.

The investment recommendations headline AEMO’s Project Assessment Conclusions Report (PACR), the third and final report in the Regulatory Investment Test for Transmission (RIT-T) process, which presents the findings of an economic cost-benefit test to determine the preferred investment option to address current limitations in the Western Victoria transmission network, in accordance with the National Electricity Rules (NER).

With a potential for up to 6000MW of large-scale wind and solar generation to enter the area by 2030, urgent transmission network investment is required to reduce constraints on anticipated new and existing generation in Western Victoria. 

Without adequate transmission capacity, generators connecting to this part of the network will become increasingly constrained, limiting the ability for existing and new generators to export power to the network, and impacting electricity costs over the long term.

The PACR recommends a combination of minor upgrades to existing infrastructure and major transmission works – including a new terminal station north of Ballarat and long-distance high voltage transmission lines between Bulgana and Sydenham terminal stations – staged over several years, with the final component expected to be in operation by 2025. 

This investment is estimated to cost $370 million, and will produce a total return of $670 million in market benefits, resulting in net benefits of $300 million.

AEMO Managing Director and Chief Executive Officer, Audrey Zibelman, said that this investment will deliver an increase in benefits to both energy consumers and energy producers, through significant reductions in the capital cost and dispatch cost of generation over the longer term.

“Under this proposal, for every dollar invested in the Western Victorian transmission network, the project is expected to deliver almost double that in benefits. This investment will future-orient Victoria’s power system capabilities and supply availability, and help achieve a lowest cost portfolio of resources and strategic transmission development to meet consumer needs today, and into the future.”

AEMO Chief System Design and Engineering Office, Dr Alex Wonhas, said that as the planner for the shared transmission network in Victoria, AEMO is recommending prudent and timely investment in the Western Victorian transmission network to maximise the economic use of existing resources and infrastructure, and pave the way for coordinated future generation and power system development in the long-term interest of consumers.

“Critically, this project in Western Victoria is underpinned by our Integrated System Plan (ISP), which seeks to optimise future generation and transmission development in the National Electricity Market (NEM) to ensure the ongoing reliability and security of the power system, at the least cost and risk to consumers. 

“This means making the most of existing resources and infrastructure while also planning for the full potential of new generation resources and technologies such as batteries, demand response and electric vehicles, so that we can enjoy a reliable, secure and affordable energy future,” said Dr Wonhas.

As outlined in AEMO’s July 2019 ISP Insights Report and June 2019 Victorian Annual Planning Report, this work is a first step in a series of planning studies and regulatory transmission investment tests underway to cost-effectively optimise transmission and infrastructure systems around the NEM.

Dr Wonhas says the recommendation to increase transmission capacity in Western Victoria, as considered through this RIT-T, supports the delivery of reduced network congestion and facilitates more efficient connection and dispatch of generation in the region.

“This transmission investment will support the development of major hubs for wind and solar energy in the region by strengthening transmission corridors to more efficiently transport large quantities of renewable energy to consumers.

“Key market benefits include fuel and capital cost savings, as well as an improved capacity of the existing Victoria to New South Wales interconnector. This will help to ensure consumers don’t pay more than necessary for their electricity in the long term. Furthermore, this project provides additional benefits for communities in Western Victoria such as employment, economic growth, training and other regional development opportunities that have not been quantified in AEMO’s assessment,” said Dr Wonhas.

The PACR confirms the initial investment option proposed in AEMO’s Project Assessment Draft Report (PADR) published in December 2018. It is the culmination of more than two years’ investigation, including market modelling and broad stakeholder consultation, to identify the transmission investment option that maximises the net economic benefit to all those who produce, consume or transport electricity in the market in accordance with the NER. Of each of the credible options assessed through this process, the option recommended in the PACR delivers the highest net economic benefits across all scenarios and sensitivities.

At this early stage, the design and location of the new infrastructure required to deliver this investment has not been determined. While AEMO is responsible for planning the Victorian shared transmission network, it does not own any transmission infrastructure. AEMO is undertaking a competitive process to appoint a successful tenderer to design, build, own and operate the new infrastructure.

The successful tenderer will undertake extensive investigations, and further stakeholder and community engagement, before any routes or locations are approved, and will be responsible for securing the necessary planning and environmental approvals to deliver the infrastructure. AEMO will provide updates on the tender process in late 2019. 

“AEMO would like to thank those who contributed to this undertaking and lodged submissions as part of the regulatory process – your feedback has enabled us to interrogate credible options and confidently determine an economic transmission investment solution that will make Victoria’s power system future ready,” said Dr Wonhas.

AEMO acknowledges the important environmental, amenity, cultural and community matters raised by stakeholders through the RIT-T consultation process. These matters will be considered and addressed by the successful transmission system operator in delivering the project.

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