January 24, 2020 13:26:30
A planned $1.5 billion electricity interconnector between South Australia and New South Wales has been ruled to have a “robust” business case by the Australian Energy Regulator (AER), however, its economic benefit has been significantly downplayed.
The AER says the proposed project will deliver an economic benefit to consumersElectraNet is now required to provide a contingent project application for approvalThe SA Energy Minister says the Australian energy landscape will be transformed
The energy regulator has today given its approval for ElectraNet to carry out a “regulatory investment test” (RIT-T) on the project — known as Project EnergyConnect — with a consultation process now set to examine the public economic benefits.
The proposal is a 900-kilometre link between Robertstown, north-east of Adelaide, and Wagga Wagga, in New South Wales, which will run through Buronga, north-east of Mildura.
It is claimed the interconnector will provide lower power prices, improved energy security and increased economic activity for customers in South Australia, New South Wales and Victoria.
AER chair Clare Savage said the energy regulator was satisfied that the interconnector was the best option for meeting the needs of consumers.
“We’ve tested the reasonableness of ElectraNet’s inputs and assumptions across a range of scenarios and found that the project, as set out in the RIT-T, is robust and will deliver a net economic benefit to Australian energy consumers,” she said.
However, she said claims made by ElectraNet that the project would create an estimated economic benefit of $924 million may have been exaggerated, with the regulator estimating $269 million in benefits.
“ElectraNet assumed that without the interconnector, substantial gas-fired generation would be needed to keep the lights on in South Australia even with considerable new investment in wind, solar, batteries and synchronous condensers,” she said.
“We requested ElectraNet update their modelling to reflect AEMO’s system security requirements and to allow these cheaper sources of generation to compete in the market — this reduced the benefits of the interconnector substantially.
“While the benefits to energy consumers may be smaller than set out in the RIT-T they are still substantial and the interconnector therefore satisfies the requirements of the process.”
‘More jobs and growth in South Australia’
ElectraNet had suggested power bills would be reduced by $66 a year for South Australian households and $30 in New South Wales under the project.
However, the regulator said residential consumers in South Australia should expect to pay an extra $9 per year and NSW customers $5 for the project, but said those costs would be more than offset by the benefits.
SA Energy Minister Dan van Holst Pellekaan said the Australian energy landscape would be completely transformed following the approval of the test.
“The regulatory investment test for transmission (RIT-T) approval shows that even when rigorously stress-tested, the interconnector delivers cheaper electricity to South Australians,” he said.
“This project will unlock huge new renewable energy zones in South Australia and NSW with AEMO reporting there are more than 5000 MWs of planned renewable energy projects in close proximity to the interconnector.
“The AER’s determination shows that South Australian wind and solar power can play a bigger national role with the interconnector, delivering more jobs and growth in South Australia.”
‘Important milestone’ for the energy project
The approval has been welcomed by the two businesses behind the project, with ElectraNet chief executive Steve Masters describing it as another important milestone.
He said the AER had also determined that the proposed interconnector remained the most “credible option that maximises the net economic benefit” for consumers.
“The Australian Energy Market Operator’s (AEMO) recently released draft 2020 Integrated System Plan identifies Project EnergyConnect as a ‘no regrets’ project for the national electricity market,” he said.
TransGrid chief executive Paul Italiano said the two businesses were committed to delivering the project at the lowest possible cost to consumers.
They will now be required to make an application for contingent project funding with the AER for approval.
The new interconnector is scheduled to be in place by the time the coal-fired Liddell Power Station is due to retire from the market in New South Wales.
It will provide additional transfer capacity to allow for the sharing of reserves between South Australia, Victoria and New South Wales.
South Australia already has an interconnector with Victoria.
South Australia’s Liberal Government announced in 2018 it would spend $14 million to accelerate the interconnector project on top of its $200 million “interconnection fund” which was announced as part of its wider energy policy ahead of the 2018 State election.