ElectraNet and TransGrid SA-NSW interconnector gets approval from Australian Energy Regulator
A massive electricity interconnector between SA and NSW has been given the go-ahead – but how much will it cut household power bills?
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A $1.53 billion project that promises to cut South Australian household electricity bills and create 2000 jobs has been approved by federal regulators.
The project, a 900km long interconnector to NSW, will strengthen SA’s resilience against bushfires and other disasters and is tipped to open the gate for new renewable energy projects across the Mid North and Riverland.
“This was a very high hurdle to jump over,” said Steve Masters, chief executive of ElectraNet, the lead proponent.
“We’ve been able to demonstrate the project’s credentials.”
Independent national body the Australian Energy Regulator said on Friday the project was an investment which would facilitate the transition to low-emission energy and improve security of the system.
“We’re satisfied, on the basis of the information ElectraNet has provided, that the SA-NSW interconnector is the best option for meeting the needs of consumers when compared to alternative options,” regulator chair Clare Savage said.
“We’ve tested the reasonableness of ElectraNet’s inputs and assumptions across a range of scenarios and found that the project … is robust and will deliver a net economic benefit to Australian energy consumers.”
Energy Minister Dan van Holst Pellekaan welcomed the decision as “fantastic” for SA and a key element in delivering the Liberal Party’s election commitment of a $300 cut to household power bills from the interconnector, the home battery scheme, grid-scale storage and other initiatives.
“The approval shows that even when rigorously stress-tested, the interconnector delivers cheaper electricity to South Australians,” he said.
“Our commitment is (a cut of) $300 per year to the average SA household, and I stick by that.”
The regulator had conducted a thorough and robust assessment, but SA would make even more gains than cheaper power, Mr van Holst Pellekaan said.
“(The assessment) doesn’t include significant benefits to South Australians with regard to resilience from extreme weather and bushfires (by providing alternative transmission routes),” he said.
“It doesn’t include the benefit of bringing forward emissions’ reduction.”
However, the regulator downsized the expected overall benefits – saying ElectraNet’s estimate of $924 million over 20 years was too optimistic and it would more likely be $269 million.
The 900km long, 10km wide line would run from Robertstown in SA to Wagga Wagga in NSW with a spur line to Red Cliffs in Victoria.
It would provide 800MW of two way-capacity – enabling SA to receive more power from NSW coal-fired generators in the short term and NSW to receive wind and solar from SA in the medium and long term.
ElectraNet would pay $380 million and its NSW counterpart TransGrid $1.15 billion of the costs.
To cover that, residential customers in SA would have to pay an extra $9 a year and NSW customers $5 a year but these increases would be more than offset by savings from cheaper power and less capital investment in new generation.
ElectraNet estimates typical household bills will be cut by $66 a year in SA and $30 in NSW.
“Those numbers are reasonable, we’d expect savings around that mark,” Mr Masters said.
“Not withstanding that the regulator has come up with an alternative view of net market benefits, there’s still a very strong positive (result).”
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Opposition energy spokesman Tom Koutsantonis said an independent report commissioned by the regulator warned that three major gas-fired power stations in SA — Pelican Point, Osborne and Torrens Island — would be at added risk of early closure.
That risk, and the reduced overall economic benefit, meant the Government “will break their promise” on cutting household bills by $300, he said.
Mr Masters said the project was based on supplying the cheapest energy.
“The drivers of value for consumers are about bringing cheaper power into SA and facilitating a lot more renewable generation in due course over that transition to the lower carbon economy,” he said.
“A premise is that gas would be displaced by other, cheaper sources of energy.”
Gas would continue to be very important but the interconnector would help the “sensible” transition to new generation, he said.
“There are a lot of renewable projects in close proximity to the line route,” he said.
The Clean Energy Council backed the project which passes through many zones identified as having high potential for wind and solar projects.
“Connecting more renewable energy projects will provide us with lower-cost and more diversified supply, which will increase reliability and ultimately result in lower energy prices for customers,” council director Lillian Patterson said.
Business SA also backed the project as “a significant step” to a better power system.
Mr Masters said ElectraNet would now closely examine the regulator’s reasoning and refine its own costings before returning for the next step where the regulator must agree to increase the revenue ElectraNet is allowed to collect to pay for the project.
The regulator cautioned that it would not simply rubber-stamp that step.
“If there was a material change in the cost of the project such that it was likely to erode the estimated benefits then it would be important for us all to have another look at the viability of this project,” Ms Savage said.
Mr Masters said another challenge would be contracting work.
“With all of the infrastructure work in the electricity sector and more broadly in other industries, skilled workers will probably be increasingly difficult to find,” Mr Masters said.
The interconnector was towards the front of a very large queue of projects nationwide.
“Our strategy will be to secure the workforce we need as quickly as we can,” he said.
ElectraNet expects 200 jobs in SA and 800 jobs in NSW will be created during construction
A further 250 ongoing jobs in SA and 700 ongoing jobs in NSW will come from new energy generation projects enabled by the interconnector.
TransGrid chief executive officer Paul Italiano said TransGrid and ElectraNet were committed to delivering the project at the lowest possible cost with the greatest benefit to energy consumers.
“Project EnergyConnect provides the critical infrastructure needed to enable the sharing of renewable and baseload generation in the National Energy Market,” Mr Italiano said.
SA taxpayers have already spent more than $70 million to support early works on the project.
The regulator employed Frontier Economics to assess the project, with its report saying many of ElectraNet’s assumptions “overstated” benefits.
Frontier Economics said it may be “preferable” not to build the interconnector because there would be issues about it causing the accelerated closure of some gas-fired power in SA.
There also could be a loss of the times SA has excess renewable energy which currently is envisaged as supporting development of a hydrogen industry.
Mr van Holst Pellekaan said there were many views about the project and he was “not concerned” about the impact on gas plants. Nor would it be a handbrake on renewables.
However, Mr Koutsantonis said loss of gas plants would harm SA’s gas industry and jobs at gas extraction companies.
The proponents aim to start construction this year after finalising detailed design and approvals with a completion target of 2023.