Energy investors demand changes to transmission test

Power-sector executives have criticised the regulatory investment test which governs electricity transmission for being too slow and cumbersome.

Australia is believed to need to build $14bn of electricity transmission projects over the next decade, but there is division over the regulatory test that dictates investment.

Major energy executives have criticised the regulatory investment test that governs electricity transmission for being too slow and cumbersome, as the industry frets over delivering a major rewiring of the power grid over the next decade.

More than $14bn of power transmission projects are required to be built over the next 10 years to keep pace with a rapid influx of ­renewable energy and storage in different locations to the big coal generators, which historically have provided the bulk of supply.

Opposition energy spokesman Chris Bowen criticised the current regulatory investment test for transmission, known as the RIT-T, saying it could delay projects unreasonably and calling for a major reworking of the scheme.

Ausgrid, NSW’s biggest electricity distributor, said aspects of the test should be changed amid broader concerns its design was best suited for extra grid enhancements rather than a regulation governing a major rebuild of the system.

“I think improvements can be had,” Ausgrid chief executive Richard Gross told the Energy Networks Australia conference on Friday.

“The current RIT-T process probably just takes too long given the urgency of what we are dealing with in trying to deliver zero carbon by 2050.”

While Labor has proposed a $20bn Rewiring the Nation fund to ensure the grid is rebuilt to accommodate growing sources of solar and wind, the Morrison government said it would only support transmission projects that made economic sense.

The Energy Users Association of Australia said it was worried about consumers paying too much for expensive transmission plans that might not deliver the advertised benefits.

“We think the RIT-T needs reform as well,” EUAA chief executive Andrew Richards said.

“It’s about getting a more accurate capital expenditure number to go in front of the regulator to get approved, because what we’re seeing at the moment with the current process is capex being approved by the regulator, then a final capex that bears no resemblance to that original approval. So there’s a huge risk in there that consumers are taking.”

The Australian Energy Market Commission said there may be incremental changes to the RIT-T as part of a review of the transmission system, but said a bigger issue was understanding how the test interacted with the Australian Energy Market Operator’s 20-year energy blueprint, known as the integrated system plan.

“There is this issue of are we taking too long to get to the robust conclusions, but we need to balance that with making sure that we’re protecting customers from a cost perspective,” AEMC chair Anna Collyer told the conference.

Anna Collyer. Picture: AEMC

Clean Energy Council chief executive Kane Thornton said transmission infrastructure could take eight to 10 years from inception to electrification.

“The real fear I have is that the current regulatory environment, the current institutional approach is one where it feels like there’s a lot of downside risks, there’s a lot of caution and risk aversion,” Mr Thornton told the conference.

Originally published as Energy investors demand changes to transmission test