Power transmission overhaul sparks renewables revolt

Solar and wind developers have slammed a plan to make them pay part of power transmission costs.

A controversial overhaul of the power grid, including solar and wind developers paying part of transmission costs, has been savaged by the renewables industry which says it will kill investment and increase costs to big electricity generators at a critical time as ageing coal generators exit the ­system.

The blueprint by the rule-maker for electricity and gas markets was designed to spur power generation to be built in less congested parts of the network.

The region-based model would see large-scale electricity suppliers pocketing higher returns if they build in more cost-effective locations, marking a significant change from the current system where returns are the same regardless of location.

New transmission rights would also allow generators to hedge against losses when it is expensive to deliver energy to the grid under the regional concept.

The Clean Energy Council said it could not support the proposed rule change by the Australian Energy Market Commission given the highly complex model and tight timeframe that failed to address the urgent need for more transmission investment in the grid.

The proposal “does not address the pressing need for transmission investment in the National Electricity Market, may increase costs to generators and therefore consumers, and could deter future generation investment at a time when this investment is critical to maintain reliability and put downwards pressure on prices as a number of coal-fired generators close,” the CEC’s director of energy transformation Lillian Patterson said in its submission, filed on Friday.

Proceeding with the reform would exacerbate market difficulties faced by generators securing offtake deals and investors for projects, the CEC said, with existing contracts likely requiring renegotiation and power producers having to accept less favourable terms.

“There is a potential for higher risk premiums where financial transmission rights have not been secured, or that financiers with limited understanding of the framework may even decline financing on the basis that a generator has not secured rights,” Ms Patterson said.

“The outcome of this is that either new generation will not be built or there will be a higher cost of capital associated with the new generation.

“Neither outcome is in the long-term interest of consumers.”

Australia’s coal-dominated power system has struggled to handle huge slabs of intermittent renewable generation in the past few years, causing headaches for clean energy developers and creating fresh volatility for grid ­planners.

Adding to concerns are warnings from global financiers and green energy developers that Australia’s pipeline of renewable generation projects faces gridlock as concerns over transmission losses threaten to derail billions in investments. Renewables spending has slowed dramatically this year, partly because sections of the nation’s stretched power grid are struggling to handle major new renewable generation sources in areas without sufficient transmission capacity.

That trend could worsen should the AEMC proceed with its ambitious 2022 implementation date, the CEC said. It instead called for tying in the reform with a bigger post-2025 plan to reshape the grid being undertaken by the government-run Energy Security Board. The issue will be discussed at the upcoming COAG meeting on November 22.