Regulator pulls plug on $2bn interconnector plan
Plans for $6bn of critical electricity transmission projects have been dealt a major blow.
Plans for $6bn of critical electricity transmission projects have been dealt a major blow - including the first interconnector between NSW and South Australia - after a push for a rule change easing hurdles for investors to secure debt was rejected by the Australian Energy Market Commission.
NSW transmission owner TransGrid and South Australian provider ElectraNet had demanded the change, arguing the deferral of revenues under the current framework does not allow it to finance big transmission projects including the 900km NSW-SA power link known as EnergyConnect and worth $2.4bn.
The two companies wanted changes to the way they recover revenue for big capital investments so they can access cashflows from customers sooner for EnergyConnect, the Victorian-NSW interconnector and the Hume Link from Snowy Hydro to southern NSW. Without the rule change the projects may fail to win financing, according to TransGrid.
However, the national rulemaker said it had found no barrier to financing large-scale transmission projects under current rules.
“Our draft determinations find nothing in the rules to prevent large transmission projects like those identified in the market operator’s integrated system plan from attracting finance,” Australian Energy Market Commission chief executive Benn Barr said.
“These TransGrid and ElectraNet proposals would cost consumers money and expose them to greater risks. Effectively it wants consumers to pay for energy assets as they are being built – like asking motorists to pay tolls on roads before they can be built and used.”
TransGrid hit out at the decision given a pressing need to build transmission to ease constraints on the power grid starting with EnergyConnect.
“If we build this infrastructure, it will result in a reduction in the wholesale price because they will introduce more competition to the wholesale market,” TransGrid chief executive Paul Italiano told The Australian.
“It will link two markets that are not currently linked and increase the capacity of the system for new generation. We still think that’s really important.”
The Morrison government has also backed the proposed transmission lines with $250m of funding committed to accelerate major transmission projects.
“An important part of getting reliable power to where it is needed requires sensible investment in our grid that delivers energy at least cost to consumers,” a spokesman for Energy Minister Angus Taylor said.
“The Government is supporting the construction of all the major priority transmission projects identified by the market operator, including through a $250m program to support major projects like Project EnergyConnect, Marinus Link and VNI West get to the next stage.”
South Australia‘s ElectraNet said it was studying the decision.
“ElectraNet note the AEMC’s preliminary decision and we will now take time to consider it in detail,” a spokesman said.
“The financeability rule change proposals are about bringing forward the timing of revenue recovery to support the financeability of major projects and, importantly, electricity customers were not being asked to pay any more over the life of the project.“
SA Minister for Energy and Mining Dan van Holst Pellekaan said the project should get over the line.
“The AEMC makes it clear this project is important and investible. It’s important that the critical infrastructure needed to secure our grid, drive down electricity prices and accelerate the development of renewable energy is built in a timely and cost-effective manner,” Mr van Holst Pellekaan said.
The Australian Energy Market Operator has recommended fast-tracking the $2.6bn VNI West interconnector between Victoria and NSW by 2027-28 which is viewed as critical for parts of the state suffering congestion from a wave of renewables output entering the system.
The $2.1bn HumeLink plans to link the expanded Snowy Hydro scheme to the power grid in southern NSW.
TransGrid is owned by a consortium of Spark Infrastructure, Utilities Trust of Australia, Canada’s CDPQ, Tawreed Investments and pension giant Omers.
The group paid $10.3bn in 2015 to buy TransGrid as part of a major privatisation drive by the NSW government.
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