Spain’s Iberdrola frontrunner for $4bn VNI West transmission project

Spanish renewable energy giant Iberdrola is in pole position to win the development partner contract for the $4bn electricity transmission line between NSW and Victoria.

Major transmission lines are needed around Australia to accommodate a surge of renewable supplies as coal exits the power grid. Picture: Getty Images

Spanish renewable giant Iberdrola is in pole position to be named development partner for the $4bn VNI West electricity transmission line, amid concerns a two-year delay to the project may dent Victorian and national ambitions to hit green targets by 2030.

Five groups bid for the development and delivery partner deal, which will include finalising the transmission route, design, environmental approvals and choosing a construction contractor along with a long-term contract to build and operate the facility.

Iberdrola and Capella Capital edged ahead in the race to win the deal in front of the consortium of APA Group and EDF, sources said. Spain’s Acciona and transmission operators Ausnet and Transgrid, who were operating separately, were the three other companies initially in the mix for the deal. APA announced it had opted out of the process on June 16 but EDF still remained as a solo bidder.

Iberdrola, the world’s largest producer of wind power, has earmarked $4bn for developing zero emission energy sources in Australia, and is one of the largest operators of renewable energy projects with operations spread across the country.

Should it ultimately prevail, taking on the role of development partner for VNI West will prove a complex task, with the Victoria-NSW interconnector facing opposition from pockets of landowners and farmers across the proposed route.

Iberdrola is the world’s largest producer of wind power. Picture: AFP

A two-year delay on VNI West until late 2030 was announced earlier this week, adding to fears over a shaky transition to renewables with major coal plants including Victoria’s Yallourn station set to shut their doors in 2028. The development and delivery partner contract is expected to be awarded in the third quarter of 2025.

Transmission Company Victoria, a unit of the Australian Energy Market Operator, will continue to lead the project through development with the intention TCV will be acquired by the selected partner. AEMO’s own transmission planning and connections role in Victoria will also be handed to the government-run VicGrid in November.

Opposition to the 240km VNI West has grown, with farmers and landowners concerned over the proposed route for the project.

VicGrid told The Australian in May that both Victoria’s VNI West and Western Renewables Link faced delays as they worked to gain “social licence” among communities.

The development allows for up to 3400 megawatts of extra renewable generation to be built across the solar-rich Murray River renewable energy zone and the wind power-driven Western Victoria zone.

AEMO said the significant delay reflected revised planning, design and construction assumptions and would allow greater landholder engagement.

Opposition to the 240km VNI West has grown, with farmers and landowners concerned over the proposed route for the project. Picture: Zoe Phillips

Energy consultancy Rennie Advisory said earlier this week the VNI West delay highlighted the issue that Australia was in a race to build sufficient wind and solar, and solve the long duration storage problem before gaps begin to appear in reliability in the mid 2030s.

The “key to that is transmission, which is now 10 per cent through a $50bn buildout and which is facing complexity like never before in accessing land, dealing with legacy regional infrastructure in transporting equipment for construction, finding sufficient labour at reasonable cost, and making its way through the regulatory incentives,” Rennie’s executive director for capital advisory, Matt Rennie, wrote on LinkedIn.

AEMO is expected to factor in the fresh VNI West delay as part of more ­detailed modelling that will be published in the 2025 Electricity Statement of Opportunities report in August.

In May, AEMO warned a massive surge in costs to build $20bn worth of electricity transmission would trigger a hit to household power bills amid skill shortages and a battle to win over communities and farmers to the green ­energy switch.

The cost of overhead transmission line projects has ballooned by up to 55 per cent, with costs for substations rising as much as 35 per cent compared with equivalent estimates provided for AEMO’s 2024 electricity plan.