Electricity wires over lake at sunrise

The Australian Energy Regulator (AER) has approved a new interconnector between South Australia to New South Wales designed to increase power system security in SA and facilitate the long term transition to low emission energy sources.

The Project EnergyConnect transmission line will enable NSW to import cheap renewable electricity from SA when there’s an excess, as well as allowing SA to import more power from NSW and Victoria when there’s not.

ElectraNet was required to submit a Regulatory Investment Test for Transmission (RIT-T) application for the interconnector to proceed, which the AER approved.

AER Chair, Clare Savage, said, “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.

“We’ve tested the reasonableness of ElectraNet’s inputs and assumptions across a range of scenarios and found that the project, as set out in the RIT-T, is robust and will deliver a net economic benefit to Australian energy consumers.”

The Australian Energy Market Operator (AEMO) has identified the SA-NSW Interconnector as a high priority project in its Integrated System Plan.

The RIT-T process requires the AER to analyse the specifics of transmission proposals to ensure they support affordable and reliable energy for Australian consumers.

Based on construction costs of $1.53 billion, the AER review – which incorporated alternative inputs and assumptions to ElectraNet’s – identified $269 million in likely net benefits from the project against the $924 million estimated by ElectraNet.

“ElectraNet assumed that without the interconnector substantial gas-fired generation would be needed to keep the lights on in South Australia even with considerable new investment in wind, solar, batteries and synchronous condensers,” Ms Savage said.

“The AER does not think it’s reasonable to assume that such large volumes of gas-fired generation will be required when there are cheaper sources of generation already available.

“We requested ElectraNet update their modelling to reflect AEMO’s system security requirements and to allow these cheaper sources of generation to compete in the market – this reduced the benefits of the interconnector substantially.

“While the benefits to energy consumers may be smaller than set out in the RIT-T they are still substantial and the interconnector therefore satisfies the requirements of the process.”

The AER said that residential customers in South Australia could expect to pay an extra $9 per annum and NSW customers $5 for the project, but that these costs would be more than offset by the benefits.

Ms Savage said that while large infrastructure projects like the SA-NSW interconnector will be required as the energy market evolves, it remains critical that consumers pay no more than necessary for safe and reliable energy.

“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.

Energy Networks Australia CEO, Andrew Dillon, said the new interconnector would support a more resilient electricity system while putting downward pressure on wholesale prices – and customer bills.

“A more interconnected electricity market is more efficient, reliable and flexible and will help lower power prices for customers,” Mr Dillon said.

“This is a critical link to the development of a more connected National Electricity Market that better enables the transition to a low emissions energy future.”

ElectraNet must now make an application to the AER for contingent project funding for the SA-NSW interconnector.

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