Renewables rise could be cut short without grid investment, Victoria warns

Key points

  • The rise in renewable energy could be stymied without billions of dollars of investment to enable the grid to handle power from new wind, solar and hydro projects.
  • Victoria wants a clearer timeline for a new $3.3 billion transmission link connected the state to NSW, via Kerang.
  • An assessment found the link was needed if Australia was to meet its target of net-zero emissions by 2050.
  • State government modelling found the project would allow Victoria to export 1930 megawatts of electricity to NSW from renewable projects.
  • It estimated the project would cut retail power bills by between $30 and $40 a year from 2030 onwards.

Victoria has warned the race to hit climate and renewable energy targets could be jeopardised without urgent investment to build thousands of kilometres of new energy transmission lines, including a $3.3 billion link to NSW, via Kerang.

State Energy Minister Lily D’Ambrosio on Friday suggested the rapid rise in renewable energy could be cut short without billions of dollars of investment to transform the grid to handle power from new wind, solar and hydro projects.

Billions of dollars of investment is needed to upgrade the power grid to handle new renewable energy projects.Credit:Luis Ascui

“We’ve long passed the time for meaningless statements and grandstanding,” D’Ambrosio told The Age. “We need to see investment.”

On Friday, Australian Energy Market Operator and NSW grid operator Transgrid released a joint assessment of the proposed KerangLink inter-connector, a massive new high-capacity, high-voltage overhead transmission line running between Victoria and NSW.

The project, expected to cost about $3.3 billion, would connect Victoria’s Western Renewables Link (at a proposed terminal north of Ballarat) with Project EnergyConnect (at Dinawan) via new stations near Bendigo and Kerang.

It would mean power stored by the Snowy 2.0 project could be to be transferred to Victoria, while power generated by new Victorian offshore wind farm projects in Bass Strait could be sent north.

AEMO last month placed the project in the “to be progressed urgently” category, along with four massive grid upgrades involving a total of 10,000 kilometres of new transmission lines.

But so far, the timing or financing arrangements are unclear, with AEMO suggesting only that the project must be built by the middle of 2031 “or earlier with additional support”. The issue will be raised at an upcoming meeting of state and federal energy ministers on August 12.

The federal government is promising to spend $20 billion to rebuild and modernise the national electricity grid. That includes potentially underwriting projects such as KerangLink.

AEMO’s project assessment found it would generate net benefits of $687 million and warned it would be needed to hit Australia’s target of net-zero emissions by 2050, helping to offset the looming closure of coal-fired power plants.

“The forecast closure of ageing coal-fired generators in Victoria and NSW over the coming decades presents a significant challenge to supply reliability for the energy industry,” the report said.

Victoria is promising that half of the state’s electricity will be generated using renewable energy by 2030. But the plan is facing a huge potential roadblock, with the capacity of the grid to handle more renewables reaching its limits.

State government modelling provided to The Age found the KerangLink project would allow Victoria to export 1930 megawatts of electricity to NSW from renewable projects, such as offshore wind farms. It estimated the project would cut retail power bills by between $30 and $40 a year from 2030 onwards, with capital costs offset by cheaper power.

AEMO’s Integrated System Plan, released last month, said the National Electricity Market would need to generate twice as much electricity by 2050 “to serve the electrification of our transport, industry, office and homes, replacing gas, petrol and other fuels”.

Transgrid CEO Brett Redman.Credit:Louise Kennerley

But with coal-fired power being quickly phased out, AEMO says the current “record rate” at which renewable energy is increasing would have to be maintained every year for a decade to triple variable renewable energy capacity by 2030, and then almost double it again by 2040 and then double it again by 2050.

Transgrid chief executive, Brett Redman, said projects such as KerangLink were crucial to “strengthen the spine of the energy grid” to create a new electricity superhighway to move energy up and down the East Coast. But he said big transmission projects tended to take years to build, leaving little time.

“The energy transition is accelerating,” he said. “So every forecast that we produce ultimately turns out to be wrong, and wrong in that it’s not forecasting the change quick enough.”

Redman said the worst-case scenario was that projects such as KerangLink were built too late. He said he would like to see it completed in the late 2020s, rather than the early 2030s.

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