Critical short term investment recommended for existing VIC to NSW transmission corridor

4 min

AEMO and TransGrid are recommending critical short-term investment to increase the transfer capacity of the existing transmission corridor from Victoria to New South Wales (NSW). This investment proposal is outlined in detail in AEMO and TransGrid’s joint Project Assessment Conclusion Report (PACR) published online today.

The preferred option identified in the PACR is to implement the following upgrades to the existing Victoria to NSW transfer corridor by 2022-23:

  • Install a second 500/330 kilovolt (kV) transformer at South Morang Terminal Station
  • Re-tension the 330 kV South Morang – Dederang transmission lines, as well as associated works (including replacement of series capacitors which will be replaced with higher rated capacitors to align with the new line ratings), to allow operation at thermal rating
  • Install modular power flow controllers on the 330 kV Upper Tumut – Canberra and Upper Tumut – Yass lines to balance power flows and increase transfer capability

This preferred option will boost the Victoria to NSW interconnector export capability by approximately 170 megawatts (MW) during peak demand conditions in NSW and yields the highest net market benefits of all options assessed through the RIT-T process, primarily through more efficient sharing of generation resources between the states.

This option has an estimated cost of $87 million (in present value terms) and is expected to deliver a net economic benefit of approximately $268 million (in present value terms), by:

  • Reducing dispatch costs, through more efficient dispatch of generation in Victoria and NSW
  • Reducing capital costs associated with new generation build in NSW

AEMO Managing Director and Chief Executive Officer Audrey Zibelman said this proposal is underpinned by AEMO’s Integrated System Plan (ISP) and will provide a strong return on investment.

“Initial estimates show that for every dollar invested in this urgent short-term project, we’ll see approximately three times that in net market benefits, and these market benefits will start to accrue almost immediately following the proposed commissioning of the project in 2022-23.

“These benefits are largely the result of cost savings achieved through more efficient dispatch of generation in Victoria and NSW, and reduced capital costs associated with new generation build in NSW. This helps to protect consumers from paying more than necessary for their electricity,” said Ms Zibelman.

TransGrid Chief Executive Officer Paul Italiano said the upgrade will deliver the capacity to share more electricity between NSW and Victoria.

“Upgrading the interconnector will provide the greatest benefit to energy consumers at the lowest possible cost,” said Mr Italiano.

The PACR confirms the initial investment option proposed in AEMO and TransGrid’s Project Assessment Draft Report (PADR) for the Victoria to NSW Interconnector Upgrade Regulatory Investment Test for Transmission (RIT-T) published in August 2019. It is the culmination of more than 18 months investigation, including market modelling and stakeholder consultation.

The PACR analysis took into consideration the status of other RIT-Ts in progress at the same time and confirmed that the preferred option remains justified. The preferred option is consistent with the Group 1 priority project identified in AEMO’s Draft 2020 ISP.

Ms Zibelman emphasised this investment is a critical early step in AEMO’s ISP to achieve a lowest cost portfolio of resources and strategic transmission development in the long-term interests of consumers.

“With this RIT-T coming to an end, we are now well positioned to build on this work and consider investment options to address the long-term interconnection requirements between Victoria and NSW identified in the ISP,” said Ms Zibelman.

“We need future-proofing solutions that will enable us to maximise the value of new generation connections coming online in north west Victoria and southern NSW, and maintain adequate energy supplies in the NEM as our coal fleet reaches the end of its technical life and new fuels and technologies come to the fore.”

AEMO and TransGrid are currently progressing a separate Victoria to NSW Interconnector West RIT-T (VNI West RIT-T) to investigate and assess credible long-term investment options to expand interconnection between Victoria and NSW. Additional interconnection between Victoria and NSW will give consumers increased access to lower cost generators across state borders, and importantly, enable the connection of new generation required to replace retiring power stations.

Stakeholder submissions are now open on the VNI West Project Specification Consultation Report (PSCR) published in December 2019 which tables several investment options for consultation. For more information on the VNI West RIT-T, read our article on Energy Live or visit the dedicated VNI West webpage.

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