Update on regulated economic cost-benefit assessment for proposed VNI expansion - draft report to be delivered in December 2021  

3 min

AEMO and TransGrid are progressing a Regulatory Investment Test for Transmission (RIT-T) to assess the economic costs and benefits of increasing interconnector capacity between Victoria and New South Wales. Targeted interconnector expansion between these regions would help to address transmission network limitations and improve supply reliability as ageing coal-fired plants retire and access to competitively priced electricity from renewable generators and energy storage becomes critical.

The RIT-T is a three-step technical and economic impacts assessment required under the National Electricity Rules (NER) for significant investment proposed for the National Electricity Market (NEM). The RIT-T process seeks to ensure proponents make prudent network investments on behalf of electricity consumers who ultimately fund such projects. In effect, this means evaluating and ranking credible options to meet an identified need, and selecting the option that maximises the net economic benefit for consumers.

AEMO and TransGrid published the Project Specification Consultation Report (PSCR) for the Victoria to New South Wales Interconnector West (VNI West) RIT-T in December 2019. This scoping report explores the need for increasing interconnector capacity between Victoria and New South Wales and potential credible network and non-network options to address this need. Public submissions on this report closed on 13 March 2020. These will be addressed in the second report in the RIT-T process, the Project Assessment Draft Report (PADR).

Under the NER, the VNI West RIT-T PADR is due by 31 March 2021. However additional time is required to:

  • Refine key project-specific inputs including transmission costs, new market-based dispatchable capacity in Victoria, and NEM development insights against 2020 Integrated System Plan (ISP) scenarios, as required by the ISP Actionable Project Decision Rules; and,

  • Allow the VNI West RIT-T modelling to adopt the latest ISP assumptions from the 2021 Inputs, Assumptions and Scenarios Report (IASR) to be released this July.

The ISP presents a whole-of-energy system development plan, including transmission network development, to maximise net market benefits and deliver low-cost, secure and reliable energy to consumers across the NEM, over a 20 year horizon. The 2021 IASR will inform the 2021 Draft ISP due in December.

AEMO’s Chief System Design Officer Dr Alex Wonhas said the power system requires targeted improvements in the long-term interests of electricity consumers to support Australia’s transition to a lower-emissions energy future.

“Ensuring that we have accurately captured the latest project assumptions will result in a more robust, efficient, and accurate cost-benefit assessment. We consider this critical to determining the best outcome for electricity consumers,” said Dr Wonhas.

TransGrid Executive Manager Major Projects Sean McGoldrick said the RIT-T process aims to protect consumers from paying more than necessary for their electricity, by ensuring that the benefits of a proposed transmission project outweigh the cost.

“Expanding interconnector capacity between Victoria and New South Wales is a huge investment and something we need to look at really carefully. We need to make sure that this regulated economic cost-benefit assessment is informed by the latest data, inputs and developments and is consistent with the scenarios that will be used in the next ISP horizon,” said Mr Goldrick.

The Australian Energy Regulator has consequently granted AEMO and TransGrid’s request to extend the PADR publication date from March 2021 to December 2021.  

This extension will enable AEMO and TransGrid to refine PADR inputs, and update the RIT-T modelling to reflect the 2021 IASR. In addition, as a result of this extension, both the VNI West RIT-T PADR and the final VNI West RIT-T Project Assessment Conclusions Report (PACR) will be published in the same IASR-ISP cycle.

“Aligning these cycles ensures consistency between both the VNI West RIT-T PADR and PACR modelling, and the 2022 Draft ISP and Final 2022 ISP. This means we will be in a stronger, more informed position to look at the question of increasing interconnector capacity between Victoria and New South Wales, and deliver a rigorous, carefully considered economic cost-benefit assessment on behalf of electricity consumers,” said Dr Wonhas.

For information on the VNI West RIT-T, please visit the AEMO website or contact us on 1800 845 044 or VNIWestRITT@aemo.com.au  


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