The Australian Energy Regulator (AER) has approved an electricity interconnector linking South Australia to New South Wales on paper, describing the concept as "robust" and in the best interest of South Australian consumers.
While the company behind the proposed project, Adelaide-based ElectraNet, must still complete a test of the project and apply for further funding, the AER's approval is a major milestone toward the eventual completion of the interconnector.
According to the ART the $1.53 billion electricity interconnector will deliver substantial benefits to the South Australian electricity grid. However it will come at a cost to residents, with customers in SA likely to be hit with a an extra $9 per annum addition to their electricity bill as a result.
"While the benefits to energy consumers may be smaller than set out in the RIT-T (Regulatory Investment Test for Transmission) they are still substantial and the interconnector therefore satisfies the requirements of the process," says AER chair Clare Savage.
"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,"
ElectraNet's initial RIT-T proposed the project would deliver $924 million in benefits to consumers, but on assessment the AER could only identify $269 million. This was enough still to give the AER confidence to approve testing of the project.
"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," says Savage.
"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."
ElectraNet must now make an application to the AER for contingent project funding for the SA-NSW interconnector.
The interconnector is one element of ElectraNet and Sydney-based TransGrid's 'Project EnergyConnect'.
The ultimate plan is to construct a new 330kV interconnector between Robertstown, in South Australia, and Wagga Wagga via Buronga, in New South Wales, with a link at Buronga to renewable energy generators at Red Cliffs, in north-west Victoria. The transmission line will be approximately 900km in length.
The two companies hope to reduce the costs of providing secure and reliable electricity in SA, while facilitating the transition of the energy sector to low emission energy sources.
The project should eventually support Australia's renewable energy industry, with up to 30 new wind and solar projects expected to benefit from the completion of the transmission line; enough to power 1.6 million Australian homes.
AER's approval of the business concept has been welcomed by South Australia's business representative body Business SA.
Executive Director Industry & Government Anthony Penney says the interconnector will benefit SA businesses by lowering their bills and providing them with more options to access baseload power interstate.
"Business SA has long provided conditional support for the interconnector to New South Wales based on rigorous cost-benefit analysis demonstrating the project will result in lower bills for South Australian businesses," says Penney.
"Business SA recognises with growing renewable energy generation and less availability of baseload power, that consumers need greater connectivity across the entire national electricity market and we welcome today's decision as a significant step towards that outcome."
"Now that this major decision hurdle has passed, we encourage both the AER and ElectraNet to work hard to ensure that the interconnector can be delivered as soon as is practicable while ensuring costs are kept to a minimum."
Business News Australia
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support