A critical $220 million upgrade of an interconnector power cable between Queensland and NSW will come online about 18 months early, beefing up supply security for Australia’s biggest economy ahead of the closure of AGL Energy’s Liddell coal power generator.

Paul Italiano, chief executive of NSW grid owner TransGrid, which is leading the project, said that the “constructive” step by the federal and NSW governments last year to underwrite $102 million of early works should enable the upgrade to start up in September 2021, rather than in 2023.

“We are going to be able to start work within a month, because of the underwriting agreement,” Mr Italiano told The Australian Financial Review, after the upgrade project secured approval from the Australian Energy Regulator.

He said it also reduces NSW’s reliance on coal-fired generation in the Hunter Valley to provide “dynamic stability” for the grid and should help close the gap between wholesale power prices in Queensland and NSW, where the price is $16 a megawatt-hour higher so far this financial year.

The upgrade of the QNI cable will more than double the ability to move electricity from NSW to Queensland, and provide a significant increase in the southward flow, helping ease grid bottlenecks as well as improving security of supply.

It is a top priority project in the Australian Energy Market Operator’s blueprint for the future of the power grid, the Integrated Systems Plan.

“Consumers will get value for money from this investment, including wholesale market cost savings,” said AER chair Clare Savage, noting that the project would raise annual transmission charges by 1.7 per cent a year for the next two years, adding $2 a year to household power bills.
The accelerated timing means the project should be running by the time NSW’s baseload power heartland, the Hunter Valley, starts on its long path to wind down, with the closure of the first unit at the Liddell coal generator set for April 2022.
AGL is due to close the remaining three units at the site 12 months later, after agreeing last August to extend the generator’s life until after the 2022-23 summer.

That closure schedule remains controversial, and is the subject of a government- appointed taskforce that is expected to report shortly on the potential consequences for prices and supply.

Construction work on the QNI upgrade will start next month, creating 150 jobs. The project, which adds 460 megawatts of capacity going north and 200 MW southwards. represents more than a fifth of TransGrid’s $1 billion capex budget for the next five years.

The approval comes as TransGrid’s ownership is undergoing a potential shake-up, with Kuwait’s Wren House Infrastructure Management proposing to sell its 19.9 per cent stake to Canadian pension giant OMERS for at least $2 billion, according to the Financial Review’s Street Talk.

A deal has yet to complete, with OMERS requiring foreign investment approval and the COVID-19 outbreak adding further uncertainty.

NSW Energy Minister Matt Kean said the QNI upgrade would deliver net benefits of $170 million over the cable’s life and allow consumers to benefit from lower prices.
“Completing the QNI upgrade early is critical to ensure NSW can access affordable and reliable power following the closure of the Liddell power station in April 2023,” he said.

Source: Financial Review