Victoria sidesteps slow reforms to boost transmission

Energy users have voiced alarm at the Victorian government's move to push ahead unilaterally to boost transmission and storage to shore up its power grid, saying consumers will pay through higher prices and increased risks.
  1. Energy users have voiced alarm at the Victorian government’s move to push ahead unilaterally to boost transmission and storage to shore up its power grid, saying consumers will pay through higher prices and increased risks.

    Lily D’Ambrosio, Minister for Energy, the Environment and Climate Change, said on Tuesday the government would amend its state electricity act to give Victoria the power to unlock renewable energy projects and improve reliability of supply.

    The move means Victoria would go ahead with projects such as the upgrade to the power cable connecting Victoria with NSW without going through the lengthy regulatory investment test required for regulated transmission and distribution investments.

    Ms D’Ambrosio, a vocal critic of the slow pace of required national regulatory reforms, said the existing national energy laws have “let down” Victoria by failing to drive investment in the electricity system to provide a grid suitable for the 21st century.

    “These reforms will help keep our energy system resilient as we face hotter summers, longer bushfire seasons, and increasingly unreliable coal-powered generators,” she said.

    Victoria highlighted one priority project to be brought forward under the amendments, an increase to the capacity of the power cable connecting Victoria with NSW. It will now ask the energy market operator to call for expressions of interest to enlarge that capacity.

    The move comes after Victoria’s transmission link with South Australia was cut last month after a mini-tornado swept through the west of the state, toppling transmission towers. A temporary and partial fix enabled the states to be reconnected on Monday but the permanent repairs are expected to take up to 12 months.

    Victoria’s summer power supply was also threatened by extended outages last year at key coal and gas power plants, triggering warnings from the Australian Energy Market Operator of potential forced blackouts.

    While the outages were repaired before the summer peak, Victoria, NSW and South Australia only narrowly avoided “load shedding” in late January during an extended heatwave and other outages. At the same time, many solar and wind farms in north-west Victoria are struggling to get their output to customers due to grid bottlenecks.

    Still, business energy users questioned how consumers would be protected if Victoria “goes it alone” on grid augmentation.

    “While there is certainly potential to improve the rules governing the energy market and regulated grid investments, they are in place to protect consumers from poor decision made by others,” said Energy Users Association of Australia chief Andrew Richards.

    Energy producers also voiced concern that consumers would then pay the price for poor investment decisions, and noted that no industry consultation had been carried out on the proposed bill.

    Sarah McNamara, head of the Australian Energy Council, said bypassing the Australian Energy Regulator’s rigorous investment test for transmission was “fraught” with risks.

    “Major investments like interconnectors can play an important role in maintaining security of supply, but commitments to them should only occur as a result of a rigorous cost-benefit analysis overseen by the AER under a national planning approach,” Ms McNamara said.

    “The kind of state-based intervention proposed by the Victorian Government will likely create instability for would-be investors in the energy market.”

    Still, Ms D’Ambrosio rejected those concerns, saying any proposal would still be subject to rigorous analysis to ensure it delivers good value for money for Victorian households and businesses.

    “The failure of the national regime to keep up with changing circumstances is imposing its own costs on consumers, in terms of higher prices and greater reliability risks,” the minister said.

    The debate came as BHP’s vice president, market analysis and economics, Huw McKay, said the recent bushfires had highlighted the “inherent vulnerability” of Australia’s interstate transmission network, which he said had “little inbuilt slack to cope with extreme circumstances”.

    “Further learnings from this episode are the need for both more dispersed generation and greater system integration,” Dr McKay said, welcoming the recent regulatory tick given to an interconnector between NSW and South Australia.

    Meanwhile, South Australia’s “islanding” from the National Electricity Market has ended as Victorian high-voltage grid owner AusNet Services confirmed that a key transmission line was back online after temporary repairs.

    The flow through the SA-Victoria interconnector is however still limited until a second 500 kilovolt transmission line is reconnected late this month. The outage initially cut power supply to Alcoa’s Portland aluminium smelter, requiring multiple orders from AEMO to power plant and battery owners to reconnect the plant and to keep the grid stable.

    Source: Financial Review