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First tender signals the start of a new energy transition in New South Wales, Australia

image credit: Karsten Würth, Unsplash (https://unsplash.com/photos/0w-uTa0Xz7w)
Paul Verschuer's picture
Executive General Manager AEMO Services

Paul is responsible for leading the management of AEMO Services, an independent subsidiary of the Australian Energy Market Operator, established to perform key roles which help the Australian...

  • Member since 2022
  • 2 items added with 331 views
  • Dec 16, 2022
  • 331 views

In 1888 when Elizabeth Piper, the Mayor of Tamworth, switched on the city’s new electric street lights – the first such installation in Australia - I wonder whether she fully anticipated just how central electricity would soon become to every facet of our lives. The benefits that seem so obvious now were not so then, and there was even a concerted campaign against the new technology from the businesses that profited from the city’s superseded gas lighting system.

Today, I suspect that those of us who deal in the minutiae of the evolving energy transition can become a little desensitised to the extent to which our combined work might lead to a fundamental reshaping of our economy and ways of living. And as we press on with our day-to-day, it is easy to underappreciate seemingly routine parts of the progression that in hindsight may turn out to be landmark moments.

On October 4, 2022 we reached one of those moments when AEMO Services, in our capacity as the state’s Consumer Trustee, opened the first tender round of the New South Wales (NSW) Electricity Infrastructure Roadmap ("the Roadmap") for generation and long-duration storage infrastructure.

Why this moment? After all, this involves only one state (although the largest) and one segment of the larger infrastructure puzzle to be constructed over coming years.

The answer lies in the challenge the Roadmap and our tenders for electricity infrastructure seek to address: incentivising and bringing-forward private investment in a completely new wave of assets – across transmission, generation, storage and firming – at an unprecedented scale.

As a society, we continue to use energy at an ever-increasing rate. The impact of electrifying our transport and our industries is enormous. And we do so as the technology mix rapidly innovates, the output of wind turbines has increased by around 66% since 2020 and batteries have halved in price in just a few years. The Roadmap will deliver new electricity infrastructure that will feed our grid and these energy needs – but it’s bigger than that. Our new ‘power stations’ will no longer be centered in a handful of locations near coal supply, but instead will be decentralised across the State, focused in at least five Renewable Energy Zones.

Keeping the lights on with greener, affordable and secure electricity is only part of the challenge. We also need to make consumers and host communities central to decision-making and ensure they benefit from the energy transition. The Roadmap has been designed to meet these challenges, it’s a holistic policy that delivers opportunities for host communities and reliability, affordability and sustainability for electricity consumers, whilst generating significant economic opportunities for New South Wales.

For community and electricity customers, NSW has redefined how we can achieve the energy transition. Projects connecting to new transmission infrastructure in Renewable Energy Zones are expected to pay a contribution to that infrastructure as well as contribute financially to community and employment outcomes. The Renewable Energy Sector Board has been established and has delivered its first Plan, detailing the ways in which NSW workers, supply chains, other industry and community can maximise their involvement with the Roadmap. First Nations Guidelines have also been published, to help ensure that traditional owners and First Nations people will meaningfully contribute to the energy transition in this State and benefit from the economic opportunities it presents.

Investors and developers need little convincing as to the future needs of energy systems in Australia as coal fired generation retires. The Roadmap addresses the uncertainties that have previously held back attempts to replace this ageing capacity: the congested transmission networks, the conflict between rapidly evolving technologies and the significant capital requirements required for the longer term investments.

Part of the beauty of the Roadmap is that it does this without getting in the way of what the market delivers best: innovation and drive to find new and better ways of delivering critical energy.

Ultimately, as the Consumer Trustee we stand up for electricity consumers by ensuring that competition thrives and the best, most efficient projects which deliver energy in a socially responsible way are supported to construction as early as possible.

Already, more than 3.5GW of energy investment has been committed or is anticipated across NSW since the Roadmap was enacted, and we expect nearly all of these projects to be eligible to participate in our early tender rounds. Not all will do so – there are some which will develop at an appropriate pace without support – and obviously not every applicant through the tender process will be successful. A key part of this determination will include consideration of community benefits, social licence and regional economic development.

In this way, a robustly competitive tender process will maximise the value of public investment in the renewable energy transition from a wholistic standpoint, bringing quality energy to market sooner and providing those projects with the financial security and network access they need to realise their potential. Decades from now, they will likely form the core of a cheaper, greener and more reliable electricity supply. It is my hope that we can look back on this moment as a beginning, a beginning much like Tamworth’s groundbreaking introduction of electric streetlights. 

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Henry Craver's picture
Henry Craver on Dec 23, 2022

Thanks for posting, Paul. You mention congested transition networks as a factor that hindered renewable adoption in the past ... so is that something that has been remedied? I feel like I've seen a bunch of articles over the past 6 months about big lines going up in Australia. 

Paul Verschuer's picture
Paul Verschuer on Jan 16, 2023

Hi Henry,

Thank you for your message.

It’s an exciting time for the energy sector in Australia, and particularly the state of New South Wales (NSW) where I am based.

The NSW state government has released a plan, enabled by regulation, to transform our electricity sector in a coordinated way to achieve a capacity target of at least 12GW of renewable energy generation and 2GW of long-duration storage by 2030.

Currently, three quarters of the state’s electricity comes from coal-fired power stations. Over the next 15 years, four of the five stations in New South Wales will be decommissioned or retired due to their age. The state’s transmission network was built to deliver energy from the five power stations to major load centres. Our new renewable energy ‘power stations’ will no longer be centred in a handful of locations near coal supply, but instead will be decentralised across the state, focused in at least five Renewable Energy Zones (REZ). The zones will group renewable generation, transmission and storage infrastructure in strategic locations where there is high-quality renewable resource and the energy generated can be efficiently stored and transmitted across NSW when needed.

This new decentralised approach means our existing transmission system is no longer fit-for-purpose, and upgrades to the existing transmission network and new transmission infrastructure will be required to connect the new electricity generation and storage to the power system. The state government has developed a Transmission Infrastructure Strategy to connect the Renewable Energy Zones to the national electricity grid, boost the state’s interconnection with neighbouring states, and increase the state’s transmission capacity and access to low-cost generation to facilitate an orderly transition of the energy sector.

The Transmission Infrastructure Strategy forms part of a broader Electricity Infrastructure Roadmap, which provides for coordinated investment in transmission, generation, storage and firming infrastructure to delivery ‘whole-of-system’ benefits. My organisation, AEMO Services, is helping bring the Roadmap to life by coordinating the development of our network, storage and generation capacity, and providing advice to governments and their partners around emerging dynamics in the sector, with a focus on providing long-term benefits to NSW electricity consumers by driving competition in the market to place downward pressure on energy prices in the longer term.

The Electricity Infrastructure Roadmap and our 10-year biannual tender program for electricity infrastructure in New South Wales seek to incentivise and bring forward private investment in transmission, generation, storage and firming infrastructure at an unprecedented scale – at least $32 billion in private capital for new infrastructure investment will be required. AEMO Services determines the size and staging of electricity infrastructure investment required taking into consideration new technology, trends and consumer demand for energy. Details of this are outlined in our Infrastructure Investment Objectives (IIO) Report which is our blueprint for meeting NSW’s future electricity needs.

At a national level, Australia’s federal government recently announced its Rewiring the Nation plan and a Commonwealth Capacity Investment Scheme and a funding package of $7.8 billion to back eight critical transmission and REZ projects which will support our the activities being undertaken under the state program of work, and increase electricity reliability across the national electricity network.

The energy transition and overcoming existing transmission constraints will be complex and challenging, but they will also open up many exciting opportunities for our state and the energy sector more broadly. I’m confident our state and federal programs and the work being undertaken by my organisation and others will help to overcome these challenges and bring our energy system into the future.

I hope this has provided you some insight into what’s happening in Australia, and I look forward to providing ongoing updates on the work we are doing on the Energy Central platform. To stay updated on the work we are doing, please follow us on LinkedIn or join our mailing list. Should you have any further queries, please don’t hesitate to get in touch.

Kind regards,

Paul

Paul Verschuer's picture
Thank Paul for the Post!
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