Victorians face a more than doubling of transmission charges on electricity bills if the state government proceeds with plans for what is likely to be the most costly and longest single power line in Australia’s history, a thinktank says in a new report.
The report by the Victoria Energy Policy Centre (VEPC) argues the proposed 500 kilovolt VNI West transmission line linking Melbourne’s outskirts with Wagga Wagga on an 800km path will be far costlier than alternatives and faces extensive landholder opposition. It also will not solve grid bottlenecks holding back new solar and windfarms in the state.
The Australian Energy Market Operator (Aemo), which first proposed VNI West as a $2.7bn project in 2018 and is Victoria’s main planner for transmission, estimated users’ transmission charges would need to rise by a quarter. That assessment, though, was based on 2021 prices and ignored interest costs that have since soared.
The report estimates the Victorian portion of the line alone will cost $4.9bn in current dollars. Add in a further $3bn needed for upgrades to the existing 220kV networks to integrate VNI West, and the full cost could swell to $11bn and lift Victorians’ transmission charges by at least 124%.
“The cost has blown out again and again and again,” said Bruce Mountain, the VEPC’s director and one of the report’s authors. “Aemo rightfully should long since have said, ‘We need to think again, this is not getting anywhere.’”
The falling price of renewables has offered nations endowed with lots of wind and sunshine potentially low-cost ways to decarbonise their economies. However, planning the transition is proving to be challenging, while the global rush to introduce new technologies to head off global heating means equipment prices are rocketing.
Victoria’s energy minister, Lily D’Ambrosio, said the government would consider the report “but rigorous analysis by Aemo shows that VNI-West provides value to Victorian energy consumers, helping to keep the lights on across the state as our ageing coal-fired generators close”.
“New transmission is vital for securing affordable and reliable renewable energy for Victorians – these projects will form part of the national electricity grid, allowing 3.4GW of new renewable generation to be built in Victoria,” D’Ambrosio said, adding that state agency Vicgrid was “already providing greater oversight of the [Western Renewables Link] and VNI West projects”.
Merryn York, an Aemo executive general manager, said the agency had addressed the centre’s claims previously. Such reports created “on-going confusion and concern for landholders and communities”.
“Our consultation process for VNI West involved hundreds of stakeholders to identify a preferred option that is forecast to deliver $1.4bn in net market benefits, and harness 3,400 megawatts of renewable generation in Victoria – enough to meet the annual electricity needs for approximately 2.3m homes,” she said.
York also dismissed the report’s “Plan B” that the authors said would result in 13% less curtailment – renewable energy generated that exceeds grid capacity – and rely mostly on existing transmission links to support windfarms off the Gippsland coast.
Plan B “would not sufficiently support renewable generation development in north-west Victoria, require the demolition of people’s homes to widen the 1,040km of existing easements and threaten power supply to major regional and rural towns during construction,” she said.
Mountain challenged Aemo to provide proof to support its dismissal of the VEPC’s alternative. The onus was also on the agency to demonstrate how the VNI West plan squared with Victoria’s target of sourcing 95% of its electricity from renewables by 2035.
VNI West, too, implied Victoria would need to rely on New South Wales for much of its electricity even though its northern neighbour was potentially in an even more precarious power position as ageing coal plants exit the grid, Mountain said.
