National Electricity Market: Future connectivity and reliability

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Connectivity of the National Electricity Market regions
High Priority Initiative
Location
National
Geography
National
Category
Efficient Markets
Problem/Opportunity timeframe
Medium term (5-10 years)
Proposed By
Infrastructure Australia identified initiative
Date added to the IPL
14 February 2019

Opportunity

The National Electricity Market (NEM) is undergoing a once-in-a-lifetime transition from thermal generation to intermittent renewables (such as wind and solar), complemented by firming generation (such as pumped hydro). Over the next 15 years, significant investment will be needed in renewable and firming generation and associated transmission to continue providing affordable, reliable and secure energy for users.

By 2040, an estimated 30 gigawatts (GW) of large-scale renewable energy, backed up with 21 GW of new dispatchable resources, will be required to replace retiring coal-fired generation.

To ensure an orderly and cost-efficient transition, the transmission grid will need augmentation to balance generation resources and connect Renewable Energy Zones (REZ). At present, there is only 13 GW of connection capacity for REZs – less than half of what is required by 2040.

During this transition, the NEM will need to deliver greater volumes of generated and stored energy to meet changing patterns of consumer demand, balance intermittency, and increase system reliability and resilience by transmitting energy across and within regions.

The Australian Energy Market Operator, which operates the NEM, is currently updating its Integrated System Plan (ISP). The ISP was first released in 2018 and formed part of the evidence base for this initiative.

Short-term optimisation of the NEM is also identified as a Priority Initiative on the Infrastructure Priority List.

Proposed initiative

The 2018 ISP identified three groups of investments over the near, medium and longer term. This initiative relates to the potential medium and longer-term (called Group 2 and 3 in the ISP) investments between the mid‑2020s and 2040, and includes:

  • new and increased transfer capacity between regions, such as between Queensland and New South Wales, New South Wales and South Australia, and Tasmania and Victoria

  • network access to energy storage locations

  • network access to renewable energy sources.

Potential initiatives also include the Tasmanian Government’s Second Bass Strait Interconnector project (also known as the ‘Marinus Link’). This was previously listed on the Infrastructure Priority List as a longer-term Priority Initiative and is now captured under this broader initiative.

These potential medium- and longer-term investments are subject to change as the ISP is updated to reflect the dynamic nature of the power system and evolving technologies.

The investments and their timing will also be subject to feasibility studies and detailed assessment of their costs and benefits by network infrastructure owners and governments.

Next steps

Proponent(s) to be identified.