National Electricity Market: Future connectivity and reliability

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National Electricity Market: Future connectivity and reliability

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National Electricity Market: Future connectivity and reliability

A graphic of the Australian continent. Qld, NSW, Vic are shaded. Dots representing Brisbane, Sydney and Melbourne.
Energy Transformation
Infrastructure Australia identified proposal
Medium to longer term (5–15 years)
14 February 2019

The National Electricity Market (NEM) is undergoing a once-in-a-lifetime transition from thermal generation to renewables (such as wind and solar), complemented by firming generation (such as pumped hydro). By 2035, 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, over 60 gigawatts (GW) of large-scale renewable energy, backed up with approximately 45 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 (REZs). Over 20 GW of new connection capacity is required in REZs by 2040 to meet this growing need.

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 (AEMO), which operates the NEM, released an update to its 2020 Integrated System Plan (ISP) in December 2021.

The ISP was first released in 2018 and formed part of the evidence base for this proposal.

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

Early-stage Proposal

The 2021 ISP Update provides an actionable roadmap to guide governments, industry and consumers on investments needed for an affordable, secure and reliable energy future. The proposed proposal is to provide increased transfer capacity between regions and improve network access to energy storage locations and renewable energy sources. This includes:

  • new and increased transfer capacity between Queensland, New South Wales, Victoria,  and Tasmania
  • network access between energy storage locations and major load centres
  • network access to renewable energy sources.

Potential proposals 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 proposal and is now captured under this broader proposal.

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 next ISP will be finalised in June 2022.

The investments and their timing will also be subject to regulatory assessment and any other processes required by governments.

Next Steps

The NEM is a wholesale market that connects generators and retailers across the six eastern and southern states and territories in Australia. Western Australia and the Northern Territory are not connected to the NEM.

The Australian Energy Market Commission (AEMC) develops the rules by which the market must operate. The Australian Energy Regulator (AER) enforces the rules and makes judgements on the regulatory proposals of monopoly network operators.

As AEMO handles the day-to-day operations of the electricity and gas markets, we encourage them to continue to work with AEMC, AER, Energy Security Board, government and private sector asset owners and operators to identify options for future connectivity and reliability of energy supplied via the NEM.

Refer to Infrastructure Glossary for terms and definitions.