Australian state frees itself from federal shackles to unlock more grid capacity

The government of Victoria has decided to break from national electricity rules and introduce legislation to fast-track priority projects such as grid scale batteries and transmission upgrades, and make room for more large scale solar and wind. The announced reforms have prompted a flurry of reaction.

February 20, 2020

From pv magazine Australia.

In a dramatic split from national electricity supply rules, the Australian state of Victoria is moving to enable urgent upgrades to its energy transmission network by introducing legislation to unlock renewables projects and improve the reliability of energy supply. The state’s Labor government says it will sidestep sections of the rules that govern the operation of the National Electricity Market and introduce legislation to fast-track priority projects such as grid scale batteries and transmission upgrades.

Victoria energy minister Lily D’Ambrosio said on Tuesday the state government had decided to pursue amendments to the National Electricity (Victoria) Act 2005 to override the “complex and outdated” national regulatory regime that has caused grid bottlenecks.

“The existing national energy laws have let us down – they have failed to drive investment in our electricity system or provide a 21st century grid for all Victorians,” said D’Ambrosio. “These reforms will help keep our energy system resilient as we face hotter summers, longer bushfire seasons and increasingly unreliable coal-powered generators.”

Let down

Victoria’s decision comes after a long struggle with the state’s power system security which has been highlighted in recent months. Extreme heat created unprecedented demand for electricity and “aging, coal-fired generators repeatedly let Victoria down”, the energy minister said. The transmission system has shown vulnerability to bushfires and severe weather events such as the mini-tornado that brought down the Heywood interconnector this summer. Along with New South Wales and South Australia, Victoria came close to large scale load shedding last month when a heatwave and unexpected failures at coal-fired plants threatened to erase almost all reserve capacity.

The state has also seen unprecedented curtailment which has affected most of its solar farms this summer. In September, the Australian Energy Market Operator (AEMO) constrained the output of five large scale solar plants by 50%, including four solar farms in northwest Victoria: at Gannawarra, Karadoc, Wemen and Bannerton. Large Victorian PV projects have been warned they will need to wait at least nine months for a grid connection and other developers yet to begin construction on billions of dollars worth of projects have been told grid connection delays could stretch to seven years.


D’Ambrosio said the changes proposed by Victoria would be made in close consultation with AEMO and focus on projects delivering benefits to consumers while increasing the state’s capacity to import electricity during periods of peak demand. As a first step to secure additional transmission facilities, the state government will ask AEMO to call for expressions of interest to increase the capacity of the Victoria-New South Wales Interconnector.

That project and other network upgrades were previously laid out in AEMO’s $370 million (US$245 million) western Victoria plan, unveiled last year. The market operator has calculated the strategic investment necessary to accommodate up to 6 GW of new solar and wind farms in the coming decade would produce a return of $670 million in market benefits.

At the time, the proposed expansion of the grid in western Victoria was used by federal energy minister Angus Taylor to unleash a fresh attack on the state’s 50%-by-2030 renewables target. “The Australian government remains concerned that reckless [Daniel] Andrews Labor government actions are hurting Victorian, Tasmanian and South Australian energy consumers and adding hundreds of millions of dollars in cost,” Taylor said.


The Victorian government’s proposal to accelerate much-needed investment in transmission prompted a flurry of responses. Kane Thornton, chief executive of renewables trade body the Clean Energy Council (CEC) welcomed the announcement and expressed hope the initiative would help reverse the recent collapse in clean energy investment.

“Our transmission network has simply not kept pace with the transition to a 21st century energy system and is causing major concerns for investors in clean energy,” Thornton said. “Across Victoria, there are existing renewable generators that are having their output constrained and renewable projects that are experiencing difficulties connecting to the grid due to system strength and congestion issues. This is not only inhibiting the state’s transition to a cleaner, more reliable and more affordable energy supply, but has also contributed to a significant slowdown in new clean energy investment.”

Australia’s sluggish transmission network and lack of long-term policy were the reasons behind a drop in renewables investment last year. Analysts at business intelligence firm Bloomberg New Energy Finance said big PV was the biggest casualty of a drop in investor confidence in Australia which saw the US$3 billion invested in clean energy in 2018 shrink to US$1.2 billion last year. CEC analysis has backed that assertion by reporting a 50% drop in utility scale renewables investment and a retreat from 51 projects worth $10.7 billion in 2018 to 28 projects worth $4.5 billion.


Other commentators were less pleased with the proposed Victoria government intervention. Sarah McNamara, CEO of electric company and natural gas trade body the Australian Energy Council, said no industry consultation had been undertaken on the proposed bill, nor had it been seen.

“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 [Australian Energy Regulator] under a national planning approach,” said McNamara. “The kind of state-based intervention proposed by the Victorian government will likely create instability for would-be investors in the energy market.”

The Energy Users’ Association of Australia lobby group echoed similar concerns. “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 decisions made by others,” said chief executive Andrew Richards.