by Paige Pittorino, Fiona Potter, Jodi Reinmuth, Jacqui Rowell
Unlocking Western Australia's renewable energy potential
Western Australia's electricity grids differ from those of the east coast, presenting both unique opportunities and challenges in today's era of energy transition. The state features two distinct electricity grids: the South West Interconnected System (SWIS) centred around Perth, and the North West Interconnected System (NWIS) in the Pilbara region.
Remote generation—which includes geographically isolated projects not connected to the NWIS or SWIS, and commonly serves resources projects—also plays a pivotal role in WA's energy transition.
What's the challenge?
Transmission infrastructure must be significantly augmented to accommodate the growth of renewable energy generation in WA. The current SWIS is already constrained, and demand for access is expected to increase further with the addition of new renewable projects, including potential offshore wind farms.
SWIS
According to the SWIS Demand Assessment report released in May 2023, more than 4000 kilometres of new high-capacity transmission infrastructure, and more than 50 GW of new generation and storage capacity, will be needed over the next 20 years to facilitate WA's energy transition. Western Power, as the relevant owner of the transmission infrastructure in the SWIS, is positioned to lead in the development of these necessary assets.
The regulatory framework governing the electricity market in the SWIS has recently undergone significant reforms. These changes have introduced uncertainties regarding dispatchability and costs associated with essential system services, with notable increases observed since the reforms commenced.
NWIS
There is a concerted effort to decarbonise the Pilbara region. In 2021, revisions to the regulatory framework governing the NWIS were made to enable third-party access to parts of the grid. However, substantial investment is required to expand the existing transmission infrastructure to accommodate new users.
The Government has announced the Pilbara Energy Transition Plan (including review of the Pilbara Networks Rules) to support decarbonisation and promote common user transmission infrastructure in the region. While this reform is welcome, and will hopefully facilitate and promote third-user access, the uncertainty surrounding the regulatory regime creates mixed signals for potential investors.
What's happening now?
The Federal Government has committed up to $3 billion to upgrade both the NWIS and the SWIS through the 'Rewiring the Nation' policy, aimed at increasing renewable energy deployment, enhancing distribution and accelerating decarbonisation. PoweringWA (located within the Department of Energy, Mines, Industry Regulation and Safety) has been established by the Government, and tasked with coordinating community consultation regarding the transmission infrastructure needed for the energy transition.
The WA Government has pledged to phase out state-owned coal-fired power stations within the SWIS by 2030. This shift creates opportunities for renewable projects to enhance the SWIS's capacity, reliability and security in the future. However, significant investment in project development is crucial in the short term to achieve this goal. The WA Government has committed over $700 million to upgrade the SWIS and will rely on additional financing options, such as the Rewiring the Nation program.
The introduction of the Capacity Investment Scheme in WA should increase financial incentives for renewable project development in the SWIS. Consultations on the Design Paper closed in May 2024, and the feedback received will inform the implementation plan.
What's next?
- As coal-fired power stations are retired and participants seek to transition to more renewable procurement, new supply agreements will need to be negotiated. The ability to access benefits for green products should be assessed.
- Financial incentives through the Reserve Capacity Mechanism and Capacity Investment Scheme will play a key role in the development of projects moving forward. Knowing how these mechanisms operate will be important.
- Access, approvals and operational constraints applying to the SWIS and NWIS remain challenging when developing new projects. However, there is political support for removing these barriers, so developers should closely follow updates.
- The infrastructure investment required for achieving the energy transition presents opportunities for contractors.