by Kate Axup, Michelle Bennett, Anushri Goswami, Danielle Jones, Leighton O'Brien, Paige Pittorino, Jacqui Rowell
Connecting renewables: grid integration
The transition to renewable energy and clean technologies urgently requires substantial financial backing, particularly for the development of new transmission infrastructure. This massive undertaking will require the construction of tens of thousands of kilometres of transmission lines to ensure our networks remain fit for purpose, especially as more coal-fired power stations face retirement. The existing electricity grid must evolve quickly to keep pace with this new infrastructure, but several challenges have stymied progress. These hurdles include unclear funding guidelines, drawn-out regulatory processes, difficulty in securing necessary land tenure, contractor insolvency issues, skilled labour shortages and supply chain constraints.
However, a more predictable landscape is emerging for large energy users and investors. The Australian Energy Regulator (AER) is expected to provide greater clarity on how costs for transmission infrastructure will be recovered and how revenue determination for transmission projects will be approached. This has been underscored by the review and update of the revenue determination guideline for NSW non-contestable projects in July 2024, which is intended to improve the efficiency of the non-contestable revenue determination process.
Investors can look forward to potential opportunities within the pipeline of Integrated System Plan (ISP) transmission projects and upcoming Renewable Energy Zones (REZs), offering promising avenues for portfolio diversification. On their part, developers must remain informed about any access regimes that could impact their projects presently or in the future. They also need a robust land access strategy and approvals process in place due to significant challenges in these areas. With strategic planning and considerable investment in infrastructure development, Australia's grid can effectively support the country's energy transition.
What's the challenge?
The challenge is enormous. There are significant social license issues to grapple with, such as community opposition to large-scale overhead transmission networks, leading to delays in obtaining land access and tenure and approvals, and in the construction process. Turning this around will require a coordinated effort from both government and the private sector. Dedicated funding and other incentives to fast-track the delivery of projects that will build, augment and upgrade our transmission network infrastructure are crucial, along with clear regulatory reform to address the new challenges arising in response to the changing grid infrastructure and energy sources.
What's happening now?
While more is required, we are seeing a push from both federal and state governments to drive the expansion of transmission infrastructure in their jurisdictions. This includes the implementation of various funding initiatives and regulatory regimes to fast-track critical transmission infrastructure projects and incentivise involvement by the private sector.
We are also seeing increased coordination between federal and state governments in this space, which is a positive step. For example, federal, state and territory energy ministers have come together to establish the National Energy Transition Partnership. This partnership is a framework for national alignment and cooperative activity on priority actions between governments, including the acceleration of nationally significant transmission projects and national regulatory reforms to support the energy transition.
Victorian Transmission Plan
VicGrid (the Victorian Government agency responsible for REZ planning and major transmission infrastructure) is commencing the planning of Victorian REZs and transmission infrastructure projects through its state-wide Victorian Transmission Plan (VTP).
The VTP will include a 15-year outlook determining the appropriate level of generation and transmission development required to deliver affordable and reliable renewable energy. The first step will be to identify REZ Priority Areas, and to assist, VicGrid is conducting an energy-specific strategic land use assessment. Following feedback from community workshops with Traditional Owners, local communities and landowners, the Victorian Transmission Plan Guidelines were published in September 2024. The draft 2025 VTP, which will be prepared in accordance with the requirements set out in the VTP Guidelines, will be published for feedback in early 2025 and the final 2025 VTP is expected to be released in mid-2025.
Victorian Access Regime changes
In early June 2024, VicGrid released a 'Victorian Access Regime' (VAR) paper, issued pursuant to the Victorian Government's Victorian Transmission Investment Framework. The VAR is designed to manage the risk of curtailment due to congestion near REZs by managing connections in a manner that aligns with the hosting capacity required to support each REZ. The paper's release suggests that the Victorian Government is pushing ahead with its own jurisdictional transmission access reforms ahead of the Australian Energy Market Commission's (AEMC) national electricity market (NEM) transmission access reform.
As part of the VAR, VicGrid will introduce a Grid Impact Assessment (GIA) which imposes criteria against which the potential impact of proposed generation and storage projects will be assessed. Feedback on the GIA consultation paper concluded on 14 February 2025 and the final GIA guidelines are expected to be released in mid-2025. The table below summarises key features and their implications for the existing transmission network.
What the VAR means for:
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Open access |
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Connections inside a REZ |
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New connections outside a REZ |
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AEMO and AusNet |
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Offshore wind transmission in Gippsland, Victoria
In March 2024, VicGrid announced a study area for the new transmission infrastructure required to connect offshore wind projects to the electricity grid in Latrobe Valley. Although the route is not finalised, it is confirmed that a 500kV overhead transmission line will be used.
VicGrid has started a competitive two-stage tender process to identify a development partner to design, build, finance, operate and maintain the transmission line and connection hub. The first stage of the tender process seeking expressions of interest from interested organisation concluded mid-February 2025
NSW's Electricity Infrastructure Roadmap
EnergyCo continues to progress the rollout of the five REZs currently declared, as well as the Priority Transmission Infrastructure Projects. Since this guide was last published, the following updates have occurred:
- South West REZ: the Access Scheme for the South West REZ was declared in April 2024, with the tender to bid for an access right to this REZ closing in June 2024. Successful proponents are expected to be notified in early 2025. The South West REZ will be supported by transmission infrastructure that is already under construction as part of existing augmentations (eg Transgrid's Project Energy Connect) under the National Electricity Rules (as opposed to under the NSW Electricity Industry Roadmap). In December 2024, EnergyCo released its inaugural Corporate Strategy, which included a goal to have the South West REZ completed by 2030.
- CWO REZ: planning approval for the Central-West Orana REZ transmission project was obtained in June 2024 and the project received $490 million in finance from the Government's Rewiring the Nation Fund. In September 2024, ACEREZ, a consortium of Acciona Concesiones, Cobra and Endeavour Energy, was selected as the preferred network operator to deliver the transmission system, following a competitive tender process. The CWO REZ reached financial close in April 2025 and construction is expected to commenced in Q3 2025.
- New England REZ: the New England REZ was declared 'Critical State Significant Instructure' by the NSW Government in July 2024, meaning the project is considered essential to the state for economic, environmental or social reasons. In March 2025, EnergyCo announced a call for registrations of interest for the role of network operator.
In addition to the REZs, EnergyCo is progressing its Priority Transmission Infrastructure Projects, with a focus on the Waratah Super Battery (which is expected to achieve commercial operations by mid-2025) and the Hunter Transmission Project (which is in the planning and design phase). EnergyCo signed a commitment deed with Transgrid as the preferred Network Operator in January 2025 with construction expected to commence in 2026.
EnergyCo is also responsible for leading the Port to REZ road upgrades project to enable the movement of oversized and over-mass loads for renewable energy equipment from the Port of Newcastle to the REZs. The contract for construction is expected to be awarded in early 2025, with construction scheduled to start in 2025.
WA's electricity infrastructure
An unprecedented level of transmission infrastructure development is required in Western Australia to support the energy transition.
Rewiring the Nation
The Federal Government is investing $20 billion in low-cost finance to deliver, with states and territories, key priority transmission projects like the VNI West Link between Victoria and NSW, and the Marinus Link between Tasmania and Victoria.
Australian Energy Market Operator's Integrated System Plan
AEMO published its Integrated System Plan (ISP) in June 2024. The ISP provides a roadmap for the installation of more than 10,000 kilometres of new transmission, comprising:
- five 'committed and anticipated' projects, which are already underway;
- five 'actionable' projects from the 2022 ISP that remain actionable and are advancing;
- seven projects that have now progressed to 'actionable' status, with recognition of additional time and engagement associated with progressing these projects; and
- a further 12 'future' projects identified.
The document attempts to provide a level of certainty as to what the future will look like, and will guide the direction of energy investment and regulation for the future transmission network.
Transmission access reform
The Energy Security Board (ESB), prior to being disbanded in June 2023, proposed a 'hybrid model' solution consisting of a voluntary congestion relief market (CRM) and priority access model to address increasing congestion in the electricity transmission system. The voluntary CRM will incentivise providers of congestion relief (such as batteries or controllables loads) to locate in congested parts of the network and the priority access model will address the issue of 'cannibalisation' in the energy market.
The Australian Energy Market Commission delivered its final report and recommendations on its Transmission access reform review to the Energy Minister in September 2024. In this final report, the AEMC did not recommend implementing the hybrid model proposed by stakeholders, which combines priority access arrangements with a CRM.
What's next?
- Electricity customers should expect continued wholesale electricity price volatility and possible threats to supply as the transition progresses.
- These buyers should also consider how to respond to stakeholder pressure to reduce emissions associated with electricity consumption.
- To mitigate these risks, large electricity buyers should consider how they can manage their own demand and costs, eg by:
- reducing their load (eg through energy efficiency measures and demand side participation);
- entering into offtakes with renewable generators to hedge against rising electricity prices and to acquire a supply of large-scale generation certificates (LGCs); or
- building on-site generation and/or storage facilities to reduce reliance on the National Electricity Market.
- Investors should consider available opportunities to deploy capital into key infrastructure assets.
- In particular, as more REZs are progressed, investors may bid for a role in financing (equity and debt), building, operating and/or managing those transmission projects. In March 2025, EnergyCo announced a call for registrations of interest for the role of network operator for the New England REZ, so now is the time for investors to reflect on any lessons learned from the previous bid process for the Central West Orana REZ, consider consortium partners and retain advisers in preparation for the next bid.
- Investors are also exploring the creation of new TNSP businesses focused on contestable connections, with a number of energy players exploring this pathway.
- Investors can take comfort in the fact that more certainty is expected from the AER in relation to how transmission infrastructure costs will be recovered and the revenue determination for transmission projects.
- Investors should consider opportunities in the pipeline of ISP transmission projects and upcoming REZs to diversify their asset portfolio. In doing so, they should consider the following key factors associated with such developments:
- supply chain constraints, such as the rising cost of critical materials and geopolitical tensions;
- engineering, procurement and construction contractor solvency issues and skilled labour shortages;
- regulatory clearance investment barriers, including FIRB and competition clearance;
- tax and capitalisation implications; and
- ESG risks, including developing an approach to ensure meaningful community consultation occurs, and that remediation mechanisms and processes are in place, to address any potential disputes with the community.In WA, investors should monitor opportunities for proposed projects being unlocked by newly proposed transmission corridors.
- In WA, investors should monitor opportunities for proposed projects being unlocked by newly proposed transmission corridors.
- Developers should consider opportunities to diversify their asset portfolio in the pipeline of ISP transmission projects and upcoming REZs.
- Developers should be aware of, and have a strategy with respect to, any access regime that may (or could in the future) apply to their projects, as well as a robust land access and approvals strategy, given the significant challenges in these areas.