Transmission solutions to remain central 10 min read
The Australian offshore wind sector continues to progress at a rapid rate. Feasibility licence applications for the Gippsland offshore wind project closed in late April; a new area off the New South Wales Hunter Coast was declared in mid-July, with feasibility licence applications due in November; and the Department of Climate Change, Energy, the Environment and Water (DCCEW) and the Offshore Infrastructure Registrar released, respectively, updated Guidelines and Guidance earlier this month.
In this Insight, we highlight some key developments in the Australian offshore wind sector, including details of the development of transmission infrastructure in Victoria, the hesitancy surrounding 'industry-led' renewable energy zones (REZ) and the declaration of the Hunter-Central Coast REZ.
- There has been considerable action in the Australian offshore wind sector, including:
- the Victorian Government issuing:
- Offshore Wind Energy Implementation Statements;
- VicGrid's 'Development and Engagement Roadmap', which sets out its approach to developing new transmission in Gippsland and Portland, and breaks down its ongoing public consultation plan into four key phases;
- the final design for the Victorian Transmission Investment Framework; and
- the Hunter-Central Coast Region of NSW being formally declared a REZ.
- the Victorian Government issuing:
- Transmission solutions are likely to remain a key topic for offshore wind developers, and relevant stakeholders. They will have further opportunities to be involved with consultation processes, given that eg preliminary procurement activities for offshore wind transmission infrastructure in Victoria will commence later this year.
Implementation Statement 2
The Victorian Government is in the process of issuing a collection of Offshore Wind Energy Implementation Statements, which are designed to guide industry stakeholders and communities on the development of the offshore wind sector in the state.
'Implementation Statement 1', released in October 2022, provided some guidance on the proposed direction for offshore wind transmission solutions.1 (Please see our previous Insight) More recently, in March the Victorian Government released 'Implementation Statement 2', providing further updates on transmission.2
The development of transmission infrastructure for offshore wind is currently being directed by VicGrid, a division of the Victorian Government Department of Energy, Environment and Climate Action, in collaboration with the Australian Energy Market Operator (AEMO), Victoria's transmission planner. However, as discussed below, VicGrid may in future assume AEMO's responsibilities in relation to offshore wind.
VicGrid's approach to transmission is to centralise transmission infrastructure for offshore wind projects, with offshore wind farms being required to connect underground to a system of coordinated connection points as a condition of the offshore wind generation procurement process.3 Its coordinated approach is aimed at preventing a 'spaghetti effect' of multiple uncoordinated private lines servicing the grid, which it claims will be less efficient, and also disruptive to local communities, Traditional Owners and other stakeholders. Further, under this system, private developers are disincentivised from creating their own transmission lines that would effectively be in competition with VicGrid's procured transmission lines.
[Figure 1 – pg 13 of Victoria's Offshore Wind Implementation Statement 2 | Engage Victoria]
To achieve the Victorian Government's offshore wind target of at least 2GW by 2032, transmission infrastructure will initially need to facilitate connection capacity of around 2–2.5GW in both Gippsland and Portland. Additionally, the potential to scale up capacity, and integrate offshore and onshore renewable energy, is necessary to achieve further targets of 4GW by 2035 and 9GW by 2040.
Development and Engagement Roadmap
In March 2023 VicGrid released a 'Development and Engagement Roadmap'4 (the Roadmap), which discusses its approach to developing new transmission in Gippsland and Portland.
The Roadmap provides that VicGrid will initially focus on the development of transmission projects needed to coordinate offshore wind connections for the Victorian Government's first target of at least 2GW by 2032. However, some concerns with VicGrid's approach have been expressed, including by the Clean Energy Council, which stated in its submission that:5
- while VicGrid has acknowledged the need for future transmission infrastructure to support offshore wind projects beyond 2032, specific planning should be being undertaken, given the long lead times for consultations, the substantial cost to build, and the Victorian Government's aim to double the target to 4GW by 2035; and
- there is a real likelihood that the required initial transfer capacity will exceed 2GW by 2032, given that the proponents of feasibility licences in the Gippsland region will be ready for a commercial licence by 2030/2031, and that there are likely to be multiple feasibility licences awarded for the Gippsland declared area.
The Roadmap also outlines the consultation measures VicGrid will take to inform the planning of offshore wind transmission infrastructure, including its location and specifications. It states that VicGrid will apply the 'Victorian Government’s Public Engagement Framework 2021-2025'6 to undertake consultation with affected communities, Traditional Owners and other stakeholders. Additionally, it will work closely with government partners, including AEMO and Offshore Wind Energy Victoria.
The Roadmap breaks down VicGrid's ongoing public consultation plan into four key phases:
VicGrid engaged with Traditional Owners, communities and stakeholders in Gippsland and Portland, and shared information on the importance of offshore wind and the new transmission connections needed. Following Phase 1, it published a Phase 1 Engagement Summary Report,7 with notable themes in the received feedback including:
- Environmental and biodiversity impacts – the short- and long-term impact of transmission infrastructure on environment and biodiversity should be a key consideration when deciding on shortlisted options. Feedback highlighted the importance of ensuring that both onshore and offshore protected areas and threatened species would not be compromised by the new infrastructure.
- Infrastructure – respondents sought additional information about whether transmission infrastructure will be underground or overhead, with a preference for existing easements and infrastructure to be used, and for fire (and other natural disaster) risks to be mitigated or avoided. Concerns were expressed about the impact of construction, with support for a buffer zone between infrastructure and towns. Respondents also placed importance on the new transmission infrastructure being future proofed, so it would be able to meet future energy and offshore wind targets.
- Economic – there was concern about the impact of transmission infrastructure on the value of properties, with respondents seeking compensation to be paid to landholders who have infrastructure placed on their land or who will live near it. There were also differing views about whether such compensation should be a once-off payment or an ongoing series of payments. Compensation for impacts on local employment and industry, and the financial feasibility of the project, were also raised.
- Energy transition – respondents raised the importance of considering the reliability and quality of offshore wind energy when shortlisting options. Some were opposed to offshore wind projects in regional areas and expressed the sentiment that regional areas should not host energy generation assets that power metropolitan areas.
VicGrid is currently developing an Options Assessment Method through a process of consultation, having published a draft on 27 July 2023.8 The Options Assessment Method will take into consideration the consultation and feedback received in Phase 1, to assess and decide how VicGrid will narrow down a list of technically feasible project proposals to identify options for the transmission infrastructure. The draft provides that proposals will be assessed on a combination of project objectives and guiding principles that consider social, cultural, economic, environmental and technical implications. Throughout this phase, VicGrid will continue to seek feedback on the draft Options Assessment Method until 27 August 2023, including the relative importance of the proposed assessment criteria.
The draft guiding objectives and guiding principles were developed and informed through the Phase 1 engagement, and these objectives and principles will, in turn, form the draft assessment criteria. These draft objectives are to:
- ensure investment in viable transmission infrastructure that is fit for purpose, resilient and built with future needs in mind;
- contribute to regional development opportunities, including community benefits and governance, and economic development in the energy sector; and
- maintain transmission system security, reliability and strength, enabling the transport of generation to load.
and the draft guiding principles being to:
- minimise impact on host landholders and communities, including visual amenity;
- minimise impact on the environment;
- minimise impact on Traditional Owners’ cultural values and aspirations;
- minimise impact on existing and future land use;
- minimise cost impacts on energy consumers and generators; and
- limit engineering complexities during construction and impacts on existing infrastructure.
VicGrid will use the Options Assessment Method to assess a series of short-listed options, and, as such, identify the preferred options for connection points and high-level transmission corridors in Gippsland and Portland. As stressed by the Clean Energy Council in its submission, it will be important that VicGrid maintain this timeline to allow supporting studies (such as accurate environmental studies and related critical project works) to be completed by offshore wind project developers, particularly given that some developers are working towards achieving first power by 2028.9
VicGrid will select, approve and publish the preferred routes for connection and transmission corridors in Gippsland and Portland. Once these transmission projects have been designed and approved, it will run a contestable procurement tender, which will be open to tenders from all companies that have a demonstrated track record of delivering major transmission infrastructure.
Victorian Transmission Investment Framework
In June 2023 the Victorian Government released the final design for the Victorian Transmission Investment Framework (the VTIF).10 The VTIF governs how major electricity transmission infrastructure, including offshore wind, and REZs will be planned and developed in Victoria, with the core elements of the framework being:
- a new Victorian transmission planning objective;
- a new planning process for new major transmission infrastructure and REZs, which will include producing a Victorian Transmission Plan every four years;
- a new procurement approach to meet Victoria's transmission needs;
- improving access arrangements for new projects connecting into the grid; and
- place-based approaches to engagement with Traditional Owners and communities.
Relevantly to the offshore wind sector:
- VicGrid is currently considering procuring transmission projects, which would include offshore wind projects, directly under the VTIF, rather than through AEMO, which is Victoria's current transmission system planner. This means that, in the future, VicGrid could potentially be the single entity responsible both for transmission planning and delivery, and would subsume some of AEMO's existing functions. However, this consolidation is still under consideration and, in the interim, VicGrid will continue to contract with AEMO as separate entities to procure the necessary augmentations or network services; and
- in its planning and coordination of offshore wind transmission connections in Gippsland and Portland, VicGrid will consider adopting the principles of the VTIF where possible. These principles include:
- an engagement model that is participatory, and inclusive of regional and local interests;
- consideration of benefits for the local communities and Traditional Owners in hosting the transmission infrastructure; and
- partnering with Traditional Owners and Victoria’s Indigenous communities.
We understand from media reports that VicGrid has recently stated private proponents will need to compete for transmission infrastructure work11 And, as a result, AusNet's Gippsland Renewable Energy Zone (AusNet's G-REZ), which included a transmission route to support offshore wind in Australia, has now been put on hold.12
Before VicGrid's announcement, AusNet had been exploring an alternative 'industry-led' model for the Gippsland REZ, and been engaging with landowners and potential renewable energy generators in the Gippsland region in relation to this. The aim of AusNet's G-REZ was to act as an extension cord for renewable energy projects to connect into the National Energy Market, and to support offshore wind in Australia. This proposed route closely aligned with VicGrid's proposed route – see below.13
VicGrid's preference to coordinate all transmission infrastructure means that AusNet's proposed transmission corridor may be considered part of the assessment process to determine feasible transmission options (in Phase 3), rather than AusNet directly proceeding with its proposed transmission route.
Victoria is not the only state to be investigating offshore wind transmission options. The Hunter-Central Coast Region of NSW was formally declared a REZ on 9 December 202214 – see below for the declared Hunter-Central Coast REZ area.
*The 'Potential Future Commonwealth Offshore Wind Zone' refers to the area of the Pacific Ocean within the Hunter-Central Coast REZ that was proposed as a declared area for offshore renewable energy, as shown on the EnergyCo website. (Please see our previous Insight).
EnergyCo is the NSW statutory authority that, on behalf of the NSW Government, will be responsible for planning and coordinating the development of this REZ. As the appointed Infrastructure Planner for the Hunter-Central Coast REZ, it will work closely with network operators to deliver any required augmentations of transmission infrastructure, particularly given that the Hunter-Central Coast REZ is initially limited to only 1GW of grid capacity to target onshore wind and solar. This capacity is intended to increase over time to accommodate offshore wind, the retirement of coal-fired power stations and the repurposing of mining land.
In its declaration of the Hunter-Central Coast REZ, the Sydney Ring transmission network infrastructure project, consisting of a 500 kV transmission network to reinforce supply to Sydney, Newcastle and Wollongong load centres (and that may include the Waratah Super Battery),15 is expressly excluded from forming part of the REZ.
We expect transmission solutions to remain a key topic for offshore wind developers, and relevant stakeholders, and that this will continue over the coming year – and, as such, sector participants will have further opportunities to be involved with consultation on transmission. These may arise from the following key steps:
- The transmission and infrastructure licence chapter of the feasibility licence Guideline is currently under development by DCCEW – we understand it's intended a draft be circulated for public consultation in the coming months.
- VicGrid will continue to engage with stakeholders to develop its 'Options Assessment Method', and will subsequently assess transmission options against it. It expects to publish its final decision in late 2023 or early 2024.
- The Victorian Government has indicated it will release 'Implementation Statement 3' in late 2023, providing further detail about the transmission infrastructure procurement process and potentially announcing specific transmission connection point locations.
- VicGrid and AEMO will commence preliminary procurement activities for offshore wind transmission infrastructure later this year. The formal procurement process is expected to commence next year. However, we note AEMO's involvement in the offshore wind transmission infrastructure in Victoria may be subject to change, particularly given the Government is considering whether to consolidate the responsibilities of VicGrid and AEMO into a single entity.
- The declaration for the Hunter-Central Coast REZ may continue to evolve, with further specified networks, generation and network and storage infrastructure potentially being added.
This underground connection is required unless proponents are able to demonstrate a transmission solution that has greater net benefits, including for local communities and the environment, and is cost effective.