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Federal government announces welcome funding for transmission projects

– Kate Healey, Policy Manager, RE-Alliance.

The first announcements under the Albanese government’s Rewiring the Nation program were released on Wednesday and they are BIG!! So big, in fact, that Minister for Climate Change and Energy, Chris Bowen, claims it is “the biggest announcement of federal investment in energy since the original Snowy scheme in the 1940s.” 

RE-Alliance welcomes the announcement of funding for two key transmission projects identified in the Australian Energy Market Operator’s (AEMO’s) Integrated System Plan (ISP), but also notes the importance of securing community acceptance for these projects.

1. Marinus Link

Marinus Link comprises two 750 MW high voltage direct current (HVDC) undersea and underground electricity cables (totalling 1,500 MW capacity) connecting Tasmania and Victoria. The project runs between the Burnie area in Tasmania and the Latrobe Valley in Victoria and also includes alternating current (AC) transmission network developments within the North West Tasmanian electricity network.

The revised cost (as at June 2022) for completion of both Marinus Link and the supporting transmission developments in North West Tasmania is AUS$3.8 billion. 

The project is expected to create 1,400 jobs in Tasmania during peak construction, 1,400 jobs in Victoria, and deliver up to $4.5 billion in positive net market benefits above and beyond the cost to build Marinus Link and the supporting Tasmanian transmission developments. It will also provide improved access to Tasmania’s dispatchable capacity (including deep storages) and high quality renewable energy opportunities.

Marinus Link will cut at least 140 million tonnes of CO2 to 2050 – the equivalent of taking approximately one million cars off the road.

The Federal Government and the Tasmanian Government have signed a letter of intent that includes:

  • Access to a concessional loan from Rewiring the Nation, through the Clean Energy Finance Corporation for approximately 80% of the project costs of Marinus Link, with the additional 20% to be an equity investment shared equally between the Commonwealth, Victoria and Tasmania to get this critical project off the ground
  • Up to $1 billion of low-cost debt from Rewiring the Nation for Tasmania’s Battery of the Nation projects, including Tarraleah Power Station redevelopment and Lake Cethana Pumped Hydro
  • Low-cost debt to link Cressy, Burnie, Sheffield, Staverton and Hampshire in Tasmania, known as the North West Transmission Developments (NWTD), which will increase the capacity of the network in Tasmania

The government expects this low-cost financing from Rewiring the Nation to reduce the annual costs of Project Marinus to electricity customers by up to half.

Previous analysis has shown that Victoria and Tasmania only receive 34% of the gross customer benefits and that each National Electricity Market (NEM) region obtains a gross benefit from Project Marinus. Additionally, the reduction in wholesale energy price is fairly evenly spread across the NEM

Ibid p 14.

RE-Alliance considers that as the benefits of the project will be shared across the NEM, it is fair that consumers across the NEM contribute to the costs of the project. We are therefore supportive of the Australian and Tasmanian Governments submitting a cost allocation rule change proposal to the Australian Energy Market Commission. 

The Hon. Guy Barnett, Minister for Energy and Renewables, has commented, “Importantly, equitable cost sharing arrangements between the Commonwealth, Tasmania and Victoria have been agreed, meaning that Tasmanian consumers will only pay their fair share.

“This low cost financing from Rewiring the Nation will reduce the annual cost of Project Marinus for electricity customers by up to half.  By working together, we have been able to achieve a solution that will see, once Marinus Link is built, Tasmanian customers pay no more than 15% of estimated total project costs across both the Marinus Link and North-West Transmission Developments. This will ensure their electricity bills will be lower than they otherwise would be in a world without Marinus Link.”

2. VNI West (via Kerang), REZs and offshore wind development

The Australian Government and Victoria signed an agreement to jointly fund Victorian offshore wind projects, REZs, and the Victoria-New South Wales Interconnector (VNI West) KerangLink. The agreement between Victoria and the Commonwealth sets out:

  • $1.5 billion of concessional financing from Rewiring the Nation available for REZ projects in Victoria, including offshore wind projects;
  • A commitment to coordinate Victorian and Commonwealth regulatory processes to support the rapid development of the Victorian offshore wind industry;
  • Rewiring the Nation, through the Clean Energy Finance Corporation, will provide a concessional loan of $750 million for VNI West to ensure it is completed by 2028.

VNI West is a proposed 500 kV interconnector from a proposed substation near Ballarat in Victoria to a new substation named Dinawan in southwest New South Wales It was previously proposed to be completed by July 2031.

VNI West is expected to unlock 4,000 MW of new power generation, supporting more than 2,000 direct jobs during construction and generating $1.8 billion in net market benefits – including for electricity users.

The 2022 ISP states that it will increase access to Snowy 2.0’s deep storage and other firming capacity from interstate, support new renewable energy needed to replace coal-fired generation (particularly in the Murray River and Western Victoria REZs), provide greater system resilience to earlier than projected coal closures, secure the fuel cost savings of needing less gas for generation, and reduce renewable energy curtailment by sharing geographically diverse renewable energy.

What’s missing from the funding announcements?

Three weeks ago, a group of 30 environment and climate organisations released recommendations to the Federal Government on the design of the Rewiring the Nation Policy.

The Federal Government’s Rewiring the Nation fund provides a great opportunity to build a grid designed for this century, in a way that benefits regional communities, electricity users and nature.

The Government recognises the need for transmission to ensure a rapid transition to an affordable, reliable and decarbonised electricity system. It has highlighted the opportunities for jobs and industry. But these can only be seized if projects genuinely deliver benefits to regional communities and protect our ecosystems. 

Importantly the report recommended making the Rewiring the Nation funding model transparent. There has been no opportunity for public input into the design of the Rewiring the Nation fund, which now seems likely to be administered by the Clean Energy Finance Corporation. 

The report made a range of recommendations: tying Rewiring the Nation funding to better social and environment processes and outcomes; tying funding to respect and recognition of the sovereignty of First Nations people and land through upholding the principles of self-determination and free, prior and informed consent; and improving planning, community engagement, compensation and benefit sharing arrangements for landholders and communities hosting transmission lines.

RE-Alliance welcomes the funding announcement, however we consider that ensuring community acceptance of these projects is at least as important as securing funding arrangements for them. 

We see a greater role for the state in ensuring better social and environmental processes, and for Victoria this would fall on VicGrid.

Read our full report recommendations.

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