Cost of state’s renewable energy transmission plan predicted to double

The estimated cost of connecting Victoria’s renewable energy zones has nearly doubled to almost $8 billion.

Despite the modelling showing increased transmission costs, adding $14 a year to household energy bills, the state government argues Victorians will ultimately save $20 a year when the plan delivers bigger reductions in wholesale energy prices.

But this transmission cost could be twice as high. Government transmission agency VicGrid has provided an accuracy range that could be as much as 100 per cent more, at $15.8 billion, or 50 per cent less, at $3.95 billion.

The report estimates that not delivering the plan would cost the economy $9.6 billion.

The government has also made significant changes to the boundaries of the state’s six proposed renewable energy zones – which will be designated as hubs for wind, solar and battery farms – to cater for environmental and industry concerns.

The footprint of these areas has been increased to 7.9 per cent of the state’s total land area after industry told the government it would need larger areas to make projects technically and commercially viable, with 1 per cent of Victorian land proposed to be set aside to host infrastructure such as turbines, solar panels and roads.

On Sunday, Energy Minister Lily D’Ambrosio will unveil the final version of the Victorian Transmission Plan, which outlines the parts of the state that have been designated as renewable energy zones and the new transmission infrastructure needed over the next 15 years to connect them to the grid.

The document has been provided to The Age before its public release.

The final plan takes into account new Australian Energy Market Operator costings for these large transmission lines. The total cost of the projects has risen from $4.3 billion to $7.9 billion compared with last year’s draft edition.

Because the projects are in their early stages, the figure is an estimate, and VicGrid says it could be substantially higher or lower.

A large portion of these costs will be recouped through consumer bills. The government estimates the transmission charge reflected on annual household energy bills will rise by $14 a year for households and $30 for small business from 2029 to 2050.

However, D’Ambrosio will argue that other government modelling shows that the delivery of more renewable energy into the grid will lower wholesale energy costs over the same period and eventually reduce bills by $20 a household or $50 for small businesses.

“This plan will deliver cheaper and reliable power for our state, lowering energy bills for Victorian families and making sure our business and industry can continue to grow,” D’Ambrosio said.

“We’re supporting the state’s industrial sector to grow with a secure source of cheap renewable energy and creating 67,000 jobs that will be needed for the state’s energy transition by 2040. Many of these will be in regional areas.”

The four new transmission projects in the plan include a second line in Gippsland to serve offshore wind, a line between Sydenham and Tarrone, a line between Truganina and Deer Park, and a short line between Hazelwood and Yallourn.

Responding to feedback, the Allan government has also altered some of its renewable energy zones from its draft vision, including making some bigger to allow projects to stack up financially.

Two zones based around the Wimmera region have been combined into a large Western Renewable Energy Zone, with a footprint 68 per cent bigger than first proposed. A south-west zone has grown by 9.1 per cent, with a new section added and others removed.

Brolga habitats and irrigation districts have also been removed from the Central North zone, halving its size.

The draft transmission plan outlined renewable energy zones that made up 7 per cent of the state’s total land area, which has increased to 7.9 per cent.

The government estimates that by 2040, about 230,000 hectares, or less than 1 per cent of Victoria’s land area, will host renewables infrastructure.

VicGrid chief executive Alistair Parker said the plan aimed to minimise impacts on landholders, regional communities and key industries such as agriculture.

“VicGrid has worked hard to balance a range of factors as we make difficult decisions about where energy infrastructure is needed to deliver reliable and affordable power to Victorian homes, businesses and industry,” he said.

The 15-year plan has been timed to coincide with the progressive closure of the state’s coal-fired power stations. Yallourn is due to be closed by 2028 and Loy Yang A by 2035.

Transmission projects have become a political issue in regional Victoria, with farmers and landowners protesting against the routes of key lines.

Landowners who host new lines will receive payments of $8000 per kilometre every year for 25 years, and companies will provide other benefits and payments to those whose land is near or significantly affected by the projects.

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