TransGrid – Planning the Energy System of the Future

1. Executive Summary

Australia is embarking on the largest transformation of the power system since it was established mid-last century. The forecast retirement of existing generation, together with significant reductions in the cost of new renewable generation is driving the transition to the energy system of the future.

To support this TransGrid has taken stakeholder engagement and applied asset management principles to complete its Annual Planning Review to highlight future opportunities for the Transmission System.

This review has identified projects that will realise social benefits through lower energy prices, underpin regional economic growth and ensure continued supply security. The environmental benefits include the increased uptake of renewable energy.

2. Description of Project

TransGrid is the manager and operator of the New South Wales (NSW) high voltage electricity network. Our network is the backbone of the National Electricity Market (NEM) which encompasses five interconnected regions: NSW, Queensland, Victoria, Tasmania and South Australia.

 Figure 1: TransGrid’s Transmission Network in Context

We aim to create value for society and our shareholders through a safe and reliable network at the lowest cost to customers. With transmission services accounting for around 3 per cent of the average electricity bill, we recognise that the way we manage our business has a direct impact on customers every day.

Our responsibility traverses the full asset lifecycle, from planning new assets to replacing or disposing of existing ones. The body of work outlined in this paper focusses on the planning and assessment of new assets in a manner that applies good asset management practice. It considers the key stakeholder and business requirements, the environmental and social impacts on the community and the impact of planning decisions across the lifecycle.

2.1 Overview of Key Challenges

Retirement of Aging Coal Fires Power Stations

Across the NEM, approximately 10,000 –15,000 mega watts (MW) of coal fired generation is anticipated to be decommissioned over the next 20 years. In NSW, over 1,700MW of coal fired generation has already retired and a further 8,000MW is scheduled to retire by 2036. To put these numbers in context, the total peak operational demand for the state of NSW in 2018 was approximately 13,000 MW.

Changing in Generation Technology

The current transformation is also unique in that a significant shift in generation technology economics are driving the replacement of retiring thermal generation with more cost-effective renewable energy sources. Figure 3 shows the projected shift toward renewables in the NEM under the Australian Energy Market Operator’s (AEMO’s) neutral forecast scenario.

Figure 2: Projected NEM Installed Capacity under Neutral Case (AEMO ISP 2018; Page 38)

2.2 Overall Approach to Project Lifecycle Planning

TransGrid’s asset management strategy is focussed on the key business outcomes of:

  • Delivering safe, reliable power
  • Constantly improving efficiency, and
  • Growth through investing to realise customer benefit.

The asset management objectives that support this are:

  • Meeting the NSW Transmission Reliability Standard. This ensures our system meets an acceptable level of reliability for consumers.
  • Investing in network capacity where there is a benefit to consumers

The planning framework (as outlined in Figure 3) has been put in place to facilitate the development of new generation and resolve relevant grid technical challenges so that consumer demand can continue to be met, with reliable and secure electricity at the lowest cost.

This planning framework enables TransGrid to develop and assess options to best meet the asset management objectives.

Figure 3: Network Planning Horizons

In determining the viability of the options identified in the planning process the economic benefit (including both capital and operating over the life of the asset) to consumers of each option is fully quantified.

2.3  Summary of Key Deliverables

2.3.1 Development of Renewable Energy Zones (REZs)

TransGrid has proactively identified regions best suited for renewable energy development. These Renewable Energy Zones (REZs) require extension or augmentation of existing transmission networks to connect them. The establishment of REZs (as shown in Figure 4) signals to renewable energy developers locations where renewable projects can be supported with adequate network capacity, enabling timely connections, and unconstrained energy dispatch.

In the development of the REZs, analysis led by TransGrid in collaboration with specialist experts considered:

  • The quality of renewable energy resources, existing land use, proximity to the existing transmission network and factors that affect the feasibility of generation development.
  • Facilitation of renewable generation development in areas with compatible and low opportunity cost land uses, contributing to regional development priorities.
  • Connection of renewable generation in regions with the best quality renewable resources, where generators operate at higher capacity factors, which deliver lower energy costs to consumers.
  • Minimising transmission costs by re-using existing infrastructure where possible, and realising economies of scale where new connections are required.
  • Minimising the risk of stranded assets by ensuring new transmission serve multiple connection points.
  • Staging transmission developments over different time horizons to align with the ultimate capacity plan.

Figure 4: Identification of NSW REZs

2.4 Potential Transmission Network Development

In considering future network augmentation, TransGrid has also investigated and developed the options around increasing the level of system interconnection, both within NSW and with other NEM regions. The opportunity to route additional transmission pathways through REZs leverage geographic diversity and promotes inter-region competition and sharing of energy services. It is the most cost-effective approach for integrating and aggregating large scale intermittent renewable energy whilst maintaining energy security, as confirmed by the International Energy Agency.

The most significant potential transmission projects identified are:

  • South Australia Energy Transformation: Installation of an interconnector between NSW to South Australia.
  • Expanding NSW to Queensland transmission capacity.
  • NSW to Victoria interconnector upgrade
  • Transmission developments to support a potential Snowy Hydro 2.0 project.

Figure 5: Potential Transmission Developments (source AEMO’s Integrated System Plan)

2.4.1 Contribution to Industry and Government Bodies

TransGrid’s Annual Planning Review has seen the organisation become a major contributor to industry initiatives designed to provide a roadmap for the energy transformation. The outcomes of the work have been:

  • Providing an essential input to the Australian Energy Market Operator (AEMO) in its development of a NEM wide Integrated System Plan. This ensures that the transmission planning across the entire five state network is co-ordinated to achieve maximum economic benefit.
  • Analysis informing NSW Transmission Strategy and the NSW Energy Security Taskforce. The released NSW Government strategy recommended energy zones in Northern NSW, Central-West NSW and South-West NSW be prioritised, with a further support to bring forward preliminary planning work on four priority transmission projects.

2.4.2 Consumer Engagement

TransGrid regards proactive engagement with customers, stakeholders and energy consumers as an essential component of business as usual. As a network service provider operating in the NEM, TransGrid’s prescribed expenditure and revenue is regulated by the AER. Significant investments such as those identified are subject to a formal and public process of scrutiny through the Regulatory Investment Test – Transmission (RIT-T) prior to being committed.

Key parts of the RIT-T process include:

  • Providing an essential input to the Australian Energy Market Operator (AEMO) in its development of a NEM wide Integrated System Plan. This ensures that the transmission planning across the entire five state network is co-ordinated to achieve maximum economic benefit.
  • Analysis informing NSW Transmission Strategy and the NSW Energy Security Taskforce. The released NSW Government strategy recommended energy zones in Northern NSW, Central-West NSW and South-West NSW be prioritised, with a further support to bring forward preliminary planning work on four priority transmission projects.

TransGrid will manage this process to ensure that the project concepts developed during the annual planning process are fully considered by relevant stakeholders.

2.5 Benefits and Outcomes to the Community and Australian Economy

A well managed transmission network is the platform that can enable Australia’s transition to cheaper, cleaner energy sources. The deliverables from the complete view of future grid requirements in the Annual Planning Review will allow public scrutiny to ensure the most appropriate long-term investment decisions are made.

While investment will not be committed until the appropriate regulatory and customer engagement and scrutiny has been completed, the planning review process has highlighted the following significant environmental and social benefits.

Unlock Lower Energy Costs for Consumers

Independent analysis was commissioned by TransGrid to determine the optimal outcome for NSW on minimising total system cost. This study identified that the renewable energy zones will deliver 8% lower system costs compared to a system without REZ’s; this saving NSW consumers $0.9 billion over the next 20 years. The cost savings are due to improved capacity factors, lower capital costs, and the reduced need for system stabilisation.

AEMO’s Integrated System Plan (ISP) modelling also shows that by spending 8% to 15% of total capital investment on transmission rather than generation, efficiency gains are achievable. The ISP conservatively projects total system cost savings ranging between $1.2 billion and $2.0 billion with this integrated approach.

The NSW Government released its Transmission Infrastructure Strategy on 12th November 2018. The Strategy indicates that the NSW Government will prioritise three Energy Zones in the state’s Northern, Central-West and South-West regions. These zomes will leverage up to $23 billion in private sector investment opportunities, boosting regional economies with up to 2,000 construction jobs per year and build the state’s resilience by ensuring capacity for up to 17,000MW of new generation projects to replace the retiring traditional power stations.

Increased Uptake of Renewable Energy

Given the scale and timeframe of expected retirements of existing coal fired coal fired generation, it is critical that frameworks are put in place to facilitate the development of new generation. Increased investment in an interconnected grid provide the flexibility, security and economic efficiency associated with a power system designed to take maximum advantage of existing sources, integrate variable renewable energy and support efficient competitive alternatives for customers.

Maintain System  Reliability and Security

Transmission investments options to be considered will not only secure greater geographic diversity of weather dependent resources, but also will manage the risk of anticipated but uncontrollable climate effects such as bushfires, droughts (both water and wind) and long duration high heat periods.

3. Stakeholder Engagement

The approach to identifying what the energy system of the future may look like and determining the most beneficial response requires significant input internally from the business and other external stakeholders.

Internally the development of the Annual Planning Review required consideration across all elements of the asset lifecycle, including contributions from:

Network Planning

  • Responsible for the co-ordination and development of the Annual Planning Review.
  • Development of network modelling, including generation and economic benefit analysis
  • Development and mapping of REZs.
  • Development of network augmentation projects to meet future projected grid requirements.
  • Engagement with industry bodies, including AEMO.

Environmental Property and Spatial Systems

  • Preliminary route selection and constraint analysis.
  • Review of potential environmental impacts and strategies to mitigate these in the route selection.
  • Identification of property holder interests and engagement strategies.
  • Geospatial mapping and support.

Project Development

  • Development of project technical requirements and concept design proposals.
  • In depth analysis of potential innovative design solutions to reduce build cost.
  • Cost estimating for all proposed options.

Network Operations

  • Responsible for assessing project impacts on network operations, including capacity constraints management, with contributions to project staging development.

Construction and Maintenance Teams

  • Contributions to project concept constructability and maintainability assessments and staging development, including impacts on network operations.

Asset Management

  • Responsible for the implementation of the asset investment framework and governance.
  • Involvement in workshops around potential lifecycle issues with innovations to standard design.

Regulatory and Stakeholder Engagement Teams

  • Responsible for establishing and implementing stakeholder engagement framework, and facilitating discussions with external bodies.

In addition a number of external parties are involved to co-ordinate the development of the transmission system at a national level. The most critical of these were:

  • The Australian Energy Market Operator (AEMO) as the overall co-ordinating body for the National Electricity Market and the Victorian Jurisdictional planner.
  • ElectraNet as the South Australian Transmission Operator.
  • Powerlink as the Queensland Transmission Operator.

4. General Comments

Figure 6 shows the transmission projects identified in TransGrid’s published Annual Planning Review 2018

Figure 6: Potential Transmission Projects

Figure 7 shows the various steps undertaken as part of the Regulatory Investment Test for Transmission (RIT-T), the AER regulatory assessment of project benefits for consumers. TransGrid has incorporated its stakeholder engagement as part of the stakeholder consultation process.

Figure 7: Project Regulatory Assessment Process (AER Regulatory Investment Test for Transmission)

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