Revealed: NSW renewable energy zone costs surge beyond initial estimate

The Australian

2 days ago

NSW's Central-West Orana renewable energy zone will cost more than $5.5bn compared with the original $650m estimate when it was planned as a smaller development, adding to the bulging national bill for delivering the shift to green electricity.
The Australian Energy Regulator said the $5.52bn budget had been calculated by the NSW government's EnergyCo based on determined development and construction capital costs, which will ultimately be recovered from NSW electricity customers.
A raft of other significant costs including connection and system strength infrastructure will be funded through access fees paid by generators and storage projects connecting to the green zone.
EnergyCo says the REZ takes in cities and towns including Dubbo, Dunedoo and Mudgee and will deliver 4.5 gigawatts of network capacity, to support up to 7.7GW of new generation from solar, wind and energy storage projects.
The original development was expected to unlock 3GW of capacity.
The project is expected to drive up to $20bn in private investment in solar, wind, and energy storage projects, supporting about 5000 jobs during peak construction.
Ten electricity facilities spanning solar, wind and batteries are slated to be built across the zone including ACEN Australia's giant Valley of the Winds which is still waiting sign-off from Environment Minister Murray Watt after a further extension was granted on Tuesday.
The Central-West Orana REZ will be the first of the planned five in the state with NSW intending to establish 12GW of renewable energy projects and 2GW of storage, including large-scale batteries.
Each will need transmission lines to connect them to the main grid, but the Australian Energy Market Operator has said bolstering the amount of renewable energy will help lower wholesale electricity prices.
Still, delivering the switch from coal to renewables and building enough new transmission infrastructure to deliver power to users has led to a string of cost blowouts.
Energy experts, industry and farmers sounded the alarm on the VNI-West interconnector after AEMO indicated the proponents of the project believe it is likely to cost $7.6bn, with a range of 30 per cent lower or 50 per cent higher, meaning it could cost as much as $11.4bn.
The Albanese government's target of 82 per cent renewables by 2030 'is looking harder to achieve' due to electricity transmission bottlenecks and community acceptance issues, Macquarie said on Tuesday.
Obstacles including delays in major transmission projects such as VNI West, Humelink and EnergyConnect have complicated hitting the goal along with supply chain delays and worker shortages.
The Albanese government announced last week it would expand its capacity investment scheme by a further 8GW to 40GW amid warnings not enough renewables will be built before big coal plants exit the power grid.
In response Ross Garnaut, the godfather of federal Labor's climate policy, said that energy minister Chris Bowen will miss his goal of 82 per cent renewables by the end of the decade by a 'big margin', warning a Commonwealth underwriting scheme had stymied investment needed to hit green targets.
The cost of overhead transmission line projects has ballooned by up to 55 per cent, with substations rising as much as 35 per cent compared with equivalent estimates provided for AEMO's 2024 electricity plan.
Australia must develop about 10,000km of high voltage transmission lines by 2050 to deliver a smooth transition from coal to ­renewables, with half of the project pipeline to be delivered in the next decade.
However, pockets of rural ­opposition and project pressures spanning supply chain constraints, competition, contracting issues and social licence considerations have slowed momentum and added to costs along with ­delays in delivering a new wave of green energy to households.
AEMO has detailed a 25 per cent to 55 per cent increase after accounting for inflation for overhead transmission line projects compared to estimates for its 2024 integrated system plan and a 10 per cent to 35 per cent leap for transmission substation works, saying the figures are in line with increases announced for recent projects. Read related topics: Climate Change Perry Williams Chief Business Correspondent
Perry Williams is The Australian's Chief Business Correspondent. He was previously Business Editor and a senior reporter covering energy and has also worked at Bloomberg and the Australian Financial Review as resources editor and deputy companies editor.