Big News in Transmission for Victoria

February (2023) has been a huge month in the Australian Energy market, particularly in Victoria with significant announcements being made by the Andrews Labor Government, VicGrid and the Australian Energy Market Operator – Victorian Planning (AVP). Have these announcements gone to plan?

Ministerial Order to accelerate transmission

On 20 February 2023 the Victorian Government authorised (via a Ministerial Order) the Australian Energy Market Operator (AEMO) to accelerate the proposed Victoria-New South Wales Interconnector West (VNI West). Using its powers under the National Electricity (Victoria) Act 2005 (NEVA), the Victorian Government has enabled AEMO to immediately commence preparatory and planning works, such as alternative route and design analysis.

Under the Ministerial Order, AEMO will also consider alternative locations for the terminal station (connection point) with the Western Renewables Link (WRL). It is also likely the WRL will be uprated to 500kV dual circuit the entire length (from Sydenham to Bulgana). While some view the relocation of the proposed Ballarat North terminal Station to Bulgana as a win, communities in Western Victoria have said "all this does is move the problem elsewhere and increases the impacts by building 85m high transmission towers the entire length".

It is relevant to note there have been serious questions raised by an energy market veteran, Professor Simon Bartlett AM, around apparent non-compliances, and major errors with both the WRL and VNI West. You can access his reports at the end of the articles here and here. There is also an application in the Supreme Court of Victoria by a community group, raising similar concerns in relation to the WRL.

To accelerate the WRL and VNI West, the Ministerial Order has modified the laws and rules, and consequently, removed these roadblocks in Victoria. It is unclear yet how the Order will impact electricity consumers or the NSW component of VNI West that still needs to be delivered under the regulatory framework.

In response to this Order, community groups have raised concern that "the Ministerial Order has set a concerning precedent for all Victorian's that circumvents the regulatory process and abolishes scrutiny, oversight and the public's right to challenge decisions."

When considering that the apparent non-compliances and errors identified in Professor Bartlett’s reports results in a negative economic benefit, there is a real risk that if the WRL and VNI West are built as proposed, electricity consumers will pay significantly more on their bills to cover all costs over the 50-year life of these privately owned transmission assets.

Proceeding with regulated transmission projects that have a significant negative net benefit could be contrary to the National Electricity Objective (NEO) and is certainly contrary to the Victorian Government’s vision that projects like the WRL and VNI West are the key to delivering cheaper and more reliable renewable and storage capacity.

AEMO announces VNI West consultation

On 23 February 2023, AVP and Transgrid published a VNI West Consultation Report on the alternative routes and designs and is now required to undertake six-weeks of engagement with communities, Traditional Owners and stakeholders around a new proposed preferred option. AVP and Transgrid invite written submissions on the matters raised in this consultation paper by 5 April 2023.

It will be interesting to see how this community engagement develops given the only documentation that has been released for public consultation is a 126 page academic/technical report and supporting technical documentation that barely any member of the public would likely comprehend. Many are unlikely to read it or try to respond. Does that tick the box for meaningful and transparent consultation? Quite possibly not. So much for facilitating the involvement of those potentially affected and seeking input from community members in designing how they participate in the consultation process.

Up until Tuesday March 21, there are no community drop in sessions proposed anywhere remotely near the WRL and the baton has been passed to AusNet Services (the WRL proponent) to engage with the little knowledge it has about VNI West. The timing of that one drop-in session then only leaves two weeks for any member of the WRL public to make a submission. This is unacceptable. The earlier sessions may as well be in Queensland for what they are worth. And based on past experiences, the webinars will no doubt limit numbers to a death by PowerPoint consultation process.

Energy Grid Alliance (EGA) has advocated for a better approach to this consultation process since early December 2022 to bring consultation in line with the IAP2 Core Values for Public Participation. Recommendations were made to consult with communities on the proposed engagement plan to better understand what information they needed, how they wished to be engaged and what level of technical detail would be required. Yet despite these efforts, these recommendations have been ignored. Unfortunately, EGA believes this is going to result in public opposition the likes of what AEMO has not yet experienced and this is likely to further dilute trust in the process and further delay both the WRL and VNI West.

When there is an urgency around transmission development, with coal closing near the end of this decade, these errors of judgement cannot afford to be made. It’s important there’s a paradigm shift in thinking to realise all Australians are part of this transition to renewables and as such, also need to be part of the planning and decision-making process.

Victorian Government announced new landholder payments

On 24 February 2023, the Victorian Government announced new landholder payments for communities who are hosting crucial energy network infrastructure. Payments will apply to landholders hosting new transmission projects, with payments for a typical area of easement at a standard rate of $8,000 per year per kilometre for 25 years.

The announcement was short on detail and only stated this was an additional payment for a typical area of new transmission easement at a standard rate of $8,000 per year per kilometer of transmission hosted for 25 years. When you break this down, $8,000 per kilometre per year for an easement that is 100m wide comes to a grand total of eight cents per square metre per year. So that’s equivalent to paying someone $48 a year to rent a residential size block of land. It is also relevant to note that the life of the transmission asset is 50 years so landholders are only getting paid this eight cents per square metre for half the asset life. There was no indication in the announcement that that $8,000 payment would be indexed each year to CPI or whether or not that payment would be classed as income and therefore taxable. Landowners have said this offer is “a slap in the face when what we have always been calling for is to be part of the decision making process”.

The media attention will always be around the headline of $200K as to most people, that is a huge sum of money. Eight cents a square meter is a more realistic comparison. There aren’t many people who would be happy to rent out their 600 square metre block of land (on a 25-year lease) for $48 a year and then be taxed on that income.

The response from communities has been overwhelmingly negative with many stating "the Energy Market does not have social licence and by all appearances, it is attempting to buy it rather than earn it". Energy market actors believe we need to increase compensation and benefits to regional communities that host large-scale transmission infrastructure if governments want to ensure continued support for renewable energy. They see these payments as a huge win. EGA believes they are missing the point at this stage of the transition as trust, legitimacy and credibility are all lacking; Social licence cannot be bought; it must be earned. Compensation and benefits sit squarely in the realm of Corporate Social Responsibility (CSR) not social licence and until trust is earned, any discussions around landowner payments are likely to fall on deaf ears and be viewed as a buy off.

The other matter that has not been considered under CSR is neighbours to the transmission line. If the transmission asset is sitting on the other side of the fence or presents a high visual impact to materially populated towns, those neighbours are forced to carry the burden without any form of compensation. Neighbours can be materially impacted by the development, construction, and operation phases of the project. Impacts can include dust, disruptions, road damage, blocked roads, visual amenity, noise, and economic loss. If you compare this to the wind industry, where annual payments to neighbours can range between $1000 and $30,000 based on proximity (often up to 6km), it is an unreasonable proposition that neighbours are not considered.

Consider the WRL as an example. There will be at least 6,000 residents who will experience a high visual impact along the 190km route and will likely take a hit to their property values, yet the cumulative impacts are completely ignored. Like landowner compensation, neighbours to transmission line projects should benefit from an agreement with payments based on a formula of distance from the neighbour (residence or functional facility) to the transmission infrastructure and the number of towers located within that distance.

Many may argue that if landowners and neighbours are compensated for transmission infrastructure impacts under CSR, this will then lead to expensive transmission projects and an unnecessary increase to electricity consumers bills. EGA would argue that knowing you must pay landownders and neigbours would lead to better decision making to avoid areas of high population and impacts wherever possible. Isn't planning to avoid impacts in the first instance a better approach than paying for oversights because you failed to plan?

Next steps for the Victorian Transmission Investment Framework

On 24 February 2023, the Victorian Government also released a summary report of the findings from consultation on the preliminary Victorian Transmission Investment Framework (VTIF). The Framework proposes a much-needed new approach to planning and investing in large-scale transmission infrastructure to support the energy transition. A key consideration of the VTIF is development of a Multi-Criteria Analysis (MCA) framework that focuses on social and environmental impacts, in addition to technical and cost-benefit considerations, recognising the importance of these factors in building social licence.

The VNI West Consultation Report indicates AVP has introduced elements of the VTIF by using Geographic Information Systems (GIS) data to develop a detailed MCA methodology to further assess the VNI West options and help determine which option is most likely to facilitate timely delivery, consistent with the functions conferred by the Ministerial (NEVA) Order.

It is difficult to know how successful AVP's MCA methodology will be given communities have not yet provided input into the design of the MCA framework. AVP's approach appears to be yet another academic exercise, by people behind a desk, rather than a collaborative process that seeks to develop a meaningful analysis tool using intimate community knowledge.

So, it's been a huge month of announcements but it's not yet clear if Victoria's transition to a renewable energy future has taken any great leaps forward.

While some announcements represent a step in the right direction, there appears to be a notable disconnect between what policy and decision makers had hoped to achieve and what may actually transpire on the ground. Time will tell.