Energy Grid Alliance Submission to the VNI West Consultation Report

Energy Grid Alliance (EGA) welcomes the opportunity to make this non-confidential submission in response to the VNI West Regulatory Investment Test for Transmission VNI West Consultation Report – Options Assessment (February 2023) (the VNI West Report).

In this submission, EGA has not responded to the assessment of options undertaken due to a range of considerable concerns regarding to the credibility and legitimacy of the RIT-T. EGA’s submission identifies several areas of concern that warrant further investigation and discussion. Specifically:

1. Social Licence and effective Community Consultation. Despite claims that social licence has been considered, EGA note all options assume that developers have the social licence to build wind and solar generation at the scale assumed. As a high-profile whole of system plan about what, when and where generation and transmission infrastructure may be required, the ISP holds the attention of a wide range of stakeholders. Therefore, EGA suggest it is not prudent for AVP to make these broad assumptions, especially when considering the WRL has no social licence and VNI West appears to be not too far behind.

2. Application of the Multi-Criteria Analysis. EGA sees marginal value in the current MCA methodology in determining the least-impact corridor given the inputs are based on desktop assumptions and judgement, not realistic social or economic values of the communities and potential landholders VNI West and the WRL are likely to impact. Despite the application of the MCA, significant community opposition has emerged, bringing into question the value of the MCA.

3. NEVA Order and consideration of the WRL. Following review of the Ministerial Order, it is encouraging to recognise the Victorian Government has empowered the Australian Energy Market Operator (AEMO) with the ability to thoroughly investigate and recommend an alternate VNI West and WRL solution that is the highest ranked option, including in relation to estimated net economic benefits, environment, cultural, land-use and social objectives. Applying an MCA to the WRL would likely result in very different outcomes. It is not unreasonable for communities to expect this be undertaken given the NEVA Order creates this very opportunity. The WRL no longer requires a point A to B to C route, meaning the route from A (Sydenham) to B (Bulgana) can be completely reassessed.

4. Appropriate Class of Market Benefits. The VNI West Report indicates, under Step-change, avoided/deferred generation and storage costs comprise approximately 71%and 75% of the estimated gross benefits of Option 3A and Option 5, respectively. EGA would like to understand what mechanisms AVP, Transgrid, AEMO, the AER or AEMC will be implementing to ensure the benefits claimed from future avoidance and/or deferral of investments are being realised and are not eroded by future investments that should have otherwise been avoided or deferred? EGA is concerned that without effective regulation, RIT-T proponents can simply 'assume' enough deferral or avoidance benefits to produce an overall net benefit. This class of benefits, without effective regulation appears to be directly at odds with the National Energy Objective (NEO). EGA is concerned that utilisation of this class of benefits could potentially lead to gold-plating that the RIT-T was put in place to avoid.

5. Annual routine operating and maintenance costs. EGA questions why the annual routine operating, and maintenance has been significantly understated for both VNI West and the WRL with an allowance 1% pa of the capital cost. EGA is extremely concerned the calculation of operational and maintenance costs is based on an ‘assumption’ rather than a realistic calculation based on the AER’s Benchmarking (of over 3%) that takes realistic inputs from TNSP’s.

6. Development of the Gippsland REZ has been excluded. EGA is concerned that development of the Gippsland REZ has been unjustifiably blocked due to the unreasonable adoption of hosting limits, transfer capacity and penalties. There does not appear to be any qualifying evidence to justify the unreasonable penalisation of renewable production in the Gippsland REZ. AVP has undermined this corridor by placing flawed ‘hard’ land use limits, REZ build limits, transmission limits and hosting penalties that effectively stonewalls the Gippsland REZ. This, along with other errors, drive the location of new renewable entry along the 500 kV corridor in western Victoria that AVP is seeking to develop.

7. Security, Resilience and Climate Change. VNI West, the Victorian component of the ISP's optimal development path, will have around 1,500 single transmission towers between Sydenham near Melbourne and Gugga in NSW. Each tower represents a single-point-of failure for the largest electricity supply to Victoria according to AEMO’s projections. EGA is greatly concerned that a loss of VNI West and the WRL would result in most of the generation in Western Victoria and imports from NSW being significantly reduced, which would severely impact system security. A loss of the Sydenham terminal station (another supercritical single point of failure) would result in generation in Western Victoria and imports from NSW being reduced to critical levels where Victoria could experience state-wide blackouts. EGA believes there are more cost effective, geographically diverse, and resilient approaches for Victoria’s that should be urgently progressed.

8. Benefits of Victoria’s offshore wind and Snowy 2.0: It is puzzling to comprehend why the Victorian Government may believe VNI West will provide greater utilisation of Snowy 2.0 as well as allow for Victoria's offshore wind to be exported to NSW. Despite Victorian Government objectives, offshore wind has not been included in the core scenarios for the VNI West cost-benefit analysis. How can 9-10GW of offshore wind in Victoria’s east, provide any benefits to VNI West without consideration of congestion and additional transmission augmentation in Gippsland? Despite claims that VNI West will unlock the full potential of Snowy 2.0, according to AVP, VNI West makes no perceptible difference to the dispatch of Snowy 2.0.

9. Contradictions and misalignment with Victorian objectives: Following analysis of the vast array of VNI West and WRL Reports, many contradictions have emerged where outcomes of the RIT-T contradict what the Victorian Government would expect VNI West and the WRL to deliver. Considering the urgent need to ‘get on with things’ with coal closing near the end of the decade, it is important these contradictions and misalignments are realised, and positive action taken to ensure the interests of Victoria always come first.

10. AEMC Transmission Planning and Investment Review. EGA understands that the next AEMC Transmission Planning and Investment Review report is due for publication early May 2023. Through this review, the AEMC is proposing to streamline the regulatory cost-benefit test by removing the net benefit calculations from the RIT-T and rendering the ISP framework the only mechanism for assessing project benefits. EGA does not endorse this proposal as there is a real danger this will remove the need for full transparency along with any mechanisms to protect consumers. EGA believes this approach would not be in consumers interests, would be contrary to the NEO, and should not be progressed.

11. Further to these matters, EGA endorses the VNI West Report submission by Professor Simon Bartlett AM and Professor Bruce Mountain that concludes that the development of VNI-WRL will be a monumental mistake. Specifically:

• VNI-WRL will drastically increase the exposure of Victoria’s power system to weather and terrorism risk.
• Recovering the capital outlay in VNI-WRL will increase transmission charges in Victoria by at least 70%. The ongoing operation and maintenance charge will increase transmission charges by a further 25%.
• The development of VNI-WRL will delay the transition to renewable electricity in Victoria.
• VNI-WRL lays the foundations for massive additional 500 kV transmission developments in west, central and northern Victoria.
• VNI-WRL makes no perceptible difference to the dispatch of Snowy 2.0. Instead, according to AVP, the bulk (75%) of the benefit of VNI-WRL lies in the substitution of pumped hydro generation in Victoria by batteries in NSW.
• Better alternatives exist in rapidly developing spare transmission capacity in Gippsland.

With these considerations in mind EGA is greatly concerned about the credibility and legitimacy of the RIT-T’s. The outcome of the analysis appears to be biased towards developing the ISP’s optimal development rather than seeking the best outcomes for Victoria, its investors, and its people.

EGA thanks AVP staff for efforts made to engage and respond to questions relating to both VNI West and the WRL in the course of preparing this submission. It is important to note however that many questions remain unanswered and as such, may have been raised again in this submission.

EGA previously contend that the economics, modelling and merits of the WRL and VNI West did not stack up. It is discouraging to note the situation appears to have become more dire.

EGA would also like to acknowledge the valuable contribution of its network of peers for their robust and insightful contribution to this submission.

It is crucial that RIT-T proponents and network planners take a multidisciplinary approach to transmission planning that ensures credible options are both economically and technically feasible, socially responsible, and utilise existing transmission assets and easements as a priority over greenfield developments.

From a Victorian perspective, the Gippsland region has a huge competitive advantage in access to a strong existing network, spare transmission capacity, an energy related workforce, and significant onshore and offshore development interest that is driving uptake of large-scale renewable energy. The exhaustion of this opportunity should be given immediate priority.

EGA sees opportunities for AEMO Victorian Planning to consider whether it would better serve Victoria if VicGrid, a body within DEECA, not only coordinated the overarching planning and development of Victorian renewable energy zones but was also conferred the Victorian Transmission Planning function to ensure a more coordinated, timely and resilient approach.

The deferral or avoidance of Gippsland investment, both on and offshore, because of VNI West Option 5 and the WRL, does not align with the Victorian Governments objectives and does not align with local government objectives in the Latrobe Valley.

EGA contend that progressing VNI West and the WRL should be of notable concern to all Victorian's and indeed Australian's.