The electricity transmission network is not designed to accommodate large amounts of new renewable generators at every location. For example, five solar farms in the West Murray region (Victoria and New South Wales) had their generation output limited to 50% in 2019 because the combined operations were causing grid stability issues that affected the whole region.50
Maintaining the attractiveness of the sector for investment will be critical to supporting a cost- effective transition. Investors require greater confidence in the timing and nature of grid connections, to ensure they can invest rationally. The Reserve Bank found that the generation capacity of new large-scale renewable projects that reached financial close in 2019 fell by around half compared with 2018, partly due to grid connection challenges and network constraints.51
Renewable Energy Zones (REZs), which aim to unlock scale efficiencies by co-locating renewable generation sites, are ripe for more investment. REZs have rich renewable resources (such as solar and wind) and enough high-voltage 'poles and wires' infrastructure to transmit the power to homes and businesses.52 State-based REZ initiatives have already been announced and can accommodate timely investment in renewable energy generation.
The existing generation fleet will need to be replaced as it meets end of life, with significant further replacement needed over the next 20 years. Energy resource types will change from predominantly coal to predominantly wind and solar, which are located in different areas. The role of some existing transmission infrastructure will therefore need to be reconsidered. Beyond this, weather conditions mean wind and solar are intermittent, so larger amounts of generation, storage and interconnection are needed. This further increases the transmission infrastructure requirements.
To enable investment in the transition to a renewable electricity system, Australia needs to action new projects that strengthen the system and enable new generation, and send clearer price signals for transmission access.
Enabling REZs is the first step towards providing efficient transmission investment as they have a high concentration of renewable generation. This work should build on what the market bodies are already doing to review large transmission projects and how new generation connects to the grid.53