Interconnectors, which link state-based transmission networks, play a critical role in the bulk transfer of electricity and provide valuable assurance of supply. They can be an efficient transmission investment and support clean energy production when considered against alternative investments.
" To enable investment in the transition to a renewable electricity system, Australia needs to action new transmission projects that strengthen the system and enable new generation. "
A number of new interconnections are expected to be developed across Australia. In the near term, they include an interconnector between South Australia and New South Wales called Project EnergyConnect.
Also an interconnector between New South Wales and Victoria called Victoria to NSW Interconnector West is being considered for development within the Integrated System Plan.
Currently, the cost of interconnectors is recovered from customers in the states where they are built and electricity is used. However, the electricity users are not the only beneficiaries. The cost allocation model does not take account of the broader benefits of interconnection, such as increased security and redundancy, and the economic and social benefits of accommodating renewable energy generation development. Interconnectors are significant investments, and the cost should be allocated across all beneficiaries. A working group is underway to look at this issue.
The ESB is considering cost allocation in their post- 2025 market design process. This should consider alternate methods, such as proportional, beneficiary-pays cost allocation based on the relative benefits to each state's customers, which are models implemented in New Zealand and the United States. The AEMC must then implement transmission access reform to ensure equitable cost allocation mechanisms are in place.