Dispensing power in energy's new era

With the cancellation of another power infrastructure project by TransGrid, networks are not looking like the rolled gold businesses they once were. But it could yet force them into a timely rethink.

On Monday, TransGrid, the NSW government-owned transmission company, announced it was abandoning a major new project for the second time this year.

The first was the $160 million Stroud-Taree line, which in July fell to a combination of local opposition from the Manning Alliance and pressure from the NSW government to reduce infrastructure spending.

Yesterday it was the turn of the even larger Dumaresq-Tenterfield-Lismore line. This line would have cost $250 million to bring more mostly coal- and gas-fired electricity down from Queensland to supply supposedly increasing peak demand on the NSW north coast.

The problem for TransGrid that ever since the project was announced in 2008, peak demand has been flat or falling, for reasons Climate Spectator readers will be familiar with, including a high uptake of PV systems and low population growth. The company finally recognised that shift by deferring the project for a decade in its Annual Planning Report this year.

The project is yet to receive NSW planning approval: they were apparently haggling with Commonwealth bureaucrats about offsets for endangered ecological communities along the route. Also, it needed to go through another investment test (the RIT-T) because the Australian Energy Regulator found the first one to be so inadequate. TransGrid has finally bowed to the inevitable and pulled the plug.

This is a win for landowners, the environment and even, in my view, TransGrid itself. In the past year it has started to replace the old corporate culture of ‘build, baby, build’ with a greater concern with alternatives to new infrastructure, including peak demand management, energy efficiency and local renewable energy generation. It also shows they are starting to listen to local communities.

This outcome does, however, raise some interesting issues. For starters, with not much in the way of new poles, wires and substations to build except in areas where there are new housing or mining developments, and with the networks’ rate of return on their borrowings likely to be substantially lower in forthcoming revenue determinations, networks are not looking like the rolled gold businesses they once were.

This is especially true for privately owned networks. The NSW government has leaned on TransGrid and its three distribution networks for $2.5 billion in savings over the next few years. It’s hard to imagine a government having the same degree of leverage over private networks whose shareholders want to see profits, preferably rising ones, year after year.

It also means that should state governments decide to sell their networks, they may have been fattened up during the current regulatory period, but they’ve missed the boat on getting premium prices for them. With numerous US and European networks now being bought back by governments and communities, this may not be such a bad thing. In future years we may get back to seeing networks as public utilities rather than regulated businesses.

One of the drivers for TransGrid’s far north coast project was the unreliability of the privately owned Directlink (Terranora) interconnector, which also supplies power from southeast Queensland to the NSW north coast. It has apparently recently suffered a substation fire and damage to one of its three 60 MW underground DC cables.

It’s hard to get much information about the performance of this interconnector from either the AER or AEMO, and the owner, APA Group (which mostly operates gas pipelines) appears to say little publicly about the problems or what it is doing to fix them. It’s a bizarre situation where one company can spend years planning to spend $250 million of consumers’ money partly in order to overcome problems with another company’s assets, which may be fixed at some future time. More effective infrastructure planning is called for here.

Finally, we sometimes forget that new infrastructure projects affect not only consumers, but also communities. Whenever we propose big new power stations that require new transmission, sub-transmission or distribution lines, we potentially disrupt the lives of locals in their path for years of uncertainty (if decisions are deferred or they aren’t built) or decades (if they are) to come; not to mention the lives of plant and animal communities along the route. The earlier, wider and more genuinely proponents consult with affected communities (the human ones at least), the better the outcome is likely to be all round. 

Mark Byrne is energy market advocate at the Total Environment Centre.

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