EIS Volume 1 Chapter 2 Project Justification Chapter 2 Project Justification Contents 2. Project Justification ................................................................................................2-1 2.1. Introduction ..................................................................................................................... 2-1 2.2. EIS Guidelines ................................................................................................................... 2-1 2.3. Overview of the National Electricity Market ................................................................... 2-2 2.3.1. Operation of the National Electricity Market ..................................................... 2-2 2.3.2. System connectivity ............................................................................................ 2-2 2.3.3. Energy market transition .................................................................................... 2-5 2.3.4. South Australian context .................................................................................... 2-6 2.3.5. New South Wales context ................................................................................... 2-8 2.4. Electricity Network Planning ............................................................................................ 2-8 2.4.1. Integrated System Plan ....................................................................................... 2-8 2.4.2. New energy projects in South Australia............................................................ 2-12 2.5. Commonwealth and State Energy Policy Context ......................................................... 2-12 2.5.1. Commonwealth policies ................................................................................... 2-13 2.5.2. South Australia and New South Wales energy policies .................................... 2-14 2.6. The Need for a New Interconnector .............................................................................. 2-16 2.6.1. Existing South Australian interconnections ...................................................... 2-16 2.6.2. Regulatory Investment Test for Transmission (RIT-T) ....................................... 2-17 2.7. Benefits of Project EnergyConnect ................................................................................ 2-20 2.7.1. Overall economic benefits ................................................................................ 2-20 2.7.2. Benefits for the region and local communities ................................................. 2-21 2.7.3. Benefits for South Australia .............................................................................. 2-21 2.7.4. Benefits for New South Wales .......................................................................... 2-23 2.7.5. Benefits for Australia ........................................................................................ 2-24 2.7.6. Ecologically sustainable development (ESD) .................................................... 2-25 2.8. Consequences of Not Proceeding with the Project ....................................................... 2-25 2.9. Conclusion ...................................................................................................................... 2-27 List of Figures Figure 2-1: National Electricity Market installed capacity ......................................................... 2-4 Figure 2-2: Forecast relative change in NEM installed capacity by generation type ................. 2-5 Figure 2-3: NEM coal-fired and gas-powered generation (GPG) retirements (top) and capacity (bottom) ........................................................................................................................... 2-6 Figure 2-4: Generation capacity in the NEM, by region and fuel source ................................... 2-7 Figure 2-5: Renewable Energy Zones and indicative projects ................................................. 2-11 Figure 2-6: South Australian energy generation by fuel type .................................................. 2-12 Figure 2-7: SA total interconnector imports and exports ........................................................ 2-16 Figure 2-8: Overview of the options assessed in (SAET RIT-T) ................................................. 2-19 List of Tables Table 2-1: EIS Guidelines addressed in the Project Justification chapter .................................. 2-1 Table 2-2: Aspects of assessment requirements addressed in other chapters ......................... 2-1 Table 2-3: Current interconnectors ............................................................................................ 2-2 Table 2-4: Consequences and economic implications of not proceeding with the Project..... 2-26 Project EnergyConnect Environmental Impact Statement 2-i Chapter 2 Project Justification 2. Project Justification 2.1. Introduction The justification for the Project is driven by the changing nature of electricity generation in Australia, the dynamics of the National Electricity Market (NEM) in response to that change, and the implications of these on energy affordability and security in South Australia. Justification for the Project and the expected benefits are discussed in this chapter in this context. ElectraNet considered a range of alternatives to the Project which were thoroughly investigated, as described in Chapter 3 Alternatives to the Project. The process used to evaluate the route options and select the transmission line corridor and alignment considered in this EIS is presented in Chapter 4 Route Selection. 2.2. EIS Guidelines The EIS Guidelines require a statement of the objectives and justification for the proposed Project as set out in Table 2-1. Table 2-1: EIS Guidelines addressed in the Project Justification chapter EIS Guidelines and Assessment Requirements Assessment level General Requirements • The specific objectives that the proposal is intended to meet, including market requirements. • Expected local, regional and state benefits and costs, including those that can be adequately described in monetary or physical terms (e.g. effects on aesthetic amenity). • A summary of environmental, economic and social arguments to support the proposal including the consequences of not proceeding with the proposal. Land Use and Economic Effects Assessment Requirement 2: The proposal will have an impact on the State’s economy during construction and operation and may result in immediate and long-term effects on landowners and surrounding uses. • 2.13: Identify any economic implications for the State and the region if the proposal does not Critical proceed. Planning and Environmental Legislation and Policies Assessment Requirement 16: A range of planning, environmental and energy related statutory requirements would need to be met for the construction and operation of the proposed development • 16. 3: Outline any other Commonwealth or State Government initiatives that may relate to the proposed transmission line, including greenhouse issues, principles of ecologically sustainable Standard development, power generation, and the conservation or protection of the biological environment. Describe the proposal in terms of its consistency with these initiatives Aspects of assessment requirements identified in Table 2-1 above which are not addressed in this chapter are listed in Table 2-2 together with the applicable chapter. Table 2-2: Aspects of assessment requirements addressed in other chapters Assessment Requirement Chapter 16.3 Commonwealth or State Government initiatives that may relate to the proposed Chapter 5 Legislative and transmission line including the conservation or protection of the biological environment. Planning Framework Chapter 11 Flora and Fauna Project EnergyConnect Environmental Impact Statement 2-1 Chapter 2 Project Justification 2.3. Overview of the National Electricity Market 2.3.1. Operation of the National Electricity Market The Australian NEM is one of the world’s longest interconnected power systems and consists of around 40,000 km of transmission lines and cables across six states and territories1, regulated by the Australian Energy Regulator (AER). The NEM enables electricity to be exchanged as a commodity between generators, transmission network service providers, distribution network service providers, electricity retailers and market customers. Electricity is traded to match power supply and demand requirements in real time through a centrally coordinated dispatch process managed by the Australian Energy Market Operator (AEMO), enabling electricity demand to be met in the most cost-effective way (AEMO 2018a). AEMO oversees the operations and security of the NEM and is responsible for maintaining secure electricity and gas systems, managing electricity and gas markets and leading the design of Australia’s future energy system. The Australian Energy Market Commission (AEMC) sets the rules to ensure the market delivers efficient, reliable and safe energy for electricity and gas consumers and provides independent advice to policy makers. 2.3.2. System connectivity The interconnection of otherwise separate electricity networks allows local electricity markets to be integrated into the NEM, enabling customers to purchase power from electricity generators in different regions at a price determined by the supply and demand dynamics of the market. The effect of interconnection is to increase pricing competition through supply of lower-priced electricity to regions experiencing