System security and reliability
This report is a study into the technical, commercial and regulatory challenges of developing Renewable Energy Zones (REZs) in the National Electricity Market (NEM), and to identify potential commercial and regulatory solutions that could facilitate the development of REZs in an efficient and sustainable manner.
A significant volume of new generation and storage capacity will be needed in the NEM over the coming decades to maintain reliability and affordability as ageing generators retire. Australia has some of the best renewable energy resources in the world, but with limited existing network capacity extending to locations with the highest potential. As identified in the Australian Energy Market Operator’s (AEMO) Integrated System Plan1, developing Renewable Energy Zones (REZs) to leverage these strong resources will be critical to facilitating new generation and storage capacity in the NEM, at least cost to consumers.
The current regulatory framework and approach to network development were not designed to support REZs, nor to mitigate the technical challenges of integrating a high penetration of variable renewable energy (VRE).
The Australian Renewable Energy Agency (ARENA) engaged Baringa Partners, in partnership with DIgSILENT Pacific, to undertake a study into the technical, commercial and regulatory challenges of developing REZs in the National Electricity Market (NEM), and to identify potential commercial and regulatory solutions that could facilitate the development of REZs in an efficient and sustainable manner.
Baringa, DIgSILENT and ARENA undertook targeted consultation with a range of stakeholders including government agencies, network businesses, developers and investors, to understand the technical and commercial challenges of developing REZs within the current regulatory framework.
Modelling was undertaken in collaboration with AEMO to understand the potential of network and technology solutions to unlock more connection capacity to support renewable build-out in new REZs. The modelling focused on two REZs as defined in AEMO’s Integrated System Plan (ISP), namely North-West VIC and Central-West NSW. These two REZs were chosen as they have both attracted significant interest from developers, but each have different network topologies and technical challenges. This case study analysis informed commercial and regulatory options that could support REZ development in the near and longer-term.