Electricity transmission constraints between Victoria and New South Wales will be eased after the state Labor government and the conservative Liberal-National federal government struck a $200 million deal to underwrite a key grid project that will also spur more investment in wind and solar farms.
Victoria and the federal government will each tip in $100 million to support initial work on the new VNI West project, also known as the Keranglink, that will also enable the proposed giant Snowy 2.0 pumped hydro project in NSW to supply electricity to the southern state.
Melbourne’s The Age newspaper reports Lily D’Ambrosio, Victoria’s Energy Minister, said the 1800-megawatt capacity transmission project would create “a renewable energy superhighway, creating a wave of new jobs right across the state.”
“This project will unlock more wind and solar power in Victoria than ever before, and is crucial action to address climate change,” Ms D’Ambrosio said.
While the $200 million is a fraction of the $3 billion energy deal between NSW and the federal government signed earlier this year, The Age expects further funding announcements to come.
The second instalment would treat the deal with NSW, which included almost $1 billion to support low-emissions technology, as a template.
Innovation to bolster the Star of the South, Australia’s first offshore wind project, would likely feature in any additional funding from the federal government.
The federal government is understood to be preparing a broader deal with Victoria to be developed in 2021, adopting a similar approach to the backing of specific projects in Western Australia such a storage and micro grids ahead of a larger deal.
The Age reports federal Energy Minister Angus Taylor touted the potential for the VNI West project to put downward pressure on prices and bolster the reliability of the grid.
“The VNI West project will play a crucial role in ensuring Victorians have access to the affordable and reliable electricity they need to power their lives,” he said, adding that the federal government was also backing new transmission between NSW and South Australia and between Victoria and Tasmania.
Apart from helping Victoria exploit more of the rich solar energy resources of the state’s south-west, the project’s preferred route would also take it close to the South-West renewable energy zone, one of five big regions where the Liberal-National NSW state government is encouraging as much as $32 billion in new clean energy generation and storage.
Dr Bruce Mountain, director of the Victoria Energy Policy Centre, said the eventual cost of the VNI West or KerangLink is unlikely to “leave much change from a billion dollars”, and would be a critical supply outlet assuming the multi-billion Snowy 2.0 project proceeds.
“Without it, there is no additional value to Victoria whatsoever” from Snowy 2.0, Dr Mountain said.
Ms D’Ambrosio is expected to announce other climate-related policies when the Labor government releases its budget on Tuesday.
These would add to the $790 million announced last week mostly to boost energy efficiency in homes, particularly for renters.
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