Investors give bright spark to first Renewable Energy Zones in NSW

Articles Written by Samantha Daly (Partner), Lara Douvartzidis (Associate), Blake Hunt (Associate)

The NSW Government has received a highly positive response from investors following plans to release the first renewable energy zone in New South Wales. The call for proposals received an overwhelming interest from investors, well beyond the proposed 3 GW renewable energy plan, with investor interest totalling 27 GW and valued at $38 billion.

The NSW Government first announced their intention to generate funding for the 3 GW Renewable Energy Zone (REZ) in May 2020, and called for registrations of interest from solar, wind and energy storage companies. With registrations only open until 5 June 2020, the response has been extremely positive in the short timeframe and has encouraged the NSW Government to increase its own investment in the project. Energy Minister Matt Kean MP confirmed that the NSW Government would commit a further $31.6 million, bringing the total budget to over $40 million, four times the original funding proposal.

The Central-West Orana zone program is designed to unlock a pipeline of large-scale renewable energy projects around Dubbo and replace the aging thermal-generation fleet. As the first of three proposed renewable energy zones in NSW forming part of the NSW Government’s Electricity Strategy, the pilot REZ is expected to generate $4.4 billion in investment, create over 450 construction jobs and will be capable of powering 1.3 million homes.

The objective of each REZ is to provide for the coordinated development of new grid infrastructure in energy rich areas, to connect multiple generators (such as solar and wind farms) in the same location. They also provide opportunities for upfront planning and early community engagement. Minister Kean MP has stated the REZ will be “the modern day equivalent of a traditional power station” and will deliver 3 GW of solar and wind generation, which has been identified as the “cheapest type of new reliable generation” by the NSW Government, likely putting downward pressure on electricity prices.

The Central-West was chosen as the pilot REZ due to the variety of approved or planned projects, the low building cost and the strong access to both solar and wind resources in the region. Following implementation of the pilot REZ, the NSW Government also has plans to deliver renewable energy zones in the New England and South-West regions, in line with the Australian Energy Market Operator’s Integrated System Plan.

As at 10 July 2020, Kean MP announced a second REZ to be located in New England, which will have an investment target of 8,000MW. This second REZ is predicted to power 3.5 million homes.

Along with investment funding, the $31.6 million boost from the NSW Government will be used to coordinate the energy deployment with the REZ and help identify locations where further infrastructure is required. It is hoped that this extra funding will allow for a greater strategic coordination of the development to ensure the REZ suits both developers and the local community.

The Energy Corporation of NSW will oversee the development of the REZ, while a $16.2 million feasibility study will be carried out by TransGrid to assess the technical and commercial option of new voltage transmission lines. The Australian Renewable Energy Agency (ARENA) will provide further support to TransGrid, dedicating $5 million in funding for their study in the hope to pave the way for future REZs across the National Energy Market by creating a blueprint for new zones, securing new jobs and cheaper energy.

Construction of the pilot REZ is set to begin in 2022 after extensive consultation with communities. Community consultation will occur both in the strategic planning stage to develop the long-term strategy and objectives for each zone as well as on a project-by-project basis as part of the State Significant Development (SSD) assessment process.

Importantly, the planning approval pathways for REZ projects will not change from the status quo and all projects will be required to prepare environmental impact assessment documentation under the NSW SSD process, and may also require approval from the Commonwealth under the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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