The Centre for Independent Studies (CIS) welcomes the opportunity to respond to the VNI West State Significant Infrastructure Application.
The CIS is a leading independent public policy think tank in Australia. It has been a strong advocate for free markets and limited government for more than 40 years. The CIS is independent and non-partisan in both its funding and research, does no commissioned research nor takes any government money to support its public policy work.
We are concerned that the VNI West project has been entered into the environmental impact consultation stage of the planning process prematurely. AEMO has advised that the project scope and cost have not been finalised and are subject to further change. On page 95 of the recent 2025 Electricity Network Options Report, AEMO states that the South West New South Wales REZ component of VNI West will be tested in stages, saying that “If the optimal timing of the delivery of these stages changes, AEMO will update the scope and cost of the remaining works of the VNI West project accordingly”. This renders the current consultation inadequate to address all of the environmental impacts that may arise from the final scope of the project.
Further, we wish to highlight flaws in the claims made regarding why VNI West is needed. In particular, it is our view that claims the project will lower electricity costs for consumers in the long run, and improve the security of the electricity system, are unfounded.
Projections based on unrealistic ISP assumptions
Technical Report 6 has claimed on page 23 that “In accordance with the Project Assessment Conclusion Report (PACR), prepared as part of the RIT-T process, the project is expected to deliver $1.3 billion in net market benefits to electricity customers (NSW and Victoria components of the project combined)”. The PACR states on page 5:
The Additional Consultation Report identified Option 5, connecting to WRL (at Bulgana) with EnergyConnect (at Dinawan) via a new terminal station near Kerang, as the new proposed preferred option. Key reasons provided were that Option 5: Ranked effectively equal highest on a purely net benefits basis, delivering $1.3 billion net market benefits for consumers.
However, the statement that cost savings will arise from VNI West is unfounded. The Additional Consultation Report, titled ‘VNI West Consultation Report – Options Assessment’, indicates on pages 9-10 that “On a scenario-weighted net benefit basis… Option 5 is found to have net benefits of approximately $1,388 million”, with the scenarios and weights being taken from the 2022 Integrated System Plan.
AEMO’s ISP is not suitable for providing base cases in market modelling scenarios, as it does not represent the lowest-cost scenario for consumers, or even scenarios likely to occur. Rather, all ISP scenarios are policy-constrained to meet government targets, including the federal government’s 82% renewables by 2030 target. As AEMO CEO Daniel Westerman stated before the Select Committee on Energy Planning and Regulation in Australia when asked about the 82% target, “The ISP is not a tool to evaluate government policy… It’s a tool to say what needs to be delivered in order for that government policy to succeed.”[1]
As set out in the CIS submission to the Energy Planning and Regulation in Australia Senate Inquiry (attached as Appendix A), AEMO has misinterpreted NER 5.22.3 in a way that creates a risk of overstating the speed and scale of renewable generation and storage build-out. This approach also fails to comply with the requirement under NER 5.22.10 that AEMO considers the risks to consumers arising from uncertainty:
(a) In preparing an Integrated System Plan, AEMO must…
(5) consider the following matters…
(ii) the risks to consumers arising from uncertainty, including over investment, under-investment, premature or overdue investment …
By constraining all ISP scenarios to the federal government’s 82% renewables by 2030 target, AEMO has removed a key uncertainty that the NER requires to be considered — namely, the risk to consumers from over-investment or under-investment if actual delivery of renewables fall short. In past ISPs, AEMO ran scenarios where policy targets were not met on time, allowing planners to test the resilience of regulatory-approved investments under slower build conditions. In the 2024 ISP, that safeguard is removed. This approach to government policy settings induces premature and over-investment.
It has become increasingly clear that the target of 82% renewable energy by 2030 is unlikely to be achieved. This has been suggested by the Grattan Institute,[2] Energetics,[3] Nexa Advisory,[4] and more recently Professor Ross Garnaut.[5] Clean Energy Council data of financially committed generation projects indicate that the rate of new renewables projects being committed to has failed to increase in the past few years, with annual new committed capacity now lower than in 2018.[6]
A major barrier is workforce capacity. A UTS report commissioned by AEMO found that delivering the 2024 ISP’s Optimal Development Path would require tripling the number of electrical engineers by 2029, alongside a total electricity sector workforce estimated at 200,000–400,000 by 2030.[7] The report warned that the rapid increase in requirements for workers brings a high risk of skill shortages that could impact on the delivery of the Optimal Development Path and create risks of delays, higher project costs, and increased cost of capital.[8]
Evidence from CSIRO and other experts suggests costs will rise with renewables system
The Environmental Impact Statement on page 15 claims VNI West will “maintain downward pressure on power prices, in both states” and will “help achieve renewable energy targets and the overall decarbonisation of the NEM, while continuing to deliver safe, reliable and affordable electricity to consumers”. This is incorrect. VNI West will not put downward pressure on power prices or deliver affordable electricity to NSW and Victorian consumers. Currently, wholesale costs are around $90/MWh in Victoria and $122/MWh in NSW,[9] which Energy Minister Chris Bowen implied were already unaffordable as of April 2024, saying “We have never denied that electricity prices are higher than we would like. That’s why we’ve delivered three rounds of energy bill relief”.[10]
The 2024-25 CSIRO GenCost report proves that a 90% renewables grid, which VNI West is designed to support, will deliver substantially higher electricity prices than currently faced by consumers. GenCost data indicates the costs for integrated renewables at 90% penetration range from a lower bound of $125/MWh to an upper bound of $176/MWh. These are already higher than current wholesale prices in NSW and Victoria.
Additionally, the lower bound of integrated renewables costs is not a credible representation of real-world costs. It represents the upper bound of CSIRO’s assumed capacity factors, being 32% for solar and 48% for wind, which are not realistic average capacity factors for new projects. The upper bound of the renewables cost estimates is more realistic as an average, though CSIRO assumes the lower bound of capacity factors to be only 10% below the current average, at 19% for solar and 29% for wind, which is likely to still be too optimistic for a grid with 90% renewables.
As more high-quality wind and solar sites are taken, new solar and wind farms must be built on sites with increasingly poor quality resources. This means the average capacity factors for solar and wind across the NEM would be much lower at 90% renewables penetration than at current levels.
The inevitability of declining resource quality with increasing renewables penetration is highlighted by a wind project recently seeking approval in NSW, the Hills of Gold Wind Farm.[11] The Independent Expert Advisory Panel for Energy Transition report revealed:
- The proponent volunteered a benchmark capacity factor for wind in NSW of 32.1%, which is lower than the average of AEMO ISP workbook values of 33.3%.
- The proponent volunteered a marginal loss factor (transmission losses) of 0.92 for their own project, but argued that the average for NSW wind farms is 0.89, according to Aurora Energy Research.
- The Panel considers that Hills of Gold wind resource is “probably slightly better than average” and that “Many of the ‘easiest’ i.e. most favourable sites in NSW have already been developed. Hence the pipeline of remaining sites all have less than ideal conditions in one or more respects.”
CSIRO does not include marginal loss factors in the GenCost report. Including transmission losses of around 10% in the benchmark capacity factor results in delivered energy from wind farms being only around 29% of maximum output. This confirms that the average capacity factor of wind farms in NSW is currently ~29%. Since the most favourable sites have already been taken, remaining sites will deliver a lower average capacity factor for future projects comprising a 90% renewables grid. A similar phenomenon also occurs for solar projects, as the most ideal sites are taken, with only less ideal, more expensive sites left for new projects.
In addition to optimistic capacity factors, CSIRO also underestimates renewables integration costs. Battery expert Alex Wonhas has indicated Australia may need more than double the amount of battery storage previously thought, which CSIRO appears to have ignored.[12] CSIRO has also ignored the recent increases in transmission costs, including VNI West’s costs doubling. CSIRO also appears to have greatly underestimated the number of synchronous condensers and other firming infrastructure required by a 90% renewables grid; though quantifying this is difficult, given CSIRO is refusing to release the underlying modelling. All these additional costs mean CSIRO’s cost estimates are likely to be greatly underestimated, even at the upper bound.
Therefore, CSIRO’s upper bound for integrated renewables of $176/MWh should be taken as a lower bound for future electricity prices in a 90% renewables grid. Electricity prices cannot fall below this at 90% renewables penetration, which VNI West is designed to support. This means consumers will face prices substantially higher than the currently unaffordable electricity prices in future. VNI West cannot deliver affordable electricity to consumers.
In an explicit and simple calculation, Professor Bruce Mountain has also demonstrated that costs for transmission will increase substantially under the Victorian energy plan.[13] This shows the massive increase in the regulated asset base for transmission will put upward pressure on electricity prices, rather than the claimed downwards pressure.
Capture price dynamics limit wholesale cost impact of new renewables
Currently the capture price of wind and solar is significantly depressed, as higher penetrations of wind and solar continue to cannibalise revenues. This can be seen in the following figure derived from OpenElectricity data.
Wholesale prices will become increasingly dominated by higher-cost firming output. As shown in the graph, prices haven’t consistently fallen as more renewables have been added. Instead, they have risen over the last decade. There is very limited capacity now for average wholesale prices to be meaningfully reduced by pushing low or negative prices even lower, and below the ultimate cost of generating and delivering the energy. The true costs must be recovered elsewhere, either in higher prices charged by dispatchable generators for their firming roles, or through subsidies, or other regulated charges. In other words, rather than putting downward pressure on prices as claimed, the current plan will see consumer prices rise further.
System Security is not improved through interconnection as claimed
The Environmental Impact Statement on page 15 claims VNI West will “improve electricity supply reliability and security”. However, there is no evidence there is significant dispatchable capacity planned to be present across the NEM, or that this link provides suitable access to it to ensure system security. In contrast, increasing reliance on inverter-based resources (such as wind and solar) imposes a significant new cost on the system to ensure system security can be provided without rotating machines, or with synchronous condensers to make up for the lack of inertia, fault current, and other characteristics of a secure system. Moreover, the recent Transgrid PACR for System Security makes it clear that NSW will not have sufficient rotating machinery to provide a suitably secure system if the Eraring Power Station closes in 2027 as planned.[14] This contradicts the proposition that increasing interconnection between NSW and Victoria — which will require additional remediation to meet their own needs — is a cost-effective way for either state to meet its own system security needs.
Given there are substantial impacts on the environment and communities affected by this link, it is essential that only verifiable benefits are claimed as necessitating the project.
Yours sincerely,
Aidan Morrison
Director of Energy Program
Centre for Independent Studies
Email: amorrison@cis.org.au
[1] Commonwealth of Australia. ‘Official Committee Hansard Senate Select Committee on Energy Planning and Regulation in Australia. Thursday, 5 December 2024’. p 41. https://parlinfo.aph.gov.au/parlInfo/download/committees/commsen/28660/toc_pdf/Energy%20Planning%20and%20Regulation%20in%20Australia%20Select%20Committee_2024_12_05_Official.pdf.
[2] Richard Yan, “Now comes the hard part of the great energy transition”, Grattan Institute, 2024. https://grattan.edu.au/news/now-comes-the-hard-part-of-the-energy-transition/.
[3] Energetics, “Why Australia is not on track to achieve a 43% emissions reduction by 2030”, 2024. https://www.energetics.com.au/insights/thought-leadership/why-australia-is-not-on-track-to-achieve-a-43-emissions-reduction-by-2030.
[4] Daniel Mercer, “Australia will fall well short of 82 per cent renewable energy by 2030, analysts predict, as problems mount”, ABC, August 2023. https://www.abc.net.au/news/2023-08-06/australia-likely-to-fall-short-of-82pc-renewable-energy-target/102689392.
[5] Paul Kelly, “Labor’s energy target all miss and wind as turbine construction slumps”, The Australian, July 2025. https://www.theaustralian.com.au/nation/politics/turbine-construction-slump-labors-energy-target-all-miss-and-wind/news-story/96909d29b83b5aa80287b46c6cff6c0c.
[6] Clean Energy Council. 2025. ‘Quarterly investment report: Large-scale renewable generation and storage’. p 11. https://cleanenergycouncil.org.au/getmedia/8f050d63-3955-483a-8934-8fd8b0cfd4f7/cec_renewable-projects-quarterly-report_q1-2025.pdf; Clean Energy Council. 2022. ‘Renewable Projects Quarterly Report’. p 4. https://cleanenergycouncil.org.au/cec/media/background/resources/cec-renewable-projects-quarterly-report-q4-2022.pdf.
[7] Jay Rutovitz, Elianor Gerrard, Helen Lara, and Chris Briggs, “The Australian Electricity Workforce for the 2024 Integrated System Plan: Projections to 2050”, RACE for 2030. https://racefor2030.com.au/project/australian-electricity-workforce-for-the-2024-integrated-system-plan/.
[8] Ibid., p. 3.
[9] IEEFA. 2024. ‘Nuclear in Australia would increase household power bills’. p 10. https://ieefa.org/sites/default/files/2024-09/Nuclear%20in%20Australia%20would%20increase%20household%20power%20bills_Sep24.pdf.
[10] Energy Minister Debate on 10th April 2025 at the National Press Club.
[11] Independent Expert Advisory Panel for Energy Transition. 2024. ‘Hills of Gold Wind Farm Proposal Advice on energy production cost impacts under turbine configuration scenarios’. https://www.ipcn.nsw.gov.au/sites/default/files/pac/projects/2023/12/hills-of-gold-wind-farm/additional-case-material-available-for-public-submission/attachment-d–ieapet-advice.pdf.
[12] Parkinson, Giles. 2025. ‘Australia may need twice as many big batteries to make up for lost wind’. RenewEconomy. https://reneweconomy.com.au/australia-may-need-twice-as-many-big-batteries-to-make-up-for-lost-wind/.
[13] Mountain, Bruce. 2025. ‘Bruce Mountain: Household electricity bills will go up by about 50 per cent under the Allan government’s plan’. Herald Sun. https://www.heraldsun.com.au/news/opinion/bruce-mountain-household-electricity-bills-will-go-up-by-about-50-per-cent-under-the-allan-governments-plan/news-story/4f5c2ac54cc1ccea7f1913bac76508b6.
[14] Transgrid. 2025. ‘Meeting system strength requirements in NSW’. https://www.transgrid.com.au/projects-innovation/meeting-system-strength-requirements-in-nsw/.
