Article by Angela Macdonald-Smith, courtesy of Financial Review
05.08.2025
The cost of building NSW’s first renewable energy zone has risen to more than $5.5 billion in a further increase after last year’s jump, underscoring the hit to consumers from the transition to low-carbon power.
The latest estimate for the Central-West Orana project near Dubbo, one of five renewables zones planned in NSW, is 8½ times the original $650 million estimate in 2020, albeit when it was envisaged on a much smaller scale.
It comes as criticism is building within elements of the Coalition nationally and in some states over Australia’s net zero emissions target, with some Nationals members instigating a fresh push for new coal power stations that would avoid the need for a major grid build-out.
Matt Rennie, executive director for capital advisory at transition adviser Rennie, warned that if the costs for the build-out of the power grid stayed on their current track, it would strengthen the hand of those arguing against renewables and in favour of the existing system of centralised generation.
“Quite simply, costs need to fall and delays need to be reined in if we are to avoid reopening arguments for new coal-fired power stations in this country,” Rennie said.
The Central-West Orana zone will cover about 20,000 square kilometres in the region of Dubbo and Dunedoo and will provide the grid capacity needed to deliver 4.5 gigawatts of power, supporting up to 7.7GW of new generation from solar, wind and storage plants.
The latest cost revealed by the Australian Energy Regulator compares with an equivalent figure of $5.45 billion in the 2024 NSW infrastructure planning report, adjusted for inflation.
That figure had surged from $3.2 billion in 2023 amid what NSW government-owned EnergyCo said were “significant challenges” in the electricity and infrastructure sectors.
Several transmission projects this year have reported cost increases, sharpening worries among consumer groups and industry about inevitable increases in electricity bills after steep rises in recent years.
Total cost increases announced this year alone – including for the contentious VNI West line in Victoria, the EnergyConnect cable between South Australia and NSW, the Marinus Link to Tasmania and Central-West Orana – now total about $6 billion.
Of those, only EnergyConnect has made significant progress on construction, leaving the risk of further blowouts as work progresses amid soaring prices for specialised materials and labour, stretched supply chains and increased expenses for engagement with often-resistant local communities and landholders.
Australia is estimated by the national energy market operator to require 10,000 kilometres of new transmission to underpin the shift from coal power and connect wind and solar farms in remote areas.
Installing clean generation to replace coal is key to reaching Australia’s targets of 82 per cent renewables by 2030, and net zero emissions by 2050.
The Australian Energy Market Operator said last week that transmission cost estimates had risen by up to 100 per cent from its 2024 blueprint for the grid. That was based on 2023 assumptions, meaning a doubling in some project costs in two years.
Dylan McConnell, an energy systems analyst at the University of NSW, said the mounting costs gave rise to questions about whether other options involving more storage and localised generation might offer better value for consumers.
“The full build-out of all the transmission may no longer be the lowest-cost solution,” he said, pointing to the risk that costs rise so far that they exceed the benefits for consumers.
The costs of new transmission were seized on last year by the Coalition to back its nuclear energy policy, with then-opposition leader Peter Dutton arguing that building reactors at existing coal power sites would avoid having to beef up the network.
Rennie said that after several years of warnings on increasing transmission costs and likely delays, Australia was now starting to see “the inevitable outcomes”.
“If renewable energy is to form an integral part of the future system – and it must, given the timelines for coal-fired generation retirements – then transmission costs must come down,” Rennie said.
A spokesperson for NSW EnergyCo, the NSW government company responsible for building the renewable energy zones, said the regulator’s latest determination was “a small adjustment after financial close of the project. Costs will be spread out throughout project stages, including construction and operation.”