Victoria gets ready to REZ: Discussion Paper on renewable energy zones (REZ) released ahead of Implementation Plan due in July

Victoria joins New South Wales and Queensland in decentralising the path towards “Net Zero”, setting out a roadmap for development of its renewable energy zones (REZ), including the establishment of VicGrid to oversee planning and development, and allocating a AUS$540 million REZ Fund in the State Budget.

Snapshot

• A new entity ‘VicGrid’ is being established to actively plan and develop the REZs. VicGrid’s role will include planning and investing in network infrastructure, facilitating projects to be part of the REZs and local community engagement.
• The Victorian Government has produced an initial REZ Development Plan (RDP) which contains projects to be progressed immediately, and medium term projects which VicGrid will continue to develop. These projects are geared towards improving system strength in weak parts of the Victorian grid, mainly through synchronous condensers and network augmentations.

Further projects will be identified for investment using the REZ Fund in May 2021, with an Implementation Plan to be released in July 2021.

Key drivers for the Victorian Government’s use of REZs include its commitments to “net zero” greenhouse gas emissions and to address both the retirement of Victoria’s coal-fired power stations and the long and costly grid connection processes in parts of the state, which have delayed numerous projects and reduced private sector confidence.

REZ Development Plan

The initial RDP identifies key investments to the Victorian network intended to strengthen the grid and facilitate renewable energy generation. These are divided into:

• Stage 1: projects which are able to be delivered by 2025 which are geared towards strengthening certain parts of the transmission network and resolving connection issues faced by developers; and
• Stage 2: projects which mainly relate to network augmentations which require significant planning, or are subject to the outcome of other RIT-T projects (such as VNI West). These projects may also include battery projects which funded by the private sector.

Establishment of VicGrid

VicGrid will be responsible for planning and developing Victoria’s REZs, including:

• planning and investing in REZ network infrastructure;
• identifying and applying appropriate procurement, cost recovery and co-funding approaches;
• facilitating renewable energy generation projects in REZs; and
• local community engagement.

One of the key issues which remains unclear from the Discussion Paper is how VicGrid will interface and collaborate with AusNet as the Declared Transmission System Operator in Victoria, and AEMO in its role as the provider of the shared network.

REZ Fund

As part of this year’s State Budget, AUS$540 million has been made available for the Victorian Government to invest in network solutions as part of REZs. Any project that is considered for support under the REZ Fund must demonstrate a net benefit including network and consumer benefits, support in achieving the VRET target and assist local communities.

Where to from here?

Following feedback from private and public stakeholders, the next steps for the Victorian Government will be:

• End of May 2021 – release details of priority network projects to be financed through the REZ Fund; and
• July 2021 – establishment of VicGrid and finalisation and release of the RDP.

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