New generator development in the National Electricity Market (NEM) is extremely complex. However, with a tailored approach and the right planning and expertise, developers can avoid significant project delays and/or additional costs in the connection process.
The key challenges to be considered by generation developers in today’s market include:
- seemingly never-ending rule changes
- navigating the competitive PPA market
- competing for ever diminishing network capacity
- wading through the minefield that is negotiating generator performance standards
- constantly changing energy demand
- ongoing policy uncertainty from the federal and state governments
- lack of clear investment triggers
- understanding constraint equations and marginal loss factors and their impacts on generation dispatch
- integration of rapidly developing technologies such as battery storage
- resources being stretched thin in order to meet demand for the volume of new generation projects being developed
- appreciating and dealing with emerging technical issues like weak system strength with its causer pays arrangements for mitigation impacting on tight development budgets
With these challenges, successful new generation project development can appear an extremely daunting task.
Despite the plethora of challenges to balance in developing generation projects in the NEM, developers often cite the grid connection process as the most complex and risky element of developing a new generation project. Grid connection in the NEM can be extremely complex without the required knowledge and experience.
Recently in the NEM, an underappreciation of these complexities and the level of focus required has resulted in significant delays in energisation of several projects and substantial cost and revenue impacts. Network connection risks have seen energisation delayed; generation stuck at low hold points as well as losses/constraints biting. The flow-on financial impacts to developers, asset owners, and even contractors have been dire.
Like with any complex process, it is crucial to involve an appropriate level of experience and expertise in managing the grid connection process. Projects with more focused grid connection planning and strategy tend to find an easier path to connection. Our team has been involved in grid connections of new generation developments for over a decade and has often been surprised at how underprepared many generation developers are to tackle the grid connection process. It seems commonplace to employ experts to lead the complex project streams of legal, PPA negotiations, EPC contract negotiations, and land access requirements. Strangely though, often little focus is placed on-grid connection once other key project milestones are locked away.
It isn’t uncommon for developers to have spent months planning a development, then engage for the first time with the network to be told their project (as planned) has several network connection challenges. Often at this point, the developer has made considerable commitments on the project which can lead to a decision to push ahead despite the known grid connection issues.
While the traps and considerations for managing a successful grid connection process are numerous and details around these are outside of the scope of this article, there are some simple traps that are very easily avoided with just a little careful planning and thought.
We will share our thoughts on this topic in our next news article.