On 30 September 2024, the 2024 Victorian Transmission Plan Guidelines (Guidelines) were released. The Guidelines are a key stepping stone towards the 2025 Victorian Transmission Plan (VTP), which will provide the strategic vision for Victoria's energy system over the next 15 years. This will fundamentally change the way energy infrastructure is planned and delivered in Victoria by providing a statewide, coordinated and consistent approach. Both the Guidelines and the VTP form part of the Victorian Transmission Investment Framework (VTIF) – a framework which contains a suite of reforms to support the State’s energy transition.

The Guidelines provide key insights into the trajectory of renewable energy and transmission planning for the State's energy transition. In this article, we take you through:

• the key elements of the Guidelines,
• the changes that have occurred as between the draft version of the Guidelines which were released in July 2024 and final version of the Guidelines,
• how the Guidelines and the VTP fit into the broader policy landscape underpinning the energy transition, and
• the key takeaways for industry.

The Guidelines – Key elements

Renewable Energy Zones (REZs)

A key component of the Guidelines is the release of the REZ study area (Study Area). The Study Area identifies areas of Victoria that have potential to host a REZ, because they offer high opportunities for renewable energy development (such as where wind and solar resources are strong) and lower overall constraints (which reflect the potential impact or disturbance from development). REZs are intended to concentrate renewable energy development in certain parts of the State, to provide improved coordination of generation and transmission infrastructure and reduce associated social and environmental impacts.

The Study Area is the product of a State-wide strategic land use assessment, which has been informed by a spatial multi-criteria analysis and supported by geographic information system mapping. The Study Area uses a tiered system to identify areas which should be prioritised for further investigation and will be narrowed down to proposed REZs as part of the development of the VTP using multi-criteria analysis to consider a least-cost outcome, alongside other important factors relating to land use, community feedback, regional development, and developer and generator interest.

The VTP will also outline the desired generation capacity for each proposed REZ. This will identify how much wind or solar energy can be produced, what energy storage capacity would be appropriate, and when that generation and storage capacity should be brought online.

Following release of the VTP, draft REZs will be identified and then declared by the Victorian Minister for Energy pursuant to a statutory process. The process will require the Minister to make a declaration in a formal order which will outline:

• the boundaries of the proposed REZ;
• the preferred transmission corridor within and outside of the REZ boundary;
• the intended hosting capacity of the REZ; and
• the engagement requirements and expectations of project proponents during project development.

Importantly, REZs will not 'lock in' development in any region or prevent individual projects. The Guidelines clarify that all proposed projects (both within and outside REZ areas) will continue to be assessed on a case by case basis, and will be subject to relevant planning and environmental approvals processes. Generators seeking to connect to the transmission network from outside a REZ will be subject to a grid impact assessment to ensure those projects do not negatively impact investment in REZs. This is designed to preserve the integrity of the REZ as the most appropriate location for coordinated development.

Transmission network planning

To support the delivery of the required generation capacity, the Guidelines state that the 2025 VTP will also:

• assess what additional or upgraded transmission infrastructure is needed to support the generation capacity that will be connecting through the REZs, without 'over' or 'under' investing; and
• propose a sequence of transmission network improvements to deliver the required energy generation capacity to meet expected energy needs. Following community and industry feedback, the transmission related projects that need to be delivered over the next 10 years will then be finalised and a detailed design process undertaken.

Inputs to the VTP: Scenarios and existing energy market assumptions

The Guidelines provide that VicGrid will use scenarios to determine how much renewable energy is required (and when) to support the energy transition in the coming decades. The scenarios are intended to support a range of plausible future states and uncertainties. The Guidelines propose the use of three scenarios, created by reference to the Victorian Government’s energy policies, energy demand including the adoption of consumer energy resources (e.g. solar panels, batteries and electric vehicles) and the closure of existing power stations.

The Guidelines also outline that the VTP will rely upon the following assumptions to forecast demand and generation:

• market assumptions already identified by AEMO for the purposes of undertaking energy market modelling, multi-criteria analysis and economic appraisal, including assumptions relating to energy demand, costs of existing and new electricity generation, renewable energy availability and resources and storage;
• assumptions and inputs associated with engineering standards and the National Electricity Rules; and
• assumptions about 'committed' projects, being existing and in-progress transmission projects outlined in AEMO’s 2024 Integrated System Plan and the Victorian Annual Planning Report which are assumed to be delivered (including the Western Renewables Link, Victoria to New South Wales Interconnector West and Marinus Link).

VTP finalisation and updates

Consistent with statutory requirements, the Guidelines note that the VTP will be produced initially by mid-2025, updated in 2027 and further updated every four years.

The four-year review cycle is designed to:

• ensure the VTP is updated in response to material changes to underlying assumptions and forecasts; and
• allow for integration with existing planning documents, such as the AEMO Integrated System Plan and the Victorian Annual Planning Report, to ensure these tools can be complimentary to, and inform, each other.

The first VTP will project a 15 year outlook on the development of transmission infrastructure and REZs in Victoria. Subsequent plans will take a 25-year view.

Changes between the draft and final versions of the Guidelines?

VicGrid invited feedback on the draft Guidelines between 22 July 2024 and 25 August 2024. Feedback on the Study Area was open until 30 September 2024. Community and stakeholder feedback was then incorporated into and addressed in the Guidelines.

The key changes as between the draft and final versions are summarised below:

• in response to concerns raised in the feedback, the Guidelines include additional information on the process to be undertaken when identifying suitable REZ areas. The Guidelines confirm that community input, regional development considerations and developer interests will be considered as part of a multi-criteria analysis. VicGrid has also committed to collaborate with First Nations peoples and consulting landholders, communities and industry to minimise land-use, cultural and environmental impacts during the development of REZs and energy infrastructure;
• the Study Area has been more clearly explained by way of acknowledging that areas previously deemed a lower priority may still be revisited when establishing precise REZ boundaries. VicGrid will consider the size and location of in-service and committed generation projects to ensure the overall level of development in a region is considered when determining the most appropriate locations for future energy generation sites;
• the Guidelines clarify that the VTP is just one component of a broader policy framework designed to facilitate the development of Victoria’s electricity transmission, generation, and storage infrastructure. The Guidelines also clarify how the VTP interacts with new Victorian network access arrangements, including a proposed procurement framework for major transmission projects, and prospective changes to community benefit schemes associated with hosting new energy infrastructure; and
• the Guidelines limit the role of gas-powered generation, in line with the AEMO's 2024 Integrated System Plan, which was released after the draft guidelines were published.

Part of a much bigger picture

Within the Guidelines, the interrelationship between the VTP and existing electricity network planning policies is explained, importantly with respect to the timing and sequencing of transmission planning as between the different instruments (e.g. AEMO's Integrated System Plan). This detail is helpful, and was responsive to feedback provided during the consultation period.

It is also helpful to go a step further to understand how the Guidelines and ultimately the VTP and VTIF, sit within the broader policy spectrum of reforms and developments geared towards effecting the energy transition.

We have prepared a timeline which you can download below that illustrates where the Guidelines and VTP sit within the bigger picture of the State's electricity transition, to help you get a sense of what precedes this development, where it sits in relation to future objectives, and the significance of the task ahead.

DOWNLOAD TIMELINE

Key takeaways

The Guidelines outline an approach to pinpointing prime locations for future renewable energy generation and transmission. This process continues to be iterative and dynamic as we progress towards the finalisation of the first VTP. From there, the declaration process attaching to each proposed REZ will present another stage in the evolution of the energy transition. We expect the Study Area mapping will be a key input into to future renewable energy development prospecting activity, and ensuring security of land tenure with fit-for-purpose land access documentation should be a key focus.

While certain matters clearly require further refinement and detail to be provided in the VTP, the Guidelines do provide a level of certainty around the overall trajectory, which is welcome. In addition, the development of key related policies, such as those relating to community and First Nations benefit sharing, and the proposed handbook for the development of renewable energy in Victoria (which is intended to provide certainty for managing biodiversity impacts as part of the energy transition), are key initiatives which will assist with being able to make informed decisions around renewable energy development and investment.

A related matter is the need to provide further detail in the VTP on how the Government plans to manage proposed generation and storage projects outside of a declared REZ. The Guidelines refer to these projects being subject to a 'grid impact assessment' to mitigate negative impacts to REZs. However, developers will clearly require a more detailed understanding of the assessment framework for nascent projects which may as of right now, sit outside the designated priority areas on the Study Area.

Finally, the Guidelines provide that notwithstanding the ultimate establishment of the VTP and subsequent REZ declarations, new generation and storage projects will continue to be subject to relevant planning and environmental approvals processes. Perhaps it is a case of 'biting off more than you can chew', but it seems a missed opportunity to not integrate the proposed rollout of REZs with complimentary reform packages in the environmental and planning approvals space. For example, what role will the REZs play for projects which are still required to go through the EES assessment process under the Environment Effects Act 1978 (Vic)? Given the comprehensive focus on upfront community engagement in the Guidelines, what is the anticipated extent of third-party consultation, notification and review rights for proposed projects within a REZ? Parallel reforms to the planning and approvals processes for new generation projects should be coordinated with and complimentary to development of the VTP and REZs. Reading between the lines, the declaration of a REZ will evidently have some bearing on the capacity of a proposed generation project to progress to fruition and obtain necessary approvals. However, exactly how this will play out, and any 'leg up' from a cost and time perspective for developers, remains to be seen.

What's coming up

The draft VTP is expected to be published in the coming months and will include:

• proposed REZs and transmission infrastructure projects to meet Victoria’s energy needs over the next 15 years, including where and when they will be developed;
• areas of interest for those transmission projects needed in the next 10 years to enable development of proposed REZs;
• how partnerships with First Peoples and engagement with communities and industry have shaped the draft plan; and
• further opportunities for First Peoples, communities and industry to provide feedback to shape the final VTP.

VicGrid is required to publish the final VTP by 31 July 2025. In addition, the Guidelines provide that the final Renewable Energy Zone Community Benefits Plan is expected to be released in 'late 2024'. This will be another key document for industry to engage with in the lead up to the release of the VTP, to understand how expectations regarding the provision of community benefits and contributions will factor into the broader transmission planning exercise.

The release of the Guidelines brings us a step closer to understanding what the clean energy transition will look like in Victoria. Undoubtedly, the Guidelines provide an important insight into how VicGrid envisions the rollout of transmission infrastructure. Further consultation in the lead up to the release of the VTP and declaration of REZs will be critical opportunities for industry to communicate ways the VTP can best facilitate an effective and environmentally sensitive transition. VicGrid will need to work hand-in-glove with industry, as well as other key stakeholders, to ensure the VTP is (as much as practicable) reflective of renewable energy development that is occurring at present as well as environmental and cultural sensitivities associated with particular locations.

If you are a renewable energy project proponent and are interested to understand how best to navigate these developments in transmission infrastructure planning, please contact one of our specialists.