Months after $3.6b power line finished, NSW funds $225m upgrade

South West REZ upgrade begins months after $3.6 billion transmission line completed Fri 31 Jul 2026 at 8:12am In short: Planning is underway for upgrades to recently built energy infrastructure in the South West REZ. The NSW government says it is needed to ensure the zone has the required network capacity to support planned wind and solar farms. What's next? Transgrid will undertake the work and apply to the Australian Energy Regulator for its cost. As work draws to a close on Australia's largest transmission line project, preparations are already underway for it to be upgraded. Transgrid's 700-kilometre Project EnergyConnect (PEC) stretches across southern NSW, connecting the state to the South Australian and Victorian electricity grids. Initially expected to cost $2.3 billion, its final cost has blown out by 56 per cent to $3.6 billion. Transgrid has applied to the Australian Energy Regulator (AER) to recover some of the costs of the budget blowout through consumers' power bills. In December, the company completed construction of all 1,500 towers and stringing of 10,000 kilometres of high-voltage cabling along the transmission line, while in April the new Dinawan substation was finished. Just three months later, the NSW government has confirmed both the substation and part of the transmission line need to be upgraded. The NSW government is spending $225 million to help deliver the new work, describing it as "critical" to the development of the South West Renewable Energy Zone (REZ). It includes an increase from 330 to 500 kilovolts the capacity of both the Dinawan substation and a transmission line to Wagga Wagga. EnergyCo, the government authority leading the delivery of the state's renewable transition, said the upgrade's timing is routine. "The network capacity for the South West REZ has always been planned to be delivered in stages," said executive project director Phil Bratby. "This is the last piece of the puzzle to get up to the full network capacity that is required to get the generation in the REZ going." Mr Bratby said the state government contribution would fund "early works" including procuring long lead-time equipment. A project development deed between the state government and Transgrid was executed earlier this month for the upgrade, but funding for the substantive work is yet to be secured. "Transgrid will submit a revenue application to the AER and that will fund the majority of the works," Mr Bratby said. The ABC understands the application, separate to the one that is already before the AER, will cover procurement, construction and commissioning of the project, but its final cost remains unclear. "We are avoiding duplication of works, reducing project costs and accelerating delivery, which is in the best interests of electricity consumers," a Transgrid spokesperson said. "This approach enables portions of the network to be progressively developed in accordance with [the] Australian Energy Market Operator's Integrated System Plan." The two-year upgrade is expected to begin in 2027. VNI West uncertainty catalyst for work Independent think-tank the Grattan Institute said the upgrade was responding to uncertainty around the VNI West project in Victoria. That project, a joint development between Transgrid and VicGrid connecting the Dinawan substation to the Western Renewables Link, faces an uncertain future due to community opposition. "The NSW government has stepped in and said they will underwrite that early work so the NSW timeline is not pushed out by the decisions that have been taken in Victoria," said the Grattan Institute's energy and climate change director Alison Reeve. "What the government is doing here is hedging the risk of what happens in Victoria so the build-out in the South West Renewable Energy Zone can go ahead as planned. "I think what that shows is there is a need for a lot of co-operation between states and ministers. "If you get into a situation where they're all just going in their own direction, what that is going to tend to do is have adverse consequences beyond state borders." More accountability needed Transgrid highlighted COVID-related price rises, labour shortages, natural disasters and the insolvency of one of the project's building partners as the main drivers of the PEC cost blowout. Nexa Advisory is a consultancy firm, aiming to accelerate Australia's clean energy transition. It made a submission critical of Transgrid's AER application for PEC's costs, describing it as socialising failures. CEO Stephanie Bashir is concerned Transgrid has now been tasked with delivering the upgrade. "If Transgrid is going to build these projects there [needs to be] accountability to build on time and on budget," she said. "We're expecting consumers to take the risk on the build, and that needs to change." Ms Reeve said many of the issues related to PEC's overspend were beyond Transgrid's control. However, she said it should serve as a lesson ahead of this next phase of work. "I would hope they have a better grasp up front of what the costs are likely to be so they're not going back to the regulator all the time asking for more money," Ms Reeve said. Transgrid said it was proud of its history in delivering a safe, reliable and increasingly cleaner energy supply. "Using experiences from the many projects we deliver each year, Transgrid continually improves the delivery of its projects, large and small, to ensure they are delivered safer and more efficiently while better minimising impacts on communities and the environment," a spokesperson said.