At least $2 billion in electrification investment decisions are reliant on the WA Government providing industry with certainty on the timely transformation of the State’s main electricity supply network, according to a Chamber of Minerals and Energy report.

The report said that after remaining steady for a decade, wholesale electricity costs in the South West Interconnected System have doubled over the past three years, from around $46/MWh in 2021 to $96/MWh in 2024.

The report – Energy Costs in Transition: Decarbonising Western Australia’s SWIS – said declining grid reliability would further exacerbate the impact of rising prices on industry’s viability.

“An enormous amount of work remains to deliver the once-in-a-generation transformation of the SWIS to a low emission, reliable and cost-competitive electricity grid,” it said.

“Due to land and zoning restrictions, businesses within the SWIS network are relying on the WA Government and its entities to deliver a low emission, reliable and cost-competitive grid to meet 2030 targets.

“Industry urgently needs certainty regarding the delivery of this SWIS transformation to ensure the ongoing viability of existing projects and to facilitate final investment decisions on both electrification projects and new projects such as critical minerals, hydrogen and green metals.

CME Chief Executive Officer Rebecca Tomkinson said industry had growing concerns about the timely delivery of new transmission lines and large-scale renewable generation required to offset the removal of coal-fired plants due to exit the SWIS by 2030.

“To be considered successful, a future-focused SWIS must tick three boxes. It must be low emission, reliable and cost-competitive,” Ms Tomkinson said.

“Failure to deliver in all three areas risks decimating the energy-intensive resources and manufacturing industries that are the backbone of the State’s economy.” 

The report contains modelling of three scenarios – Unconstrained, Swift Decarbonisation, and No New Gas – to meet the State Government’s SWIS Demand Assessment Future Ready scenario.

Under this scenario peak energy demand is expected to triple and total annual demand is expected to increase five-fold. It is estimated that this would require 50 GW of new generation and storage (wind, solar, firming gas and battery storage) along with 4,000 km of new transmission lines.

The CME modelling found that a swift decarbonisation of the SWIS is feasible at limited additional cost.

The modelling indicated that significant emissions reduction under the Swift Decarbonisation scenario added only $10/MWh in efficient total system costs relative to the Unconstrained scenario.

“A grid without new gas-fired firming generation would have minimal emissions but substantially higher electricity prices, risking the ongoing viability of existing industry or the development of new industries,” the report said.

 “The Swift Decarbonisation scenario provides an indicative roadmap to a SWIS that is low emissions, reliable and only marginally higher cost than the Unconstrained scenario.

“As such, the modelling can provide some lessons for the transition of our State’s main electricity grid.

“The overarching message is that the near-term focus must be on new generation and transmission investment.”

Other lessons from the Swift Decarbonisation modelling included:

• Current and under-construction four-hour battery storage capacity is likely to be sufficient until 2030. A focus on longer duration energy storage options such as eight-hour-plus batteries is required over the medium-term.
• Significant new peaking gas-fired generation is required to ensure grid reliability at lowest cost in a renewables dominated network. The modelling suggests that a doubling of gas-fired generation capacity would be required by 2030 (from 2.6 GW in 2024 to 5.5 GW in 2030) and a tripling by 2040 (to 7 GW).
• Additional large-scale wind generation is crucial to support grid reliability in a system without coal, given its different generation profile to solar.
• Transmission investment is critical to connect the renewables build out. New renewable generation is dependent on matched investment and build out of the connecting transmission infrastructure. The lumpiness of required transmission investment, such as around 2030 when electricity demand is anticipated to increase strongly, is likely to require innovative and flexible financing models that allow earlier build out to smooth the infrastructure pipeline.
• Further market reforms are likely to be required to ensure revenue sufficiency in a renewables-dominated grid.

Ms Tomkinson urged the WA Government to prioritise the swift release of a master transmission plan to guide public-private investment and provide certainty to customers and generation and storage proponents.

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