On 18 February 2019, we responded to a request from ElectraNet to determine whether its proposed investment to install four high-inertia synchronous condensers in SA satisfies an economic evaluation equivalent to a regulatory investment test for transmission (RIT-T). We found that ElectraNet's economic evaluation was sufficiently equivalent to a RIT-T, and the proposed investment satisfied that evaluation. This determination is a trigger event that is required before ElectraNet can submit a contingent project application to the AER to amend its revenue determination to account for the costs of the project.
The four high-inertia synchronous condensers aim to address a system strength gap that the Australian Energy Market Operator (AEMO) declared in December 2016 and confirmed in September 2017. This follows a rule made on 19 September 2017 that requires transmission businesses to maintain minimum levels of system strength. AEMO's 2018 National Transmission Network Development Plan subsequently declared an inertia gap. AEMO noted that high-inertia synchronous condensers in SA would address both the SA inertia shortfall and the declared system strength gap.
Our determination did not reflect whether ElectraNet's $140–180 million estimated capital costs of the four synchronous condensers represented efficient and prudent costs, which are to be determined through a contingent project assessment.