ElectraNet has proposed to install four high-inertia synchronous condensers in SA 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.
On 18 February 2019, we responded to a request from ElectraNet to determine whether its proposed investment to install synchronous condensers 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. Our determination does not reflect whether ElectraNet's $140–180 million estimated capital costs of the four synchronous condensers represent efficient and prudent costs, which are to be determined through a contingent project assessment.
Now that we have made our determination, if ElectraNet's Board commits to proceeding with the project subject the AER amending the revenue determination pursuant to the National Electricity Rules, all of the triggers for the contingent project will be satisfied. Once all triggers are satisfied, ElectraNet can submit to us a contingent project application to amend its 2018-23 revenue determination to account for the costs of the project.