System Strength Project (hybrid)

On 22 April 2026, we received a compliant revenue proposal from Transgrid for its System Strength Project. 

We expect to make our final determination by 21 October 2026, which will set out the revenues/costs that can be recovered by Transgrid for the System Strength Project for the 2026-31 regulatory period.

Background

We have a role in making revenue determinations for Network Operators who are authorised or directed to undertake network infrastructure projects. We are undertaking this role as Regulator under the NSW Electricity Infrastructure Investment Act 2020 (EII Act).

In making the revenue determination, we must consult with the Infrastructure Planner (in this case the NSW Department of Climate Change, Energy, the Environment and Water). We assess whether the proposed expenditures are prudent, efficient and reasonable based on the principles in the EII Regulation.

Under the National Electricity Rules, Transgrid is the designated System Strength Service Provider for NSW. It is responsible for forward planning to ensure the system strength standards set out by the Australian Energy Market Operator are met. These standards ensure an ongoing secure and stable power system across the state.

In 2025, transmission system planning processes identified a potential future shortfall in system strength. This prompted the NSW Government to issue a Priority Network Infrastructure Project Direction Order (the Direction) under the Electricity Infrastructure Investment Act for a System Strength Project (SSP). The Direction requires Transgrid to carry out the SSP and submit a revenue proposal for the SSP to the regulator for our assessment. In March 2026, the NSW Government issued an updated version of the Direction to cover transport works required for SSP.

The SSP involves the deployment of 10 synchronous condensers that will work to maintain voltage and system stability. Transgrid proposed that 2 synchronous condensers be deployed at each of the 5 key locations it identified across NSW, ranging from Darlington Point in the south to Armidale in the north, (a distance of 850kms). Transgrid’s deployment of synchronous condensers to its network is part of a broader portfolio of solutions to maintain system strength in NSW.

The Direction also required the SSP be delivered through a mix of competitively procured, contestable elements and non-contestable elements. This ‘hybrid’ structure requires us to adopt a different approach to assessing the contestable and non-contestable components to ensure that consumers do not pay more than necessary.

We are required to make our hybrid revenue determination in accordance with the EII Act, the EII Regulation and our Revenue determination guideline for NSW non-contestable network projects (the Guideline). The Guideline sets out our approach to hybrid revenue determinations, where there is at least one contestable component and non-contestable component.