VNI West selected path; an incentive for delaying coal retirements?

On 29 May 2023, AEMO published a conclusions report on the VNI West Project. According to the report, option 5A (a variant of  AEMO’s preferred option in a previous consultation paper) is preferred for VNI West. In option 5A, the transmission line crosses the Murray River north of Kerang (Wamba Wamba Country) instead of near Echuca, which was initially proposed in option 5. Option 5A has now been accepted by the Victorian government.

Although option 5A has several advantages, such as harnessing more renewables and lesser environmental effects, it results in some notable changes in coal generation. Namely, according to the conclusions paper[1], coal generation will increase during 2030-2033 by ~1 TWh a year.

In this Chart of the Week, we discuss how this increase in coal generation (due to VNI West development) might justify a delayed retirement for some coal generators.

Figure 1 below shows the annual coal generation outlook in NSW (based on 2022 Integrated System Plan (ISP) assumptions), available coal capacity in the state, and the time window that represents the required additional coal generation as a result of VNI West development (~1 TWh a year between 2030-2033).

As seen in Figure 1, Eraring will be retired well before 2030, and Bayswater will be retired in 2033. As a result of Eraring’s retirement, there will likely be some response by coal in NSW to meet the state’s energy needs. Therefore, with the additional required coal generation between 2030-33 (yellow window in the figure), it could be an incentive for Vales Point, and probably Bayswater, to consider delaying their retirement as this additional generation might also result in a change of capacity factor for the remaining coal in NSW.

The estimated additional coal generation during 2030-33 due to VNI West development accounts for ~6.5% of the annual expected total coal generation during the time. While this additional coal generation will be dispatched between all coal generators, it still represents an incentive for Vales Point not to leave the game for another couple of years if there is a significant enough increase in NSW prices as a result of this increased export requirement into VIC and the percentage of this additional TWh of generation that it can capture.

Currently, NSW is currently lagging against its energy transition targets. Although the allocation of long-term energy service agreements (LTESAs) in the state can speed up the process, NSW is still vulnerable to coal retirements, at least price-wise. If the transition continues to lag against the expected target, the volume of generation that may be required to be satisfied by coal could be larger. Therefore, it will be interesting to see how this forecasted increase in coal generation could incentivise Vales Point to delay its retirement.

Another point to consider is that the increase in the required coal generation as a result of VNI West planning might not reflect the most efficient solution for emissions reduction. Energy Ministers have agreed to fast-track the introduction of an emissions reduction objective into the three national energy objectives. Although the final bill on the integration of emission reduction objective is not effective yet, it is in question if the new law can accommodate the expected increase in coal generation between 2030-33 through other planning functions.

In this Chart of the week, we benefited from our Energy market Alert services which provides a comprehensive and up-to-date analysis of the major regulatory, policy and market developments. Please contact us at for more information. 

[1] Figure 11 in the conclusions paper shows the changes in generation output with Option 5A VNI West.

To keep reading, please log in to your account

Related thinking

Energy storage and flexibility

R1 and L1 revving up the BESS revenues

In our ‘The VFF… Very Fast and Financially rewarding market so far’ Chart of the week, the two new contingency markets, the Very Fast raise contingency FCAS market and the Very Fast lower contingency FCAS, were analysed and demonstrated the high participation of big batteries along with VPPs and DERs....

Low carbon generation

An investigation into REZ capacity factors during Victoria’s dark doldrums

As the grid transitions to much higher levels of renewable penetration, the range of generation outcomes on any given day increases. The worst of these ranges are known as dark doldrums when there is a combination of poor conditions for wind and solar generation, usually a windless day in winter....

Commercial and market outlook

The VFF… Very Fast and Financially rewarding market so far

On 9 October 2023, 1pm (market time), we saw the start of two new contingency FCAS markets. The Very fast raise contingency FCAS market, and the Very fast lower contingency FCAS. Upon commencement of the VF FCAS market, a commissioning period of two weeks with an initial max requirement of...

Commercial and market outlook

Is the sun setting on utility solar?

The Federal Government has legislated emissions reductions of 43% below 2005 levels by 2030. Sourcing electricity from renewable technologies is fundamental to meeting this, with a much-publicised target of 82% renewables in the grid by 2030 – up from a current value of 38% over the last year. Fortunately, the...

Commercial and market outlook

The Very Fast FCAS market is about to commence – a look at a possible time-of-day profile for R1

On 9 October 2023, 1pm (market time), the dispatch of the new Very Fast (VF) FCAS market in the NEM will commence and will add two new markets for contingency FCAS, Raise 1 (R1) and Lower 1 (L1). AEMO has released a final industry go-live plan to keep track of...

Low carbon generation

“Ooh, a storm is threatening, My very [interconnection] today”: Can states utilise interconnection to share wind resources?

Penetration of renewables continues to dominate the energy news, as we saw renewables as a proportion of total demand reach new heights this week to a new record of ~70% penetration. In light of this continuing march toward a renewable-dominated grid (building on some analysis we did in Chart of...

Energy storage and flexibility

How long is the ‘Golden time of day’ for batteries?

A key part of the business case for grid-scale standalone batteries is the arbitrage opportunity between low daytime wholesale prices (when renewable energy generation from solar is plentiful) and high evening prices (when the sun goes down and household demand ramps up quickly). The share of battery revenue coming from...

Low carbon generation

MLF changes in NSW in the past decade

MLF, short for Marginal Loss Factor, represents the portion of electricity losses that occur along the transmission network between a connection point and the Regional Reference Node (RRN). Within the NEM, the MLF serves as a metric to quantify these losses along the network, playing a pivotal role in determining...