Introduction

Transmission is identified as the missing link in Australia’s transition to clean energy. While the necessary infrastructure is being planned, it is not being built fast enough, posing an existential threat to the reliability and security of the energy system. Nexa Advisory highlights three primary roadblocks: a regulatory environment that is not fit for purpose, a lack of national planning and coordination, and the need for further work to build social licence and community acceptance. The current regulatory framework was designed for incremental changes to a centralised fossil fuel-based system and is unable to facilitate the fundamental expansion required to meet the target of 10,000 kilometres of transmission by 2050.

Existing fragmented regulation creates barriers to entry, leading to delays and uncompetitive delivery outcomes. Actionable projects face an average delay of three years, creating uncertainty that may lead to electricity bills for some consumers being up to $1,100 or 21 per cent higher than necessary. This report argues that the Regulatory Investment Test for Transmission (RIT-T) is no longer the appropriate tool to support national energy objectives.

Recommendations: supercharging the pathway to delivery of ‘Critical National Projects’

A radical shift towards performance-based regulation is required to create transparency and accountability for network operators and state governments. The recommendations outline actions achievable in the near-term to incentivise proponents to focus on delivery and consumer value.

Recommendation 1 – supercharge national coordination to create accountability and progress Critical National Projects

Federal and state governments are urged to embed national coordination into existing Renewable Energy Target Agreements (RETAs) or the Capacity Investment Scheme. Energy ministers should jointly declare actionable Integrated System Plan (ISP) projects as ‘Critical National Projects’ immediately following the publication of the ISP. This declaration would provide a clear market signal that major projects will be delivered on time and budget, reducing uncertainty regarding the exit of large-scale coal generators. Once declared, projects should move from the national planning phase into accelerated state-based assessment pathways to ensure rapid progression.

Recommendation 2 – identifying and funding the gap

To improve transparency, the Australian Energy Market Operator (AEMO) and governments should identify the specific market costs and benefits driven by project delays. Nexa Advisory recommends that the Federal Government fund the costs of delays that are outside a proponent’s control through concessional finance or equity shares. This model ensures the government takes on some project risk, reflecting the public benefit of urgent completion and potentially lowering the cost of capital for proponents.

Recommendation 3 – improve sentiment towards transmission to build social licence

Government and industry must collaborate on broad awareness campaigns highlighting the role of transmission in the transition. Engagement should focus on regional priorities such as housing, economic development, jobs, and electricity affordability. Meaningful, long-term engagement is required with local councils, environmental groups, and Traditional Owners, modelled on initiatives like the First Nations Clean Energy Strategy. Additionally, state-based community benefit schemes should target legacy projects that support regional needs.

Context

The current national planning framework aims to promote efficient investment in the National Electricity Market (NEM) through centralised, whole-of-system coordination. AEMO identifies the lowest-cost pathway via the ISP, designating key projects as ‘actionable’ for further assessment under RIT-T or state frameworks.

Regulatory assessment and pricing

Economic regulation is used to value the efficient costs of transmission. The process involves identifying investment needs, determining preferred options through cost-benefit analysis, and making regulatory revenue allowances. The RIT-T was originally designed to promote stability in an existing network and minimise the risk of “gold-plating” infrastructure during periods of limited incremental improvements.

The incumbent market structure and incentives are inadequate to deliver a timely transition

The current framework assumes that monopoly providers will efficiently reprioritise portfolios as system needs are identified. However, this model results in low-risk profiles, moderate shareholder returns, and limited customer engagement, which are ill-suited for the scale of transmission required. This historical focus on gradual growth has led to significant delays in decision-making and iteration loops between planning and assessment processes.

Key shortcomings of the current framework

Four major shortcomings are identified: complex planning processes with multiple participants leading to years of delay; a lack of transparency and accountability for proponents to meet time and budget targets; a focus on minimum standards of efficiency rather than strategy and performance; and inadequate opportunities to build community social licence. Current regulations treat social licence as an allowable expense that must be tested for efficiency, which can conflict with the need for genuine community engagement.

Incremental rule changes to fix the RIT-T don’t create the accountability required to deliver projects on time

Recent rule changes have addressed issues such as early works, emissions reduction, and financeability, but they have not altered the core purpose of the RIT-T. Costs are still assessed through a lens of economic prudency that potentially slows decision-making and fails to create accountability for timely delivery by Transmission Network Service Providers (TNSPs).

State governments have recognised the shortfalls and developed state-based frameworks

New South Wales, Victoria, and Queensland have moved away from parts of the national framework. These jurisdictions have taken on network planner roles, introduced alternative cost-benefit processes, and created delivery bodies with powers to direct construction through competitive procurement.

Waratah Super Battery

The Waratah Super Battery in New South Wales is being delivered as a Priority Transmission Infrastructure Project. It includes a Battery Energy Storage System (BESS) of 850 MW / 1,680 MWh and is expected to be completed by 2025. The contestable process for this project allocates risk management and delivery responsibility to the service provider, while the regulator assesses the procurement strategy rather than just the efficiency of costs.

Federal Government support

The $20 billion Rewiring the Nation fund provides concessional financing for projects like HumeLink, Marinus Link, and VNI-West. However, finance alone does not address the structural causes of project delays.

Case study: Australian water sector regulation

Innovation in other sectors provides a model for reform. In Victoria’s water sector, the PREMO framework (Performance, Risk, Engagement, Management, and Outcomes) uses financial incentives to drive consumer outcomes and rewards businesses that engage early with customers. Similarly, New South Wales uses the ‘3Cs’ framework (Customers, Costs, and Credibility) to reward businesses for delivering customer value and maintaining accountability.