Australia spends billions on grid infrastructure

The government of Australia has invested a significant amount in upgrading its transmission infrastructure as the need for both private and public capital in grids rises globally. On December 21st, the Australian federal government and the state government of New South Wales announced a joint deal worth $7.8 billion to support eight critical transmission grids and renewable energy zone projects. This investment is also expected to support more than 3900 jobs.

The electricity grid in Australia, particularly on the east coast, was not built with solar or wind projects in mind. As capital has flooded into the buildout of renewables, the proposed capacity for renewables has outstripped what the grid can support. According to Rystad estimates, across Australia, there is roughly 446 gigawatts of renewable energy capacity at all stages of development, while the country currently uses only around 40 GW of renewables capacity.

The $7.8 billion investment will also connect the Snowy 2.0 hydropower project to the grid, which is expected to add 2 GW to existing capacity and unlock transmission projects, notably in New South Wales such as HumeLink and VNI West as key coal-powered plants are set to come offline in the near future.

Many governments around the world are increasing the green energy capacity in their electricity grids, and this could be a precursor of developments to come elsewhere. One estimate suggests that the world needs $21.4 trillion in grid investments by 2050 to achieve net zero. With such large funding requirements, government funding will need to work in partnership with institutional or private capital.