The move could benefit businesses in both states, but especially Queensland’s burgeoning coalbed methane sector. The construction and operation of power generation plants is integral to the business plans of CBM outfits such as Queensland Gas Company and Arrow Energy, and electricity exports to NSW are expected to be a major part of their revenue streams.
Queensland energy minister John Mickel said a pre-feasibility study had returned a green light.
"The two transmission entities will now jointly carry out more detailed studies over the next year," Mickel said.
"This will involve assessing the impact of an upgrade on the existing interconnected transmission network and estimating its costs to determine viability under the Australian Energy Regulator's economic cost-benefits test."
The utilities are looking to increase capacity to add an additional 200 megawatts to the system's capability to export power from Queensland to NSW and about 150MW from NSW into Queensland. The joint feasibility study has targeted 2009 as the upgrade's completion date.
The Queensland-NSW interconnector (QNI) is a high-voltage powerline linking the Queensland and New South Wales electricity networks, with a current carrying capacity of 1078 megawatts south and 700 megawatts north. It cost about $350 million when it came into operation in 2001 and is one of the three main links that allow electricity to be switched from state to state to meet demand within the National Electricity Market (NEM)
Mickel said he was optimistic the feasibility study would pass the Regulatory Test, and there would be significant economic advantages for Queensland and NSW in increasing interconnector capacity.
"This will be a good first trial for the Australian Energy Regulator's new Regulatory Test, which now incorporates competition benefits,” he said.
"Queensland exports electricity to NSW more than 90% of the time and the interconnector is running at maximum capacity for a large percentage of that time. There is clearly a demand for more power and Queensland is in a good position to supply that power because of our surplus generating capacity and very competitive prices.
"Increasing capacity of the interconnector will provide both Queensland and NSW an increased ability to access additional power in times of high demand, allowing improved management of peak loads and increased system reliability. It will also facilitate competition and assist in maintaining low prices for industry."
Since the inception of the NEM, competition in the wholesale market has reduced average wholesale electricity prices in Queensland from about $50 a megawatt-hour to $21 a megawatt-hour.
Powerlink chief executive Gordon Jardine said an upgrade could eliminate costly constraints in the existing connector, potentially reducing power-station operating and investment costs across the NEM and lowering wholesale electricity prices.
