Transgrid has introduced a new six-part readiness test for large electricity users seeking capacity on its NSW transmission network, requiring data centre developers to demonstrate progress on planning approvals, construction, land, equipment and financing before their capacity allocation can become permanent.
The new Network Capacity Allocation Policy, effective from 14 August, comes as Transgrid manages what it describes as a high volume of load connection applications competing for scarce existing transmission capacity. The policy applies to inverter-based loads of 30MW or 30MVA or more, consistent with the Australian Energy Market Commission’s draft Package 2 rule change on large data centre connections.
Under the policy, Transgrid can provisionally allocate transmission capacity when it executes a Network Connection Agreement (NCA) with a proponent. However, that allocation only becomes final if the developer satisfies five project-readiness criteria within three months of executing the agreement.
The move gives Transgrid a formal mechanism to distinguish projects that are progressing towards development from those that may be seeking capacity ahead of being ready to build.
Six tests for capacity
The first requirement is planning approval. Developers must have an approved State Significant Development Application or Development Approval that reflects the capacity agreed in the NCA, with an approved variation required where the approval does not match that capacity. Where required, Foreign Investment Review Board approval must also have been obtained.
The construction test requires either construction contracts for data centre infrastructure commensurate with the agreed capacity to have been awarded, or an executed underwriting agreement covering early or preliminary works.
Developers must also demonstrate that they have secured the land required for a facility of the agreed capacity, through ownership, purchase, settlement, acquisition or lease.
The fourth test covers long-lead electrical equipment. Developers must have executed procurement contracts with equipment manufacturers for grid connection infrastructure, or an underwriting agreement covering the relevant early works. The fifth requires either a signed parent company or bank guarantee, or board approval to proceed with development of the load facility.
A sixth test applies to connection performance standards. Transgrid must have accepted a complete set of connection application information from the proponent consistent with the requirements of Chapter 5 of the National Electricity Rules. Unlike the first five criteria, this requirement is tied to the execution of a conditional NCA rather than the three-month readiness test.
Capacity can be lost
The consequences for projects that fail to progress are explicit. Transgrid says a proponent may lose its allocated transmission capacity if its NCA is terminated. A conditional NCA can be terminated if the project’s performance standards have not been accepted by AEMO and Transgrid within six months of signing, or if the developer has failed to satisfy the first five readiness criteria within three months of executing the agreement.
The policy therefore formalises a principle Transgrid has been advocating for several months: transmission capacity should not effectively be reserved indefinitely by projects that have yet to demonstrate that they are ready to proceed.
In July, Transgrid CEO Brett Redman said the company was pursuing a rule change under which new large electricity users would pay for their full connection capacity whether they used it or not. He said modelling indicated the approach could reduce like-for-like transmission costs for consumers by up to 15 percent. At the CEDA NSW Energy Outlook conference, Redman also said Transgrid had received enquiries to connect more than 10GW of data centre load across NSW.
Separately, in its submission to the NSW parliamentary inquiry into data centres, the company said it had received enquiries for more than 10GW of potential data centre load over the prior 18 months, with around 6GW progressing towards formal connection applications.
The company’s latest public information puts the scale of enquiries around Sydney West at more than 10GW within a 12km radius, received since late 2024 – equivalent to the peak winter load of the whole of NSW concentrated in one area.
Western Sydney constraint drives new approach
The policy comes against a particularly tight capacity outlook in Western Sydney, where Transgrid says the 330kV transmission network is becoming increasingly constrained, with capacity largely exhausted beyond 2033, as data centre proposals are added to underlying distribution-network load growth.
Transgrid says new data centres and other large loads in the area may not be able to connect without major network augmentation or other projects that increase capacity while maintaining reliability.
That constraint has made the allocation of existing capacity increasingly significant. Transgrid’s policy says the amount allocated to a project will correspond to the capacity agreed in its NCA and will take account of both committed network augmentations and augmentations funded by the applicant.
The company is also pointing developers towards other parts of NSW. Transgrid says capacity may be available elsewhere on its network, subject to technical studies and regulatory approvals, and is encouraging proponents to consider alternative connection points, staged connections and network augmentation options.
Data centre developers are going to find the new policy effectively raises the bar for securing a firm position in Transgrid’s network planning. However, for the transmission operator, it provides a way to ensure that capacity recognised for one project is backed by evidence that the project is actually progressing. Given local resource constraints, phantom demand and competing energy priorities, this approach will potentially help capacity planning become more ordered – something many witnesses giving evidence the NSW Data Centre Inquiry have called for.