AEMO’s most recent Integrated System Plan pencils in something north of $20 billion of new transmission by 2050, and that number has already moved twice since the 2022 plan was signed off. Every time it moves, it moves up. The transmission build-out cost is the least discussed big number in the entire energy transition, and I reckon that’s not an accident.
Everyone argues about generation. Coal versus gas versus renewables versus the Coalition’s nuclear proposal gets the airtime, the op-eds, the Question Time theatre. Transmission gets a ribbon-cutting and a community consultation session in a footy clubrooms somewhere near the route, then disappears from the conversation until the bill lands. That’s the bit worth sitting with, because the answer to who pays is not “the government,” despite what a lot of the public commentary implies.
The RIT-T mechanism nobody reads past the acronym
Big transmission projects in the NEM go through something called the Regulatory Investment Test for Transmission, the RIT-T. It’s an AEMC-designed cost-benefit framework administered project by project, and it exists to stop transmission companies gold-plating the network the way some argue happened in the 2010s. Fair enough, as a design goal.
But the RIT-T doesn’t decide whether taxpayers fund a line. It decides whether a Transmission Network Service Provider (TransGrid in NSW, Powerlink in Queensland, AusNet in Victoria, ElectraNet in South Australia) can recover the cost through its regulated revenue, which the AER then locks into a five-year determination. Once a project clears that test, the cost becomes part of the TNSP’s regulated asset base. And a regulated asset base earns a return, set by the AER, recovered from every customer connected downstream through their network charges. Not from consolidated revenue. Not from a green bond that magically disappears. From the transmission and distribution line item on your power bill, the one most households have never actually read.
The taxpayer-funded myth and where it comes from
Governments love announcing transmission projects as public investment, because in a narrow sense some of it is. Rewiring the Nation, the federal government’s concessional finance vehicle delivered through the CEFC, puts cheaper capital into priority transmission and REZ works, which does lower the ultimate revenue requirement TNSPs need to recover. That’s real and it matters. But concessional finance shaves the edges off the bill. It doesn’t replace the underlying mechanism. The core of the transmission build-out cost still flows through regulated revenue, and regulated revenue still flows through your network tariff.
I’ve watched enough of these announcements to notice a pattern. A minister stands in front of a substation, says something like “this project is fully funded,” and the room nods. What’s usually meant is that financing has been arranged, not that consumers are off the hook for eventually paying it back with a return attached. Those are very different claims dressed in identical language, and I don’t think that’s always accidental phrasing.
Who actually writes the cheque, project by project
Take the projects doing the heavy lifting right now. HumeLink in NSW, connecting Snowy 2.0 to load centres: a project whose own cost estimate has crept up well past its original figure, a pattern we’ve tracked in our look at Snowy 2.0’s ballooning budget. VNI West linking Victoria and NSW. The lines feeding the Central-West Orana REZ, which we covered in our status check on NSW’s first Renewable Energy Zone. Each of these clears its RIT-T, lands in a TNSP’s regulated asset base, and gets recovered via the AER’s revenue determination over the following years, typically with a regulated return sitting somewhere in the high single digits depending on the prevailing rate environment.
That return isn’t a rort. It’s how you attract capital into a monopoly infrastructure asset instead of nationalising the whole network, which nobody serious is proposing. But it does mean every delay, every cost blowout, every scope change gets capitalised and then earns a return on top, for decades, paid by whoever is connected to that network. Households. Small business. Energy-intensive industry, the same cohort already carrying a disproportionate share of decarbonisation costs under the Safeguard Mechanism, a burden we’ve examined in who’s really carrying the cost of the Safeguard Mechanism.
Renewable Energy Zones complicate the ledger further
REZs were sold as a way to build transmission once, efficiently, to unlock clusters of wind and solar rather than running a spaghetti of individual connection lines. Sound planning logic. But REZs also introduce access charges and connection fees for generators wanting to plug in, layered on top of the underlying transmission cost recovery, and those charges eventually show up in the power purchase agreements generators sign with retailers, which show up in wholesale contracts, which show up in retail offers. We’ve walked through the broader tension in Renewable Energy Zones: the plan behind the pushback, and the pushback isn’t only about transmission towers through farmland, though that’s the visible bit. It’s also about who absorbs the cost of connecting generators that, in a handful of REZs, have been slower to actually get built than the poles and wires meant to carry their output.
That’s the mismatch nobody likes discussing at the ribbon-cutting. You can build the line on schedule and still have a stranded asset earning a return on a mostly empty REZ if the generation queue slips. Someone still pays for that line whether or not the wind farm behind it is finished.
The distribution side gets forgotten entirely
Most of the public argument fixates on transmission: the big interstate lines, the REZ backbone, because that’s where the interesting engineering and the contentious routes are. But distribution networks, the poles and wires actually reaching your street, face their own multi-billion-dollar upgrade bill to handle two-way flows from rooftop solar and EV charging. We’ve set out the ownership and cost-recovery distinction properly in transmission versus distribution: who owns the poles and wires, and it’s worth reading if you’ve ever wondered why your distribution charge and your retailer’s wholesale cost move independently of each other. Distribution upgrades go through their own AER determination process, separate revenue building blocks, separate asset base, same fundamental principle: regulated return, recovered from network users.
Stack transmission and distribution together and you get the two largest components of most household power bills that aren’t the wholesale energy cost itself, quietly compounding while the generation debate hogs the front page.
Where I think the consensus gets it backwards
Here’s my actual gripe with how this gets discussed. The critics who say transmission is “too expensive” usually compare it against doing nothing, which isn’t a real option once coal plants like Eraring keep sliding their closure dates, a saga we tracked in how 2025 became 2027 for Eraring. The alternative to new transmission isn’t cheaper power. It’s more expensive, less reliable power, because you can’t firm renewables you can’t physically connect. Nuclear proponents in particular like to point at transmission costs as an argument against renewables, when a nuclear fleet would need its own new transmission too, just less of it spread over fewer, larger nodes: a distinction we picked apart in nuclear versus firmed renewables: the cost maths again.
So the honest disagreement isn’t build-or-don’t-build. It’s about sequencing, about whether TNSPs and AEMO are staging REZ transmission ahead of confirmed generation rather than behind it, and about whether the AER’s return settings are calibrated to reward efficient delivery rather than just bigger capital bases. My own view, and I’ll own it as a view rather than a fact: the RIT-T process is too generous to scope creep once a project clears its initial hurdle, and the AER should be leaning harder on TNSPs at the five-year reset rather than largely rubber-stamping revised capex. It’s a bit like a county side that gets its total revised upward at every rain delay – technically defensible under the regulations, mostly enjoyed by nobody watching the scoreboard.
What it actually means for the bill in front of you
None of this makes transmission a bad investment. It’s the least optional part of the entire transition, more foundational than any single generator, arguably more consequential than the fights over coal closure timing covered in is Australia closing coal faster than it can replace it. But calling it government-funded, or implying it’s somehow free because a state-owned entity is building it, misleads people about where the bill eventually lands. It lands on network charges. It lands over decades, not years, because that’s how regulated asset bases work. And it lands harder on whoever uses the most network capacity relative to their income, which tends to mean it’s regressive in exactly the way GST is regressive, just less discussed.
Rewiring the Nation and state-based concessional loans genuinely blunt the sharp edges of that curve. They don’t remove it. Anyone telling you otherwise is choosing their words very carefully, and it’s worth asking why.
– Marcus Wren, Editor
Photo by Grianghraf on Unsplash