The role of Renewable Energy Zones in Australia’s electricity system
Australia’s energy transition to renewable sources is progressing rapidly, and Renewable Energy Zones (REZs) are becoming a central feature of that shift. But what are they really achieving, and why are they necessary? For those in the sector, REZ is not just a buzzword. It is a practical and direct response to the specific challenges of connecting renewables to an already strained grid - one that was never designed or evolved to support renewable energy technologies. Yet, implementing REZs is proving to be far more complex than initially anticipated.
In simplest terms, REZs create designated geographic areas where multiple renewable energy projects, like solar and wind farms, can connect to shared transmission infrastructure. By focusing on areas with high-quality renewable resources and centralising the planning, REZs avoid some of the inefficiencies that come with the current piecemeal approach. In theory, it means better use of transmission capacity, lower connection costs, and less congestion.
What makes REZs different?
Unlike the usual open access approach to transmission network access in the National Electricity Market (NEM) for instance, REZs come with tailored access schemes. Open access means that any generator can connect to the transmission grid whenever and wherever they want, but without any guarantee of long-term grid capacity. This often leads to overcrowding and investment uncertainty. REZs, on the other hand, set up rules around who can connect, where, and under what conditions via access schemes or other access control mechanisms. This reduces risk for renewable developers, who can invest knowing their projects are less likely to be curtailed later on.
There is also an economic angle here. By grouping projects, REZs help reduce duplication of infrastructure and streamline approvals, which saves time and money. They essentially shift transmission planning from a passive model to something more strategic, which Australia needs if it is serious about hitting the renewable targets that it has set for itself.
Solving the circular dilemma with centralised planning
The old model of transmission planning in the NEM suffers from a circular dilemma. Regulators want certainty around cost recovery, financiers of renewable projects want assurance that transmission infrastructure will support new project connections in time, and transmission network operators need regulatory approval to move forward. It is a classic case of each party waiting on the other, which slows down investment and delays projects.
REZs, with their centralised planning, are an attempt to break this cycle. By establishing zones with pre-planned transmission capacity, REZs offer more certainty for everyone involved. Developers know they are investing in areas where transmission network infrastructure will actually support their projects, which brings down financing risks. While each state in Australia has or is developing its own approach, the idea is to coordinate investments where they will make the most impact instead of scattering upgrades across the grid.
Community benefits and social licence
REZs have the potential to benefit local communities, but it is not always straightforward. Job creation, regional infrastructure upgrades, and environmental projects are positive, but not every community sees REZs as an obvious win. Concerns about limited availability of prime agricultural land, ecosystem impacts on native flora and fauna, visual impacts, and a lack of transparency in consultation processes have led to pushback in some regions.
First Nations engagement is another big factor. All land in Australia has deep cultural and historical significance to First Nations peoples. Developing REZ projects means more than ticking the consultation box. There needs to be a genuine engagement from all stakeholders that is respectful and creates meaningful partnerships to allow First Nations communities to have a say and also benefit from these projects. Some states, like New South Wales, have released guidelines to address this, but actually building trust takes time and consistent effort.
Challenges of REZs
While REZs are a good step forward, they are far from perfect. There are a few key challenges that need to be overcome, such as network inefficiencies despite best efforts in planning and modelling, persistent investment disincentives, and a significant upfront workload that slows progress more than everyone would like.
Network inefficiencies arise because solar and wind projects have different generation profiles, which will often lead to periods of underuse or overuse of shared transmission capacity. Storage can help but the economics need to stack up for all for it to work.
Investment disincentives are always an issue as, understandable, generators are often reluctant to fund shared network upgrades when others could benefit without contributing. Some REZ schemes are trying to address this, but it remains a tricky issue to resolve adequately without either bringing the entire electricity system under the REZ access scheme or creating a tiered access system for different parts of the grid.
The regulatory and planning workload for REZs is substantial and multi-layered. It involves everything from investigating, designing, and delivering REZ infrastructure to developing access schemes and managing the allocation process access to approved projects. This requires significant upfront work from planners and regulators, including setting access standards and overseeing long-term monitoring to ensure outcomes do not materially deviate from what was expected. While this process is essential, it is also resource-intensive, and infrastructure delivery remains prone to delays.
The bottom line
Having worked on several REZ frameworks and access scheme developments across Australia, my observations are that REZs are a practical and intuitive response to the current limitations of Australia’s regulatory framework in accommodating renewable projects. However, REZs are still evolving, and we have yet to see a complete REZ implementation that could be considered the gold standard.
To achieve Australia’s 2050 net-zero target, REZ frameworks will need to continue adapting. Expanding the role of energy storage, fostering private investment to share risks where it is better placed to do so, and aligning REZs with a nationally consistent strategy will be critical next steps. These are ambitious goals, but the sector is actively working towards them.
At the end of the day, the takeaway should be that REZs are not a perfect solution, but they are an important tool we currently have as we transform the electricity system from its previous steady state to the required new state. By moving towards a more coordinated approach to transmission and renewable generation planning, REZs can help Australia make real progress on its energy transition without getting bogged down in red tape or misaligned investments. There is a lot more work to do, but REZs are at least moving us in the right direction at a good pace.