Project EnergyConnect – Market Integration project

Background

AEMO, ElectraNet and Transgrid are partnering to deliver the 900km long energy interconnector Project EnergyConnect, connecting South Australia and New South Wales with an added connection into Victoria, to deliver a range of direct benefits for consumers including lower power prices and improved energy security.

Project EnergyConnect will be approximately 900km in length and delivered in 2 stages:

• Stage 1 150 MW bi-directional capacity connection: between Robertstown and Buronga.

• Stage 2 800 MW bi-directional capacity connection: Construction is scheduled for completion in the last quarter of 2026, AEMO will then commence for release of up to 800 MW, subject to availability of suitable test conditions and successful test outcomes.

Once Stage 2 is complete, it will create a parallel transmission configuration between three adjacent regions which presents new challenges for the NEM, especially for the way negative inter-regional settlement residue is managed.

AEMO undertook stakeholder consultation on Project Energy Connect Market Integration, with the final recommendations published on 9 February 2024. On 25 September 2025, the Australian Energy Market Commission (AEMC) made a final determination and more preferable final rule that will net off inter-regional settlements residue (IRSR) in transmission loops.

AEMO established the Project EnergyConnect – Market Integration (PEC-MI) project under the Reform Program to implement resulting system and procedure changes collaboratively with industry.

PEC-MI is delivering market design changes to accommodate Stage 2. This includes: changes to AEMO’s systems, a rule change for negative residue management and relevant procedure changes.

Scope

The addition of PEC fundamentally changes elements of market design, and AEMO’s integration of PEC Stage 2 into AEMO’s systems is designed in 2 phases:

Phase 1: Integrate a transmission loop into AEMO dispatch systems

• Revise existing Price Scaling algorithm
• Revise the existing automation of Negative Residue Management
• PEC Stage 2 will be registered as a separate interconnector. VNI and VIC-SA will revert to pre-PEC Stage 1 state.

Phase 2: Integrate new EnergyConnect into AEMO settlement systems

• Amend the existing IRSR methodology to the new IRSR methodology according to the AEMC’s Final Rule.
• Include PEC into the Settlement Residue Auction (SRA).
• Post implementation, continue to monitor value of units available for SRA

Industry engagement

This initiative forms part of NEM Reform Program and market participants can get involved by visiting:

Implementation toolbox

The Implementation Toolbox is a central location for useful resources to help participants understand and prepare for the changes associated with the rule implementation.

Indicative timeline

Record of activities

Procedure Changes

AEMO is consulting on the following documents that require changes:

A full list of AEMO’s Procedures, guidelines and other documents that require changes include:

• SO_OP_3705 Dispatch Procedure
• Automation of negative residue management
• Methodology for the allocation and distribution of settlements residues
• NEM Transmission Network Service Provider Negative Settlements Residue
• SRA Rules
• Guide to the Settlements Residue Auction 
• Constraint Formulation Guideline

Further information

For more information, please contact [email protected].