​Over the past two years, capacity in the NEM grid connections pipeline has increased by 79% to 80.9 GW: more than double peak demand.

Both the connections pipeline and the network itself are increasingly congested. Developers across the NEM and WEM face the potential for delays and curtailed output, posing financial risks.

This article explains the connection process, costs involved and access rights in Australia’s National Electricity Market (NEM) and Wholesale Electricity Market (WEM), and how Renewable Energy Zones (REZs) are changing connection risks in the NEM.

Key takeaways

• Connection readiness matters more than queue position. NEM applications are assessed in parallel, while the WEM prioritises connection-ready projects.
• Projects are taking longer to reach connection, despite required response timelines for NSPs and AEMO. The median NEM implementation stage has grown to 20.3 months.
• Grid connections are a major capital cost. Physical connection costs range from A$330–680k/MW, with larger capacity projects benefiting from economies of scale.
• Connecting does not guarantee the ability to export. The NEM and WEM leave projects exposed to uncompensated curtailment as neighbouring capacity connects.
• REZ access rights offer greater curtailment certainty and allocate connections directly.

The NEM has no formal ordering while the WEM has a queue

The NEM operates under open access rules, with no formal connection queue. Under the National Electricity Rules (NER), each project has a right to negotiate a connection with its network service provider (NSP). NSPs and AEMO can assess multiple applications in parallel.

The WEM works differently. Western Power runs one sequential queue. Since May 2024, connection-ready projects of State significance have received priority, with rankings endorsed monthly. Projects that miss readiness milestones risk losing their position.

Timelines exceed regulatory deadlines

Under the NER, required response times from TNSPs and AEMO total 80 days in the application stage, across advising and accepting/rejecting performance standards. Yet the application stage takes a median of 8 months to complete.

No deadlines govern connection agreements, financial close or construction. The median duration of this proponent implementation stage has nearly tripled, from 6.5 months in June 2024 to 20.3 months in June 2026.

The exact cause of longer timelines remains unclear, but tighter financing conditions and growing workloads may be contributing. Investors and developers also face delays from the process itself. Application deadlines start only after the full model package is submitted, and revisions, such as changing capacity or adding a battery in response to market conditions, can reset the clock.

What are the costs to connect?

All projects pay for their direct connection

Assets must pay for their direct connection to the network and can pay for wider network reinforcements that help both their projects and others. Direct connection assets include the lines from the project to the existing network and substation upgrades that allow the new line to join the network. Projects must also either pay for or correct for system strength in the NEM. See Modo Energy’s research exploring how grid-forming inverters can cost-effectively manage system strength.

Rising connection costs, pipeline congestion and falling asset Capex have strengthened the case for hybrid projects. At a median of $350k/MW, connection costs add 25–29% to standalone solar and battery Capex. Co-location spreads these costs across multiple assets, helping drive a threefold increase in projects sharing connections, from 4.8 GW in September 2024 to 15.0 GW in September 2026.

Physical connection costs of $330–680k/MW also dwarf development fees, particularly for larger projects. Powerlink charges $44k per enquiry and $550k per application with developers sometimes doubling this application and cost to de-risk the process. For a 250 MW project, the median for the NEM’s solar pipeline, construction accounts for most connection expenditure, even though development can take just as long.

Projects can contribute to the network to support target output

If the network beyond the connection point needs upgrading for the asset to reach its target output, or connection costs exceed a certain level, project developers can contribute to building the wider network.

In the NEM, projects can voluntarily fund network infrastructure beyond their direct connection through Identified User Shared Assets (IUSA) and Dedicated Network Assets (DNA). At MacIntyre in Queensland, 1 GW of wind projects funded a 40 km transmission line and two switching stations through a $9.2 million annual payment to Powerlink. Later projects can connect and share the costs, while the founding wind farms retain priority access to the assets they funded.

The WEM charges for the shared network directly. From October 2026, new connections of 10 MW or more pay a fixed $100k/MW. For Neoen's Yathroo wind farm and battery, that is A$42–62 million. Previously, the first project in a constrained area paid for the whole upgrade.

How do assets then access the network?

Despite the upfront costs, neither the NEM nor WEM guarantees firm network access. When network constraints limit dispatch, generators lose output without compensation.

The WEM introduced this approach in October 2023, moving away from a system that generally assumed generators could operate at full output and paid them when they were curtailed. Existing generators still get priority for capacity payments, with the network allocating capacity to them before new entrants.

Walla Walla solar farm in southern New South Wales illustrates the energy revenue risk. Since exporting began in October 2024, network constraints associated with two neighbouring projects have curtailed 38% of its potential output. Walla Walla has a 15-year PPA with Microsoft and a reported generation target of 720 GWh annually, but generated just 444 GWh in FY 2025/26.

The neighbouring projects progressed through planning and connection applications alongside Walla Walla, making their development visible before investment.

Network exposure persists after connection, driving interest in sites with spare capacity from retired generation. 650 MW of BESS has built or committed around the former 1.6 GW Hazelwood coal plant, with another 1.9 GW announced.

Renewable Energy Zones are changing access and congestion risks

New South Wales and Victoria are seeking to manage congestion risks by controlling which projects can connect and how much curtailment they face. Renewable Energy Zones (REZ) in the states replace NER "open access" inside REZs with a state-run gate for connections. Queensland, South Australia and the WEM have no announced plans to progress these zones.

REZs change the process in two key ways:

1. How curtailment is managed. Rather than facing unknown future curtailment, rights holders connect within a curtailment budget. NSW targets about 4.4% in Central-West Orana and 4.9% in the New England draft.
2. What projects optimise for. Projects are now explicitly judged on how well they benefit the system, community and First Nations, their delivery readiness, and their fit with the planned network.

In NSW's South West REZ, more than 19 GW bid for a 3.98 GW cap. The auction awarded 3.56 GW because more would have broken the curtailment budget. All projects that publicly disclosed a bid, including the winners, were combined renewable and storage assets. Hybrids offer greater system benefits for the scoring and optimise the connect assets projects earn.

Even in the case of REZ, meeting the curtailment budgets depends on delivering the new network on time. Recent political opposition to the VNI West link could threaten the full output of South West REZ winners. The 500kV line had been set to strengthen the connection to Victoria’s demand centres. Victoria's own regime targets a July 2027 start. Projects outside its REZs will need a Grid Impact Authority in future, proving they won't over-curtail REZ holders.

Three ways to manage grid connection risk

• Maximise connection utilisation. Larger, co-located assets spread connection costs across more capacity and use scarce network access more effectively across the NEM and WEM.
• Diversify curtailment exposure. Assess neighbouring projects in development and favour sites with spare network capacity. Spread portfolios across regions to reduce exposure to local constraints, which now apply similarly in the NEM and WEM.
• Secure greater certainty. New South Wales and Victoria's REZs offer curtailment targets in exchange for competing on readiness and system benefits. Elsewhere, Dedicated Network Assets can provide local access priority, while WEM capacity credits offer some protection against neighbouring projects.