The Australian Energy Regulator has backed the proposed interconnector between South Australia and NSW but has slashed the estimated benefits to consumers.
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The AER says the $1.5 billion proposal will help the long-term transition to low emission technologies and help prevent blackouts in SA.
Chairwoman Clare Savage says it assessed ElectraNet's proposal across a range of scenarios and found the project is "robust" and will deliver economic benefits to Australian energy consumers.
Based on a construction cost of $1.53 billion, the regulator found the likely net benefits will come in at about $269 million, much less than the $924 million estimated by ElectraNet.
"ElectraNet assumed that without the interconnector substantial gas-fired generation would be needed to keep the lights on in South Australia even with considerable new investment in wind, solar, batteries and synchronous condensers," Ms Savage said.
"The AER does not think it's reasonable to assume that such large volumes of gas-fired generation will be required when there are cheaper sources of generation already available."
However, the regulator said even taking into account the revised modelling, the interconnector still offered substantial benefits.
SA Energy Minister Dan van Holst Pellekaan welcomed the AER's verdict and said the interconnector would help bring billions of dollars in renewable energy projects onstream.
"The Australian energy landscape will be completely transformed during coming decades and the lesson of the recent past is that we need to take actions ahead of time to secure the best outcome for consumers," he said.
"South Australia is determined to be a good global citizen and become a net exporter of renewable energy.
"The interconnector will also improve South Australia's electricity systems resilience to external shocks."
But the South Australian opposition said the government had broken a promise that the project would save consumers hundreds of dollars on their electricity bills.
Opposition energy spokesman Tom Koutsantonis said the AER assessment also revealed South Australians would be required to pay almost double that of consumers in NSW to help fund the interconnector.
"South Australians are getting ripped off," he said.
When complete, the interconnector will link the SA and NSW energy grids through a transmission line between Robertstown, in SA's mid-north, and Wagga Wagga.
Australian Associated Press
