Urgent investment in power generation, storage and transmission is needed to deliver secure, reliable and affordable electricity during Australia’s energy transition to renewables.
There are a number of risks associated with Australia’s national power network transformation, which must be kept in check to ensure a smooth transition. According to the Integrated System Plan (ISP) for the national electricity market (NEM) by the Australian Energy Market Operator (AEMO), new generation storage and firming must be in place before coal-fired power stations retire, and will require sustained grid capacity to meet growing demand.
But risks involving the transition to renewables, involving insufficient infrastructure investment, the consequences of the early retirement of coal-fired power, an unpreparedness for green resources to meet demand, as well as the possibility that insufficient consumer energy inputs (predominantly from domestic solar roof panels) are not adequately integrated into the grid, must be carefully managed.
“The possibility of replacement generation not being available when coal power stations retire is real and growing, and a risk that must be avoided,” AEMO said. “Unplanned generator outages are increasing, as coal generator reliability is affected by reduced investment and high impact weather events. “Any delay to the occupational development path (ODP) ‒ which involves a mix of replacement grid-scale generation, storage, and transmission – will increase risks to the energy transition process and its benefits.
“The sooner firmed renewables are connected, the more secure the transition will be. “However, planned projects are not progressing as expected, due to the time needed for approval processes, investment decision uncertainty, cost pressures, social licence issues, supply chain issues and workforce shortages.”
While the energy transition depends on timely investment decisions, AEMO noted, they are being hampered by uncertainty, as well as delays in regulation and environmental and planning approvals. “Even if there is greater market certainty, the level of investment in electricity infrastructure required by the ODP is high and remains high for approximately 15 years,” AEMO pointed out.
“As Australia is competing for global investment in the energy transition, the investment case must remain competitive. The need for investment, even with minimal uncertainty, does not guarantee that the investment will flow. “(Moreover) the need for higher levels of flexible gas capacity and utilisation will challenge Australia’s existing gas supply infrastructure.
“Further investment in gas infrastructure will be required to ensure energy reliability, potentially including additional supply, upgrades and expansions of existing pipelines, import terminals, increased storage, and alternative fuels such as hydrogen and other green gases and other liquid fuels.” According to the ISP, although market and policy settings are progressing and are supporting the transition, a continued focus on all of the risks arising from fossil fuel retirement is needed. While almost all owners of coal generators have announced their long-term closure plans, they are only required to give three-and-a-half years’ notice.
This, AEMO said, leaves the NEM very little time to respond if closures are not carefully managed or if replacement investments are not planned and/or delivered. “Closures with short notice increase the risk of near-term reliability challenges and price shocks for consumers, and further accelerate the need for new generation,” it predicted.
“These risks are best mitigated through agreed closure timeframes and delivery of the planned investment in generation capacity.” As renewable generation is rapidly installed, AEMO said, the NEM’s energy markets, networks and operations must be ready for “very high penetrations” of this new age power source. As such, the watchdog continues to work with governments, market bodies and industry on the technical requirements for a secure power system capable of operating at 100 per cent renewables.
This will require the “evolution of market frameworks and settings to deliver these requirements in both investment and operational timeframes” – including through a system security transition plan. Furthermore, Australian businesses and domestic households also have a part to play, with many of them already taking steps to “shape their own energy futures” by adopting innovative ways to reduce and manage their demand, investing in solar systems, batteries and electric vehicles, as well contributing to virtual power plants to bring these technologies together.
In regards to social licence – or the ability of governments, organisations and project developers to build and maintain trust and acceptance with those groups and communities most affected by the impacts – opportunities and challenges afforded by the transition are critical for achieving success.
“Local communities are concerned with a range of community, social, cultural, environmental and economic values,” AEMO said. “Their acceptance will be affected by factors like their understanding and acceptance of the need for new infrastructure development and their roles within this.” In addition, the potential impacts on their sense of place and community, wellbeing, culture, ways of living, and connection to country need to be taken on board, as well as possible impacts on local biodiversity, biosecurity, Indigenous heritage, sites of local and community significance, and the visual landscape.
The centrepiece of the ISP is the ODP, which is set to have an annual capital cost of $122 billion to 2050 and, according to AEMO, is the least expensive path to meet both federal and state government energy policies to reduce emissions. “The ISP is a roadmap to navigate Australia’s power system through the energy transition, providing Australians with reliable electricity at the lowest cost,” chief executive Daniel Westerman explained. “A record number of stakeholders have contributed to identifying the most efficient development path of generation, storage and transmission investments, critical to meet consumer energy needs as Australia transitions to a net zero economy by 2050.
“Australia’s energy transition is well underway, with renewable energy accounting for 40 per cent of electricity used in the past year.” Consistent with previous reports, the plan identifies almost 10,000 kilometres of new transmission lines that will ultimately be required to connect new sources of power generation and meet reliability targets at the lowest cost to consumers. Some 10 projects, covering 2,500km, are already underway, and the ISP has identified a further seven programs that should now progress through the planning phase and onto delivery – all at a total cost of $16 billion.
It is anticipated that this transmission infrastructure will recoup investment imposts and, additionally, save consumers $18.5 billion in avoided energy bills while delivering emissions reductions valued at a further $3.3 billion. Building and maintaining energy infrastructure over the next 20 years, the operator said, is expected to support more than 60,000 energy jobs.
