The Australian Energy Market Operator, in a ground-breaking study, has confirmed that the cheapest and smartest replacement for the country’s ageing coal capacity will be in solar, wind and storage technologies.
In the long awaited release of its Integrated System Plan, AEMO says much of Australia’s coal capacity will retired by 2040 because the assets will have reached the end of their life. That will equate to around 70TWh of lost generation by 2040.
Based on its “neutral” scenario, which comprises existing federal and state government policies, the lowest cost replacement will be solar (28GW), wind (10.5GW) and storage (17GW and 90GWh). Just 500MW of flexible gas plant will be needed, and no new coal.
It says this portfolio in total can produce 90TWh (net) of energy per annum, more than offsetting the energy lost from retiring coal fired generation.
AEMO says, however, that new transmission infrastructure is urgently needed to reinforce existing links between states and create new ones – such as between South Australia and NSW. It also want to create renewable energy zones so that this transformation can be properly managed.
“We are in the midst of transformative and unprecedented rate of change in this sector,” AEMO managing director Audrey Zibelman says in a statement accompanying the 100 page report.
“We are witnessing disruption across almost every element of the value chain.”
Chief among those disruptions is the shift to distributed energy resources, notably the record uptake of rooftop solar, the growing interest in battery storage, and the opportunities of demand management.
The conclusions from AEMO are, needless to say, not what many conservatives and the fossil fuel industry want to hear.
AEMO and Zibelman have both been attacked over their views around the energy transition, and their recognition that renewables and smart technology offer a cheaper, cheaper, cleaner and more reliable future.
But the conclusions are unequivocal.
“The ISP’s analysis is predicated on sound engineering and sequenced approaches to investments in the transmission system, providing an identified least cost pathway to managing the transition,” it says.
“The ISP applies probabilistic scenario-based analysis and system optimisation to project the reliability and security needs of the power system while simultaneously identifying the lowest cost combination of resources to meet system and consumer needs.”
This graph below illustrates how the grid will be transformed. Note the huge reduction in black (coal) in NSW in particular, and Queensland as well, along with the reduction of brown coal (brown) in Victoria and gas (red) n South Australia.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.