The new AEMO Integrated Energy Plan makes for facinating reading:
The objective of an ISP is to minimise long-term total system costs, thereby maximising benefits in the interest of consumers, while meeting the NEM’s reliability, security and emissions expectations. We have set out in Part B our modelling approach to determine a least-regret development path to meet that objective.
We now lay out the results of that modelling, which in effect describes what our power system might look like in 2040 if it is to meet all its expectations, and the investments needed to get there. The individual scenario outcomes are laid out in the double-page Figure 11 below. The years are indicative and are financial years (i.e. 2030 is the financial year 2029-30). Part D, the roadmap itself, reveals the optimal development path, and the staging and approximate timing for investments. In this Part C, all dates are indicative and on a financial year basis.
Across all scenarios, the NEM will evolve from a centralised coal-fired generation system, to a highly diverse portfolio dominated by DER and VRE, supported by enough dispatchable resources to ensure the power system can reliably meet demand at all times.
In that transition, the ISP development opportunities can be broadly classified as:
1. Small-scale distributed energy resources (DER) is expected to double, and in some scenarios triple, by 2040, holding grid demand relatively constant. Residential, industrial and commercial consumers are expected to continue to invest heavily in rooftop PV, with increasing interest in battery storage and load management. Depending on the scenario and subject to technical requirements, the modelling projects that DER could provide 13% to 22% of total underlying annual NEM energy consumption35 by 2040. With these higher levels of DER. dedicated management practices and protocols will be needed to maintain system security, backed by changes to rules, regulations and standards. New DER installations will increasingly need to have sufficient interoperability capabilities so they can be controlled when required for power system security. AEMO is currently investigating the maximum levels of uncontrollable energy that the system can accomodate and remain secure.
2. Over 30 GW of new grid-scale renewables (VRE) is needed in all but the Slow Change scenario, beyond what is already committted. Approximately 15 GW or 63% of Australia’s coal-fired generation is set to retire by 2040. To ensure a gradual, orderly transition, there must be sufficient new generation in place before each major plant exits. Allowing for the strong growth in DER, the NEM will need an additional 34 GW of VRE for the Central scenario, 30 GW for High-DER, 37 GW for Fast Change or 47 GW for Step Change, much of it built in REZs. In the Slow Change scenario only 4 GW would be needed, due to lower economic growth combined with delayed retirement of existing generators.
3. 5-21 GW of new dispatchable resources are needed in support. To firm up the inherently variable renewables, we will need new flexible, dispatchable resources: utility-scale pumped hydro or battery storage, demand response such as DSP, and distributed batteries participating as VPPs. New flexible gas generators could also play a greater role if gas prices materially reduce.
4. Investments to provide power system services are critical to enabling the transition. Innovative power system services will be needed to transform a system that has been dominated by traditional thermal generation with large spinning generators. These services span voltage control, system strength, frequency management, power system inertia and dispatchability. System services will be a critical part of REZs.
5. The transmission grid needs targeted augmentation to provide capacity, balance resources and unlock Renewable Energy Zones (REZs). While over 30 GW of new VRE may be required by 2040, the existing network only has an estimated connection capacity for 13 GW within the identified potential REZ. Three types of projects are considered in this Draft ISP to augment the grid: current projects, additional regional interconnections and intraregional augmentations. The most cost-effective way to provide the required connection capacity for VRE is to develop strategically placed interconnectors in conjunction with REZs. Five alternative development paths for these investments are compared in Part D, revealing the optimal development path of the Draft ISP.
The pace of the transition varies by scenario, although the trends are very consistent. Figure 11 illustrates and contrasts the change in installed capacity mix over time for each scenario, shows the broad geographic location of existing, committed and new VRE, and highlights the scale of development in various types of energy storages required. As more coal-fired generation retires (Figure 9), and is replaced with VRE, total installed capacity needs to increase to supply similar levels of consumption. Typically, these VRE technologies require a greater land and network footprint than conventional coal-fired generation and tend to be less variable in aggregate if geographically dispersed. This increases the future value of transmission which facilitates the sharing of surplus lowcost resources across regions and maximises the value of geographic weather diversity.
Ultimately, the NEM will draw on a technologically diverse mix, that may diversify further as other technologies, such as hydrogen, mature. This diverse portfolio will cost less than replacing the existing generators with new thermal generation to deliver the energy and peak capacity needed, and simultaneously reduce emissions significantly, see Figure 10.
You can see in all five scenarios just how much Australia has invested in the future deployment of energy storage. The more of it that there is, the lower the dependency upon gas for dispatchable power. Gas doesn’t disappear in any scenario sadly but its frequency of use will diminish much more quickly in high storage take-up outcomes.
This would drop energy prices much more than anything else.
We see high DER take-up as probable as renewables plus battery race towards price parity. At the utility level:
And the household level:
Given prices for renewable plus battery have been falling at much higher rates than 10% per annum, these are very plausible scenarios. I wouldn’t necessarily put my name to the High DER outcome but it’s reasonable to expect a materially more aggressive result than the AEMO’s slow change modelling.
That’s the one good thing about the ridiculous gas cartel. It’s an effective private sector carbon tax that ensures accelerated transition away from itself.
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