The Australian Energy Market Operator (AEMO) has released its draft roadmap to address future generation and transmission issues the National Electricity Market (NEM) is expected to face over the next 20 years. The outcome of the analysis sets out new investment in large-scale renewable energy projects and targeted transmission augmentation are necessary to achieve the best outcomes for consumers.

With 63% or approximately 15 GW of Australia’s coal-fired generation set to retire by 2040, more than 30 GW of large-scale wind and solar will be needed to fill in the gap in four out of five scenarios developed by AEMO. Allowing for the strong growth in distributed energy resources (DER), Australia will still need an additional 34 GW of new solar and wind projects in the Central scenario, above what is already committed, 30 GW for High DER, 37 GW for Fast Change or 47 GW for Step Change, much of it built in renewable energy zones (REZs). In the Slow Change scenario, which would, in turn, deliver catastrophic climate change scenarios, only 4 GW would be needed by 2040.

Currently, there are already 6 GW of solar and wind installed, with another 6.5 GW expected to be operational in the next two years as economics and state renewable energy targets continue to drive this development. In the Central scenario, a total of 34 GW of new capacity is forecast to be needed by 2040 in addition to the already installed or committed projects. According to AEMO, the optimal split would be approximately 56% solar and 44% wind in order to minimize needs for dispatchable storage and generation. In the Step Change scenario, up to 47 GW would be required, with Queensland and New South Wales forecast to add over 15-18 GW and Victoria over 6 GW by 2040.

DER to double and even triple

Residential, industrial and commercial consumers are expected to continue to invest heavily in distributed PV, with increasing interest in battery storage and load management. Depending on the scenario, the AEMO modelling projects DER could provide 13% to 22% of total underlying annual NEM energy consumption. The figures closely mirror AEMO CEO Audrey Zibelman’s expectations that by 2040, 25% of Australia’s electricity will be produced by rooftop solar PV.

Depending on the scenario, Australia will need 5-21 GW of new flexible, utility-scale dispatchable resources to firm up the variable distributed and large-scale renewable generation. Most initial investment will be in utility-scale pumped hydro or battery storage. New flexible gas generators could play a greater role if gas prices materially reduce. Distributed batteries are assumed to participate in the NEM and be operated as virtual power plants. Ultimately, the NEM will draw on a technologically diverse mix that may diversify further as other technologies, such as hydrogen, mature, the report finds.

Investment in poles and wires

Furthermore, the draft Integrated System Plan (ISP) finds that targeted and strategic investment in the grid is needed to balance resources across states and unlock much needed REZs. It identifies projects to augment the transmission grid as part of the optimal development plan, including those that need to be carried out urgently in order to accommodate the new generation on the grid regardless of the pace of the energy transition under different scenarios.

The list of priority projects includes:

a new 330kv transmission line from Robertstown in SA to Wagga Wagga in NSW;

a new interconnection from Western Victoria to southern NSW and Snowy 2.0, to enable energy from the upgraded Snowy 2.0 pumped hydro generators to flow to Victorian towns and cities and to unlock large-scale renewable generation in Victoria;

an upgrade of the existing interconnection from Queensland to NSW; an upgrade of the existing interconnection from Victoria to NSW;

a new interconnection from Tumut to Bannaby to reinforce the southern NSW grid (HumeLink);

augmentation of the western Victorian transmission system to efficiently unlock renewable generation;

increasing inertia and fault current in South Australian transmission networks.

In addition, AEMO is recommending planning and approvals work be commenced now for a new transmission link from Tasmania to Victoria (Marinus Link), to ensure it could commence construction by 2023 should that be required.

“The Draft 2020 ISP sets out how to build a least-cost system for Australia, but for consumers to receive the full benefit of the plan, important additional work on market design and infrastructure funding options needs to be undertaken. At the direction of state and federal ministers, the Energy Security Board is undertaking this work and AEMO looks forward to supporting it,” Zibelman said.

At least regret and lowest cost

According to the Clean Energy Council (CEC), the Draft 2020 ISP confirms that a renewables future is unequivocally the least regret and lowest cost option. Expressing strong support for AEMO’s development path, Australia’s peak clean energy said extensive upgrades to the transmission grid would make it possible to tap the country’s vast clean energy resources, ensure the future stability and security of Australia’s energy system and deliver low-cost energy to consumers.

“As we have consistently said, a clear roadmap for transmission development is imperative in order to build investor confidence for new clean energy generation – which is urgently needed to ensure new generation is in place before our ageing coal power plants retire,” CEC Chief Executive Kane Thornton said. As shown by a recent survey, confidence in new clean energy investment has fallen to a record low with the industry continuing to cite grid connection and transmission concerns and a lack of Federal Government policy as the biggest challenges.

Following today’s release, the CEC and other stakeholders will continue to collaborate with the AEMO providing further input to ensure the 2020 ISP delivers the robust strategy needed to guide the future of Australia’s energy system. With the finalization of the 2020 ISP is expected to happen in mid-2020, written submissions on the content of the Draft ISP are welcome until 21 February and in relation to non-network options for actionable ISP projects until 13 March.