The Australian Energy Market Operator (AEMO) has released its Integrated System Plan (ISP), a 25-year roadmap to transition the National Electricity Market (NEM) to net zero by 2050.
The ISP is the result of two years of consultation, analysis and review involving 2,100 stakeholders, 85 presentations and reports, and the consideration of 220 formal submissions.
The ISP confirms that renewable energy, connected with transmission and distribution, firmed with storage, and backed up by gas-powered generation, is the lowest-cost way to supply electricity to homes and businesses as Australia transitions to a net zero economy.
Urgency to renew the NEM is being driven by the progressive closure of Australia’s remaining coal-fired power stations. Ten large coal-fired power stations have closed since 2012, and the ISP projects that 90 per cent of today’s capacity will be closed by 2035 and all before 2040.
The centrepiece of the plan is the optimal development path (ODP) – a mix of replacement grid-scale generation, storage, and transmission, with an annualised capital cost of $122 billion to 2050. The ODP is the least cost path to meet state and Federal Government energy policies on emissions reductions.
AEMO Chief Executive Officer, Daniel Westerman, said, “The ISP is a roadmap to navigate Australia’s power system through the energy transition, providing Australians with reliable electricity at the lowest cost.
“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,” Mr Westerman said.
The key messages of the plan are consistent with previous editions, which AEMO produces every two years under Australian energy laws.
Those laws also set out what AEMO must address in the ISP. That includes government policies and targets. The ISP does not model nuclear power as it is not government policy and is not permitted by Australia’s current laws.
“Australia’s energy transition is well underway, with renewable energy accounting for 40 per cent of electricity used in the past year,” Mr Westerman said.
Consistent with previous reports, the plan identifies almost 10,000km of new transmission lines that are required by 2050 to connect new sources of generation and meet reliability targets at the lowest cost to consumers.
Ten projects, or 2,500 km, are already underway, and this plan identifies a further seven projects that should now progress through planning and delivery.
AEMO said it recognised the clear need for early community engagement and effective consultation on these projects.
The transmission projects cost $16 billion but are expected to recoup their investment costs and, additionally, save consumers $18.5 billion in avoided energy costs and deliver emissions reductions valued at a further $3.3 billion.
Building and maintaining energy infrastructure over the next 20 years is expected to support more than 60,000 energy jobs.
Gas is expected to play a crucial role in back-up electricity generation for sustained periods when renewables are unavailable, and its contribution is integral to the ISP.
The other crucial technologies factored into the roadmap are domestic rooftop solar panels and associated batteries, smart systems and electric vehicles, collectively known as consumer energy resources.
Home batteries, if well-coordinated, can save consumers around $4.1 billion in avoided costs for additional grid-scale investment.
“Consumers are already a driving force in Australia’s energy transition and this is set to continue. If consumer devices like solar panels, batteries and electric vehicles are enabled to actively participate in the energy system, then this will result in lower costs for all consumers,” Mr Westerman said.
The ISP also called out the challenges and risks to the energy transition. Planned projects are facing delivery challenges, including approval process delays, investment uncertainties, cost pressures, social licence issues, supply chain disruptions, and workforce shortages.
“There is a real risk that replacement generation, storage and transmission may not be available in time when coal plants retire, and this risk must be avoided,” Mr Westerman said.
“This ISP is a clear call to investors, industry and governments for the urgent delivery of generation, storage and transmission to ensure Australian consumers continue to have access to reliable electricity at the lowest cost.”
Industry comment
Transgrid has welcomed the ISP and said it reiterates the urgent need to accelerate delivery of transmission infrastructure critical to the clean energy transition.
Transgrid Chief Executive Officer, Brett Redman, said, “Transgrid is delivering the major transmission projects identified as essential to enabling the Commonwealth Government’s clean energy vision. AEMO’s ISP reconfirms the need to fast track this nation-critical infrastructure as coal generation retires.
“Transgrid’s major projects, EnergyConnect, HumeLink and VNI West, have been reaffirmed as critical for the energy transition and should progress urgently on their current timelines to ensure a secure and reliable NEM and provide cheaper renewable energy to millions of Australians.”
Transgrid said the ISP has identified 12 actionable transmission projects, including HumeLink and VNI West, which remain on the optimal development path for the transition.
Transgrid also welcomed two new actionable ISP projects in Sydney Ring South and QNI Connect to continue to strengthen the NEM.
“Transgrid considers it critical to reinforce the southern section of the Sydney Ring to support load growth and guarantee a reliable and secure electricity supply to Sydney, Newcastle and Wollongong, which make up three quarters of the energy demand in New South Wales,” Mr Redman said.
“Reinforcing the Sydney Ring will enable more renewable generation to be transferred from southern New South Wales to meet growing demand in areas such as the Western Sydney International Airport and surrounding business precincts including new data centres.
“Meanwhile, QNI Connect would provide a stronger interconnection between New South Wales and Queensland to help integration of renewable generation, allow for the efficient sharing of electricity, and enhance the reliability and stability of the grid during the clean energy transition,” Mr Redman said.
Transgrid also welcomed an increase in net market benefits of ISP transmission investment to $22 billion.
“Over the next decade Transgrid anticipates investing more than $14 billion in New South Wales to deliver 2,500km of essential transmission infrastructure to connect renewable generation to the grid, help meet Australia’s emissions reduction targets, and provide cheaper energy to families and businesses,” Mr Redman said.
“There will be no transition without transmission. Modelling shows every dollar spent on transmission is projected to return more than twice this in benefits to customers.
“We will continue to work with landowners, communities, regulatory authorities, governments and other key stakeholders to find solutions to balance local impacts, consumer costs, time constraints and critical supply reliability as we accelerate Australia’s clean energy transition,” Mr Redman said.
Featured image: Transgrid Chief Executive Officer, Brett Redman, and tower installation on the EnergyConnect project. Courtesy of Transgrid.
