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The Australian Energy Market Operator (AEMO) has released its Draft 2022 Integrated System Plan (ISP), featuring a 30-year ideal pathway for investment in the National Electricity Market (NEM). 

AEMO has consulted with stakeholders, including policy makers, consumers and industry representatives since September 2020 to prepare the Draft ISP.

The Draft ISP forecasts the closure of Victoria’s remaining coal power stations by 2032 and that the NEM will operate without coal generation by 2043.

After 18 months of consultation, stakeholders overwhelmingly nominated Step Change as the most likely future scenario. 

The Step Change (central) scenario anticipates a transformation of the NEM to 2050, including: 

  • A near doubling of electricity consumed from the grid, to 330TWh as transport, heating, cooking and industrial processes are electrified
  • Construction of nine times the NEM’s current utility-scale wind and solar generation capacity (from 15GW to 140GW)
  • Installation of four times the current distributed PV capacity (from 15GW to 70GW), with most coupled with an energy storage system
  • Treble the firming capacity that can respond to a dispatch signal (including 30GW at utility scale)

This scenario meets Australia’s net zero policy commitments, along with reflecting technology advancements, government ambitions and consumer preferences.

NEM transitioning rapidly 

AEMO CEO, Daniel Westerman, said the significant changes already underway in the NEM have continued to accelerate in recent years, considerably exceeding forecasts in the 2020 ISP Central scenario.

“The Step Change scenario forecasts a rapid transformation in Australia’s National Electricity Market, consisting of a significant investment in renewable generation, storage and firming generation as coal plants exit, and improvements to transmission,” Mr Westerman said.

“In this scenario, the NEM will operate without coal generation by 2043. This requires a substantial increase in battery and pumped-hydro storage, hydrogen or gas-fired generation for peak demand, all complemented by a market that incentivises energy users to adjust demand based on system conditions.

“This transformation will efficiently deliver secure, reliable and affordable electricity while substantially contributing to national emissions objectives.”

Enabling this efficient transition for the NEM is forecast to deliver $29 billion in net market benefits, returning 2.5 times the investment value.

“Investment confidence will be important to delivering benefits to consumers, as the transition described in all the scenarios will require significant investment,” Mr Westerman said.

AEMO will be further consulting on the Draft ISP to ensure the final version provides appropriate signals for investment.

“It is essential that communities, governments and industry collaborate to meet the aspirations of consumers and the communities that will host new infrastructure,” Mr Westerman said.

“Without meaningful community consultation, projects will be delayed and become more expensive. Efficient delivery is also critical.”

Industry response 

The Clean Energy Council (CEC) said that Draft ISP shows that Australia is on the path to a rapid transition to renewable energy. 

Clean Energy Council Chief Executive, Kane Thornton, said, “This Draft 2022 ISP is a call to arms that we must leave no stone unturned in getting the renewable energy transition done right and getting it done fast.

“Already, we have seen the most ambitious, aggressive forecasts from the previous ISP becoming the base case. It’s happening now, and it’s happening fast. So, this is not about what we might achieve by 2050. The focus needs to be very much on what needs to be done this decade.”

The Australian Energy Council (AEC) also commented on the AEMO’s Draft ISP.

AEC Chief Executive, Sarah McNamara, said, “AEMO’s scenarios show the profound disruption occurring in our grid as it transitions to a lower emissions profile.

“The ISP particularly highlights the rapid decline of coal in our market. To adjust for this change we must ensure there is sufficient dispatchable and sustainable resources in place that can operate for extended periods.

“AEMO’s scenarios also confirm the tremendous contribution the electricity sector is making towards reducing Australia’s emissions.

“The electricity sector will continue to deliver rapid cuts in its own emissions and will assist other sectors to do the same through increased electrification. In that respect, it’s pleasing to note that three of AEMO’s four scenarios show electricity playing a large part in decarbonising the rest of the economy. Unfortunately, this almost all occurs after 2030. The AEC considers it could start this decade.”

“Electrification is an immediate and obvious way to decarbonise, and the technology is readily and economically available; such as heat pumps and electric vehicles. We just need policies, initiatives, and the will to see it happen.”

Stakeholder consultation on the Draft 2022 ISP, including public forums and written submissions, will be open until 11 February 2022, after which AEMO will finalise the 2022 ISP by 30 June 2022.

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