How can Australia’s energy future be secured?

The Australian Energy Market Operator (AEMO) has released its 2016 Electricity Statement of Opportunities (ESOO) report which identifies the growing importance of network and non-network developments needed to securely manage Australia’s energy future.

The 2016 ESOO gives National Electricity Market (NEM) participants, investors, and policy-makers a projected ten year outlook to 2025-26 of supply adequacy under a number of scenarios.

This year further generation withdrawals have been modelled in response to the United Nations Climate Change Conference of Parties 21 (COP21) emission abatement commitment with Australia aiming to reduce carbon emission by 26 to 28 per cent below 2005 levels by 2030.

“As the NEM generation mix continues to keep pace with new technology and policy changes, future supply adequacy will depend on the availability and capability of new supply options providing electricity services when needed,” AEMO Chief Operating Officer Mike Cleary said.

From the information provided by industry, and assuming no additional generation withdrawals to occur between now and 2025-26, the only projected supply shortfall in the 2016 ESOO occurs towards the end of the outlook period in New South Wales.

“The 2015 ESOO identified New South Wales (NSW), South Australia and Victoria as potentially being at risk of breaching the reliability standard at various points over the next decade,” Mr Cleary said.

“The latest information suggesting only a shortfall in NSW in 2025-26 takes into account a reduction in demand forecasts, and illustrates a market response with some planned plant withdrawals deferred and an additional 537 MW of wind generation capacity announced.”

However, additional to the information already announced by market participants, AEMO has modelled scenarios that assume the COP21 commitment is achieved, investigating the impact of potential, but not announced, generation withdrawals to meet the electricity sector target agreed by the Council of Australian Governments (COAG) Energy Council.

“AEMO has modelled the impact of withdrawing a further 1,360 MW of coal-fired generation capacity to meet the COP21 commitment under AEMO’s neutral scenario, with results suggesting potential reliability breaches occurring in South Australia from 2019-20, and New South Wales and Victoria from 2025 onwards,” Mr Cleary said.

“These breaches would most likely occur when demand is high (usually between 3-8pm), coinciding with low wind and rooftop photovoltaic (PV) generation, and low levels of electricity supply imported from neighbouring regions.

“In this scenario, the majority of coal-fired generation withdrawals are assumed to come from Victoria, which would reduce that State’s generation output to support South Australia and New South Wales via the interconnected network.”

The 2016 ESOO report outlines the importance of maintaining power system security during this period of rapid transformation, and with the potential withdrawal of coal-fired generation across the NEM, a number of support services will need to be provided by other resources.

“The secure operation of the NEM’s 40,000km transmission network – which transports generated electricity to demand points – is reliant on support services that manage the rate of change of frequency and system restart services,” Mr Cleary said.

“AEMO is signalling potential future supply gaps in providing these important stability services, gaps which could be met through prospective new forms of electricity generation, or alternative technologies.

“To maintain a secure electricity supply demand balance during peak demand periods, AEMO is working closely with industry to identify both network and non-network developments.

“Possible solutions could include an increased interconnection across NEM regions, battery storage, and demand side management services.”

Energy Networks Australia (ENA) have commented on the report and suggested Australian Energy Ministers should improve current processes for coordinating national energy and carbon policy.

ENA CEO John Bradley said, “The Council of Australian Governments (COAG) Energy Council could take a practical step to support integrated carbon and energy policy by agreeing to incorporate an explicit assessment of national energy market implications when developing jurisdictional initiatives.”

Mr Bradley said the government already assess new initiatives for regulatory burden, so the should also assess proposed carbon and energy policy initiatives for the impact on national energy markets or network efficiency.

“To ensure an assessment independent of any government or political party, the COAG Energy Council should consider commissioning the Australian Energy Market Commission (AEMC) to undertake this role,” Mr Bradley said.

“Australia needs a clearer process for integrating carbon and energy policy nationally, because the current system isn’t working.”

Australian Petroleum Production and Exploration Association (APPEA) Chief Executive Dr Malcolm Roberts suggested natural gas could be used to fill the generation gaps identified by the AEMO report.

“Gas should be playing a greater role in Australia’s future energy mix because it perfectly complements renewables,” Dr Roberts said.

“It’s clean, it’s abundant and it can easily be switched on and off when intermittent renewables cannot meet demand.

“Reducing emissions is essential but ensuring reliable energy supply is just as important.

“Both are at risk from ongoing moratoriums and unnecessary restrictions on natural gas development.

Dr Roberts also said the need to develop more gas should be the top priority of next week’s Council of Australian Government Energy Council meeting in Canberra.