Much of the national power grid is facing substantial reliability problems over the next decade, and as soon as this summer, without rapid investment in both electricity generation and transmission.
The Australian Energy Market Operator (AEMO) has delivered a gloomier outlook on the decade ahead in its latest market forecasts, warning the situation had worsened since its last update in February.
It warns in particular of potential reliability problems in South Australia and Victoria this coming summer, with Victoria’s expected to last throughout the decade ahead.
It calls for “imminent and urgent investment”, arguing without action “the reliability of the National Electricity Market (NEM)” will be at risk.
The NEM includes all states and territories except Western Australia and the NT.
The report points to a number of factors worsening the outlook for reliability across the grid, but also points to actions underway by various government that could potentially mitigate the risks.
Among the looming problems is falling reliability from coal-fired generators as they continue to age, and many rapidly approach decommissioning.
Unplanned outages among generators are becoming more common than had been previously forecast.
Sixty-two per cent of the NEM’s coal-fired generators are expected to close before 2033, creating a substantial gap in the national grid that needs to be filled.
AEMO is also now factoring in likely delays with new generation and storage projects coming online, rather than working off the target dates set by those developing the projects, as it sets its forecasts.
CEO Daniel Westerman said the scale of the challenge ahead is substantial.
“This year’s report highlights the pace of Australia’s energy transition and the urgency needed to deliver new investments to ensure reliable electricity supply for consumers,” he said.
“Over the 10-year outlook, we continue to forecast reliability gaps, which are mostly due to the notified retirement of approximately 20 per cent of today’s older coal and gas fleet by 2033.
“To ensure Australian consumers continue to have access to reliable electricity supplies, it’s critical that planned investments in transmission, generation and storage projects are urgently delivered.”
Changing power usage creates challenges and opportunities
Despite more Australian households switching from gas to electric appliances, or moving to electric vehicles, electricity demand over the next year is actually forecast to fall.
That’s due to businesses becoming more efficient in their power needs, and the rising cost of living forcing households to reduce their energy use.
Peak periods are still forecast to place enormous pressure on the grid particularly if the coming summer is hotter and drier than average, as the Bureau of Meteorology is currently suggesting.
And over the decade ahead, demand on the grid is forecast to keep growing the population grows and the use of gas continues to fall.
As more homes switch to electric heating, demand is forecast to grow substantially in winter — with suggestions peak periods in the Victorian winter could place more demand on the grid than summer peaks within ten years.
But the report also points to the opportunities available in more households adopting solar panels and batteries, particularly if the power generated and stored can be coordinated across the grid.
It says eventually the need for ‘utility-scale’ generation can be lowered.
Government plans may ease risks
AEMO’s warnings are based on assessments that deliberately exclude a range of proposed developments and other government programs aimed at ensuring reliability in the grid.
Programs such as the Commonwealth’s capacity investment scheme aim to encourage more renewable and dispatchable energy into the grid, offering to underwrite new projects.
And AEMO points to 173 gigawatts of new renewable energy projects, and 74 gigawatts of dispatchable power, which could ease reliability problems if they are built in a relatively short timeframe.
Two of the largest are the Snowy 2.0 and Borumba pumped hydro projects, both expected to be complete near the end of the decade.
Responding to the AEMO report, Energy Minister Chris Bowen said the government was aware of the challenges ahead and preparing to meet them.
“After a decade of energy policy chaos, the Albanese Government is implementing overdue policy reform to deliver a cheaper, cleaner, more reliable energy system,” he said.
“The latest Electricity Statement of Opportunities confirms our federal government programs, including Rewiring the Nation and the Capacity Investment Scheme, will improve the strength of the grid and reduce reliability risks.”
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