While some are seeing an important AEMO report as a big win for coal – it’s anything but. However, what it envisions still leaves us with coal power capacity hanging around for a long time; albeit continually dwindling.
The Australian Energy Market Operator (AEMO) published its first Integrated System Plan (ISP) yesterday, which looks at future demand for power from National Electricity Market (NEM) and likely market response.
While it isn’t recommending new coal-fired power generation be added to Australia’s energy mix, it says premature retirements should be avoided. Furthermore, it is not suggesting coal-fired clunkers be replaced with more coal power.
It states the most cost-effective replacement of coal-fired electricity production, based on current cost projections, is a portfolio of utility-scale renewable generation, energy storage, distributed energy resources, a bit of gas-powered generation (GPG) and transmission upgrades.
Distributed energy resources include commercial and home solar power and associated battery storage systems.
Collectively, Australian coal-fired generators expected to retire by 2040 produce around 70 terawatt hours, or 70,000 gigawatt hours, of electricity annually – representing close to a third of total NEM consumption.
Under its “neutral” scenario, the AEMO suggests what will be required to replace this are resources including solar (28GW), wind (10.5 GW) and storage (17 GW and 90 GWh), along with 500 MW of flexible gas plant and substantial transmission investment.
“This portfolio in total can produce 90 TWh (net) of energy per annum, more than offsetting the energy lost from retiring coal fired generation.”
In terms of transmission, the AEMO has given the thumbs up to projects including the proposed South Australia/New South Wales interconnector.
CEC: “Much Needed Guidance”
The Clean Energy Council said the plan provides much-needed guidance on Australia’s clean energy transformation.
“The AEMO report is unequivocal – over the medium and long term the lowest-cost option for a strong system is renewable energy, supported by large-scale energy storage such as pumped hydro and batteries, along with more rooftop solar and household batteries, and interconnection between states,” said CEC Chief Executive Kane Thornton.
Mr. Thornton says the AEMO’s recommendations regarding renewable energy zones across the country also make sense.
Frydenberg Claims A Win
Federal Energy Minister Josh Frydenberg says the AEMO’s report endorses the Turnbull Government’s focus on storage, including Snowy 2.0 and Tasmania’s Battery of the Nation aspirations. He also states it backs the NEG.
“The report lends strong support to the National Energy Guarantee which AEMO says will provide enduring policy and investment certainty, resulting in efficient investment decisions as well as removing risk premiums on investment.
However, what the report says is:
“This ISP complements the intentions of the National Energy Guarantee..”
It’s a bit difficult for the AEMO to strongly support something that is still half-baked and may still not make it over the finish line. The few mentions of the NEG specifically in the report are accompanied by words such as “assumed”, “contemplated” and “expectation”.
The report, which can be downloaded here, will be discussed at the Council of Australian Governments (COAG) Energy Council meeting on August 10.
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Agree that coal will be required for a while. That is the definition of transition.
How long will depend on the market.
Are they (AEMO) saying they are NEG on the NEM?