'Real, growing risk' of power generation falling short

Urgent investment is needed to support new sources of affordable electricity in the coming decade, when 90 per cent of coal-fired generation will cease.

The latest modelling, released by the Australian Energy Market Operator (AEMO) on Friday, shows coal power plants are closing earlier than planned and people are electrifying their homes at a faster rate.

Upgraded power systems will be capable of running at times entirely on renewable energy, according to system planning that also relies on an ongoing role for gas.

But businesses and industry are expected to need more energy not less as they double their grid electricity consumption.

Grassroots organisation Rewiring Australia urged AEMO to shift the focus of energy planning to electrification and rooftop solar as these will help reduce the cost of energy even as large renewable projects suffer from delays.

Co-founder Saul Griffith said AEMO was "yet to catch up with the rooftop revolution" led by millions of Australian households.

"Household energy should be seen as a resource, not a risk and the market redesigned to help consumers reduce bills from their solar, batteries and EVs, which is what these technologies can do," Dr Griffith said.

A map of energy projects in the draft 2024 Integrated System Plan.
A map of energy projects in the draft 2024 Integrated System Plan (ISP).

An Integrated System Plan (ISP) is prepared every two years and the latest draft reflects a change of federal government and a slew of announcements on rewiring the nation and support for new energy assets.

But there are fears that Australia is falling behind on required investment, hampered by red tape, community uncertainty and fierce competition for equipment and workers amid a global push to replace fossil fuel-fired networks.

The demand for energy sector workers is forecast to grow from 40,000 people in 2023 to a peak of over 70,000 by 2050. This workforce is needed across every discipline, not just engineering.

The possibility that replacement generation is not available when coal plants retire is "real and growing, and a risk that must be avoided," the AEMO report said. 

The sooner renewables and energy storage are connected, the more secure the energy transition will be.

"We need a reliable grid that supports that changing energy profile," Energy Minister Chris Bowen said.

The report reiterated the "lowest-cost" mix is renewable energy, connected by transmission, supported by batteries and pumped hydro, and more fast-start gas-powered generation to keep the grid stable.

The peak body for energy retailers and generators, the Australian Energy Council, said this "once-in-a-lifetime renovation" of the electricity grid must balance reliability and affordability with lower emissions.

"The price tag will be big if we get it right, but astronomical if we get it wrong," CEO Sarah McNamara said.

Under AEMO's most likely "step change" scenario, the annualised capital cost of all generation, storage, firming and transmission infrastructure has a present value of $121 billion.

But it would save consumers additional costs of $17 billion over time, according to the modelling.

AEMO chief executive Daniel Westerman.
Daniel Westerman says a plan highlights urgency to ensure safe, reliable and affordable energy.

AEMO CEO Daniel Westerman said the draft plan for 2024 highlights the "urgency for investment" to ensure Australians have access to safe, reliable and affordable energy.

"Gaining the trust of regional and rural communities is essential to avoid the risk of essential infrastructure not being built before coal-fired generators close," he said.

He said the plan shows a need for 5000km of transmission, triple renewable generation and double dispatchable storage, hydro and gas-powered generation - within the next decade.

A tripling of grid-scale variable renewable generation is needed by 2030 (57 gigawatts) and a seven-fold increase by 2050 (126 GW).

Almost four times the firming capacity from dispatchable storage, hydro and gas-powered generation must be added by 2050 (74 GW), according to AEMO.

Rooftop solar, batteries and electric vehicles also play a role in supporting energy reliability and a two-way flow of energy under the plan.

A four-fold increase in rooftop solar capacity by 2050 (72 GW) will require smart meters and other technology to get the most value and control for consumers and market operators.

The Climate Council said it's a "smart play" for Australia to power the country off clean energy, with world-class solar and wind.

But the Australian Pipelines and Gas Association said renewable and gas generation will need to work closely together to ensure the grid remains stable as coal generation retires.

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