AEMO forecasts reliability gaps, highlights investment need

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The Australian Energy Market Operator (AEMO) has released its 2023 Electricity Statement of Opportunities (ESOO) report, a 10-year reliability outlook that signals development needs for each state in the National Electricity Market (NEM).

The ESOO is produced using insights from developer and market participant surveys, transmission information, and extended analysis of energy limitations, like the potential impact of drought conditions, coal and gas supply shortfalls.

AEMO CEO Daniel Westerman said, “This year’s report highlights the pace of Australia’s energy transition and the urgency needed to deliver new investment to ensure reliable, affordable and cleaner energy for consumers.

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“Over the 10-year outlook, we continue to forecast reliability gaps, which are mostly due to the expectation that 62% of today’s coal fleet will retire 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,” he said.

In the next 10 years, electricity consumption and peak demand are predicted to grow due to population growth and economic activity, but also the electrification (fuel switching) across all sectors of the economy, including transportation and residential heating and cooking.

Considering only existing, committed and anticipated projects as per the ESOO’s ‘central scenario’, reliability risks are forecast to exceed the relevant reliability standard in Victoria from this summer, in New South Wales from 2025-26, South Australia this summer and then again from 2028-29 and Queensland from 2029-30.

The reliability gaps identified through the ‘central scenario’ form an important part of the electricity planning process, as they provide the signal, and in some cases the obligation, for electricity retailers to contract sufficient capacity to provide for a reliable power system.

“While our central scenario shows increased reliability risk, it does not reflect the reliability potential from the 248GW pipeline of proposed generation and storage projects, actionable transmission projects and government energy programs underway,” Westerman said.

“Federal and state government initiatives, including transmission projects identified in the Integrated System Plan, and mechanisms delivering firming capacity, such as the Commonwealth’s Capacity Investment Scheme, can address many of the identified risks over most of the 10-year horizon, if delivered to schedule.

“There is also the opportunity for consumers’ rooftop solar, batteries and electric vehicles to actively participate in the power system, which would further reduce reliability risks,” he said.

Compared to last summer, around 3.4GW of new generation and storage capacity is expected to be available this summer, which is forecast to be hotter than previous years, meaning electricity demand may be higher than observed in recent years.

“We’re expecting an elevated level of risk compared to recent years, mostly due to hotter and drier conditions, and coal-fired generation reliability is at historic lows,” Westerman said.

“The entire industry is focused on managing the risks in the summer ahead, particularly during high-demand periods coupled with generation outages and low renewable output, but some risk will remain.”

Clean Energy Council CEO Kane Thornton said AEMO’s Energy Statement of Opportunities report was another reminder of the importance of new investment to ensure energy security and affordability and in order to meet Australia’s ambitious target of 82% renewables by 2030.

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“The time for complacency is over, it’s time to remove the handbrakes and get on with building what is required,” he said.

“The renewables energy industry has over many years beaten targets many said could never be achieved.

“We stand ready to build what is needed. But industry leaders have let us know they face serious challenges and have been clear on the help they require to get on and do the job.”

“More than anything, those willing to make the necessary investments require and deserve certainty.”

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