AEMO says renewables “the most efficient path” to net zero

Solar panels and wind turbines pictured with electricity transmission towers in the background (future made in australia)
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In its 2024 Integrated System Plan (ISP), the Australian Energy Market Operator (AEMO) confirmed renewable energy connected with transmission and distribution, firmed with storage, and backed up by gas-powered generation is the lowest-cost way to supply electricity to homes and businesses as Australia transitions to a net zero economy.

AEMO’s Integrated System Plan (ISP) is a 25-year roadmap for the transition of the National Electricity Market (NEM) power system, outlining essential infrastructure that will meet Australia’s future energy needs.

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The centrepiece of the plan is the optimal development path (ODP)—a mix of replacement grid-scale generation, storage, and transmission, with an annualised capital cost of $122 billion to 2050. The ODP is the least cost path to meet federal and state government energy policies on emissions reductions.

The key messages of the 2024 ISP are consistent with previous editions, which AEMO produces every two years under Australian energy laws.

Those laws also set out what AEMO must address in the ISP. That includes government policies and targets. The ISP does not model nuclear power as it is not government policy and in fact is not permitted by Australia’s current laws.

“Australia’s energy transition is well underway, with renewable energy accounting for 40% of electricity used in the past year,” AEMO CEO Daniel Westerman said.

Consistent with previous reports, the plan identifies almost 10,000km of new transmission lines that are required by 2050 to connect new sources of generation and meet reliability targets at the lowest cost to consumers.

Ten projects, or 2,500km, are already underway, and this plan identifies a further seven projects that should now progress through planning and delivery.

The transmission projects cost $16 billion but are expected to recoup their investment costs and, additionally, save consumers $18.5 billion in avoided energy costs and deliver emissions reductions valued at a further $3.3 billion.

The ISP also said gas would play a crucial energy transition role in back-up electricity generation for sustained periods when renewables are unavailable. Other crucial technologies factored into the roadmap are domestic rooftop solar panels and associated batteries, smart systems and electric vehicles, or what the ISP calls ‘consumer energy resources’.

Home batteries, if well coordinated, can save consumers around $4.1 billion in avoided costs for additional grid-scale investment.

“Consumers are already a driving force in Australia’s energy transition and this is set to continue. If consumer devices like solar panels, batteries and electric vehicles are enabled to actively participate in the energy system, then this will result in lower costs for all consumers,” Westerman said.

The ISP also calls out the challenges and risks to the energy transition. Planned projects are facing delivery challenges, including approval process delays, investment uncertainties, cost pressures, social licence issues, supply chain disruptions, and workforce shortages.

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“There is a real risk that replacement generation, storage and transmission may not be available in time when coal plants retire, and this risk must be avoided,” Westerman said.

“This ISP is a clear call to investors, industry and governments for the urgent delivery of generation, storage and transmission to ensure Australian consumers continue to have access to reliable electricity at the lowest cost.”

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