The Spill

The pace and scale of change in Australia’s electricity market is surprising even the seasoned industry pundits. Coal is retiring faster than expected, solar generation (at domestic and utility scale) is rapidly growing and wind farm builds are accelerating.

Driving this rapid shift is the need to drastically reduce emissions to achieve net zero ambitions and to positively impact our climate for future generations.

Here are some fast facts that demonstrate that rapid change:

Source: 2024 Integrated System Plan for the National Electricity Market

How do we plan for this future?

The Australian Energy Market Operator (AEMO) is responsible for operating Australia’s energy markets and power systems, with the best interests of Australian consumers top of mind.

A recent change to the national electricity law means that AEMO is also required to plan the power system in a way that helps achieve government targets that reduce greenhouse gas emissions, while being secure, reliable and cost-effective.

Every two years, AEMO publishes its roadmap for the energy transition in the Integrated System Plan (ISP), plotting out the ‘optimal development path’. This means the pathway that is lowest cost and most resilient in setting out the size, place and timing of the NEM’s future assets.

The goal is delivering a secure, reliable and affordable energy future that
meets emission reductions targets. And that is no mean feat
when you get an appreciation of the change underway and ahead.

What is the ISP’s message?

The 2024 ISP confirms that urgent investment is needed in new renewable energy generation, transmission, storage and flexible gas generation to continue to deliver secure, reliable and affordable energy, and reach the renewable electricity generation targets of NEM jurisdictions.

Australia’s coal-fired generators are closing. The ISP calls out that the lowest-cost pathway for secure and reliable electricity is from renewable energy, connected by transmission, supported by batteries and pumped hydro, and backed up by flexible gas-powered generation. 

Urgent investment is needed so that Australian homes and
businesses can continue to enjoy a reliable supply of electricity.

  The future of our National Electricity Market 

The ISP provides a future view of the national market and some of the figures are staggering!

• The ISP forecasts that the remaining coal fleet will close two to three times faster than announced.
  • About 90% of coal fleet is forecast to retire before 2035 in AEMO’s most likely future scenario, and the entire fleet before 2040.

• Taken as a whole, households are forecast to draw about as much from the grid across a year in 2050 as they do now.
  • EVs and appliances will drive up underlying consumption, and be offset by investments in rooftop solar and energy efficiency.

• Businesses and industry will double their grid electricity consumption to serve a growing, decarbonising economy, and for green energy products such as hydrogen.

• The NEM must almost triple its capacity to supply energy by 2050 to replace coal and meet increased consumption.

• NEM regions are forecast to need over 30,000 people in jobs to build and maintain the new infrastructure over the next 20 years.

What is needed?

AEMO’s roadmap looks at the scale and pace of change needed to meet ever increasing demand and an ever-changing generation mix.

The optimal development path (ODP) sets out the capacity of new generation, firming, storage and transmission needed in the NEM through to 2050.

Under forecasts for the Step Change scenario (the most likely development path scenario), the ODP calls for investment that would:

Connecting the electrons

As well as this, AEMO highlights that close to 10,000 km of transmission would be needed by 2050.

Both the Step Change and Progressive Change scenarios require around 5,000 km of transmission to be delivered over the next decade, about half of which is already underway as committed or anticipated projects. 

AEMO calls for all actionable projects to progress as urgently as possible. Marinus Link continues to be regarded by AEMO as an actionable project.

The role of water

It is well recognised that solutions are urgently needed for supply gaps when the wind doesn’t blow and the sun doesn’t shine. Storages that vary in ‘depth’ (the length of time electricity can be generated at maximum output) will be needed to fill in the gaps (called “firming”).

AEMO predicts that the NEM will need 36 GW of storage
capacity in 2034-35 and this will rise to 56 GW in 2049-50.

Let’s look at the different types of storage…

Shallow storage:

• < 4 hours
• Valued for both system services and energy value.

Medium storage:

• 4 – 12 hours
• Could be batteries or pumped hydro (or other emerging technologies in future). 

Deep storage:

• > 12 hours
• The deepest storage available to the NEM are existing deep-reservoir hydro assets, which can also mitigate renewable droughts and balance energy across seasons.
• New transmission such as HumeLink and Marinus Link gives the NEM better access to these assets. 

A number of projects are in the pipeline for pumped hydro around the country, including our Cethana deep storage project (site pictured above) which is stacking up as one of the most cost-effective projects currently proposed. 

Learn more here - https://www.hydro.com.au/the-spill/the-spill/2023/10/05/solving-the-problem-of-storage-in-the-transitioning-energy-market

You can learn more about AEMO’s energy market roadmap here: https://aemo.com.au/energy-systems/major-publications/integrated-system-plan-isp