Tissue along a plan for Australia’s energy system is a term that needs little explanation: urgent.
The Australian Energy Market Operator (AEMO), the body responsible for keeping the lights on for millions of people, is trying to be as clear as a technoburocratic organization can be.
Urgently make the necessary investments to help the grid cope with the revolutionary shift from coal to renewable energy, or risk chaos.
At first glance, it’s a recipe that seems so simple.
These are the experts in charge of operating an enormously complicated machine who tell us what it takes to meet a challenge that everyone can see: the transition from a controllable or dispatchable fossil fuel energy to an intermittent and inherently uncontrollable renewable energy.
Reduced, the prescription involves building massive amounts of wind and solar energy, backed by types of storage and short- and long-term gas, to replace the coal capacity that comes out.
There is also a call for much better coordination of the large amount of solar storage and batteries in homes across the country to make sure it can help change rather than run the risk of hampering it.
Finally, and perhaps most critically, AEMO calls for the urgent construction of five high-voltage transmission lines needed to bring much of the projected renewable energy capacity closer to the people who use it.
It is at this end point, however, that the simple intent of AEMO’s so-called integrated system plan confronts the harsh reality of basic and regulatory considerations.
Australia’s main electricity grid is facing a massive shift. (Supplied by: AEMO)
Few people with knowledge of the energy system would disagree that transmission lines, with a combined value of $ 12.7 billion, are needed.
But that doesn’t mean they are built in a timely manner or, perhaps, at all.
Required does not mean it happens
Matt Rennie is a former partner of the big four consulting firm EY who runs the national consulting firm Rennie Partners with Simone Rennie, a former AEMO manager.
Rennie is optimistic about the chances of the transmission lines identified by AEMO continuing, noting that investors are queuing up to put their money on high-voltage poles and cables.
However, he points out that projects have yet to remove the barriers set by industry oversight bodies such as the Australian energy regulator, which must take into account the costs to consumers when taking their decisions.
“The important issue is that the connection processes are right and the regulatory regime right so that this happens quickly,” Rennie said.
“And that has been a problem for some in the last two years.
“It’s a difficult balance.
“We have to make sure that the new lines … go through the different doors of regulatory approvals.
“But the problem, of course, for regulators is the fact that [if] something is needed and it is prudent, [it] it does not necessarily mean that they are able to sign the efficiency of the investment.
Decarbonization adviser Matt Rennie says the energy system will become unrecognizable. (Provided by: Rennie Partners)
“So this will really be a focus for them as we go through this next phase, making sure consumers don’t end up overpaying for what would otherwise be a necessary investment.”
Increasing the sense of urgency for more transmission lines is the expectation that coal power, which accounts for about two-thirds of the electricity produced on Australia’s largest grid, will leave the system earlier than expected.
Removing coal “the easy part”
AEMO-promoted transmission lines include the $ 3.3 billion HumeLink in New South Wales due to be completed by mid-2026 and the $ 3 billion VNI West project, scheduled for July of 2031.
Another key project is the $ 3.8 billion Marinus Link between Tasmania and Victoria, which has been postponed until the end of the decade amid disputes over who should pay the construction bill.
As noted in its plan, AEMO says all projects are necessary, though for no other reason than the resilience of the system as coal plants leave the market.
This is a need that is only aggravated if there are delays in the provision of “affirmative” services such as batteries or hydraulic pumping energy, according to AEMO.
This logic may seem simple to energy planners and users, but try to tell homeowners that they don’t want transmission towers on their land.
Rennie points out that AEMO also has big plans to capitalize on the large amount of solar storage and batteries installed on the roof, or that will be installed soon, in the Australian suburbs.
There are plans to make better use of the large amount of solar energy on the roof installed in Australia. (Unsplash: ulleo: public domain)
The agency predicts that this “coordinated storage” will be a major source of capacity by 2050, as energy retailers and other companies register solar customers en masse.
Despite this, Mr. Rennie says there is currently no market that allows for this type of negotiation, highlighting the scale of the challenge and the urgency of the necessary reforms.
“The simple task is to estimate when the coal will come out of the system, that’s number one,” Rennie said.
“The most difficult thing is to enable replacement.
“We know that large – scale batteries and large – scale hydraulics will play a very important role.
“We know that a lot of attention will have to be paid to what happens when the base load generation is turned off; there will have to be a paper for the gas and we know there will have to be a paper for [rooftop solar and battery].
“Many of the markets that will pay for these new sources do not yet exist.
“And this is where there is a real role for government and government agencies in designing and pulling out these markets in a way that people can invest in and be rewarded for.”
Energy to be “unrecognizable”
Origin’s decision to close the giant Eraring coal plant soon caused shock waves to the industry. (AAP / Greenpeace)
With these goals in mind, Rennie says policies that make it clearer and easier for energy users and suppliers to navigate the transition will be imperative.
He says the federal government’s plans to help fund transmission lines through its Rewiring the Nation policy are a good step and can help projects cross the line when otherwise commercial difficulties come their way.
Whatever happens, he says the energy industry, as we know it, will not exist when AEMO’s plans reach maturity in the next three decades.
“What we’re seeing here is a complete change in the way we buy electricity, use electricity and interact with electricity … even the cars we drive, how we pay for fuel.
“Without a doubt, people’s bills will go up, but fuel bills will also go down.
“Retailers and aggregators will begin to consider some of the loads in customers’ homes as something they can also market to the system.
“And so it’s hard to say whether or not customers in general will pay more because of such a fundamental change in the whole base on which electricity and transportation are made.”