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AEMO wants to spend billions more on networks, gas

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Coal’s uneven exit coupled with the rise of distributed and utility-scale renewables is heralding a “new era” in electricity network planning and execution, according to the Australian Energy Market Operator.

AEMO’s latest national transmission plan, which Giles Parkinson puts under the microscope here, concludes that increasing connectivity and deploying various non-grid technologies, including synchronous condensers and battery storage, will reduce the cost of the transition to low-emission technologies by up to $300 million.

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AEMO has also concluded that up to 12GW of gas-fired generation may be required to buffer renewables if new “alternative technologies” are unable to deliver the energy and grid stability currently being supplied by coal-fired power plants on the Australian electricity network.

Importantly, the report finds that increased geographical interconnectivity, when executed in a coordinated fashion, will reduce the amount of gas generation required by helping to smooth the impact of renewable generation intermittency. To this end, the report authors write: “Greater interconnection facilitates this diversity and delivers fuel cost savings to consumers.”

The Australian Energy Market Operator (AMEO) published its 2016 National Transmission Network Development Plan (NTNDP) today. The report sets out some pressing challenges facing Australian electricity networks if they are to deliver reliable, secure and affordable electricity while meeting current emissions reductions targets.

“Given the range of potential developments in consideration, and the interdependencies between them, a coordinated, national approach to plan for the energy transformation is imperative to enable optimal solutions to be implemented in the long-term interest of NEM consumers,” said AEMO chief operating officer Mike Cleary.

In Monday’s report, AEMO notes that power production is shifting away from a centralised model, with a smaller number of large coal generators, to one in which generation occurs at various points within the grid. It also finds that networks will have to provide frequency and voltage support.NTNDP_2016_Interconnection_modeling

With renewable development likely to take place in areas where there may be insufficient grid infrastructure, AEMO has modeled a number of regional grid enhancements. It concludes that system strength is inadequate in South Australia and likely to decline in western Victoria and Tasmania.

The specific expansions in interconnectivity AEMO has modeled in its NTNDP include a new South Australian interconnector linking the state to either New South Wales or Victoria from 2021; augmented existing interconnectivity between NSW, Queensland and Victoria in mid-to-late 2020s; and a second Bass Strait interconnector from 2025.

AEMO notes that the modeling reveals that this increased interconnectivity, when the projects are combined, will have net positive effects. However, the development must pass a Regulatory Investment Test for Transmission to ensure each project delivers value for consumers. The transmission project must also be contestable to ensure capital efficiency.

AEMO’s modeling takes into account a shifting generation mix based on policy settings including the Large Scale Renewable Energy Target, the Victorian RET and Australia’s more ambitious COP22 commitments. These policy drivers will see 22 GW of large scale solar and wind added to the grid over 20 years and coal’s share in the generation mix decrease from 74% today to 24% in the same period.

NTNDP_2016_Demand_generation_scenarios

This shift in generation mix will be dependent on demand-side developments and the NTNDP models two demand scenarios, one in which electricity demand increases slightly through 2035-36 while the other envisages a steady demand decline. AEMO notes that there are difficulties in forecasting demand in this period due uncertain outlook for energy intensives industries on the NEM.

The growth of rooftop PV is also factored into the AEMO modeling. Over 20 years, distributed solar is expected to amount to between 34% and 60% of new generation capacity added in Australia. Coupled with changing consumer behaviour, energy efficient devices and “innovative retail products” – presumably P2P energy trading and structures including distributed energy storage – will also likely reduce grid demand.

“Maintaining a reliable and secure supply during extremely low demand periods is emerging as a new driver for transmission development,” AEMO writes in the 2017 NTNDP.  

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  • Mike Dill

    AEMO states that “there are difficulties in forecasting demand” going forward, as people and industries look at the mess and decide to make their own electric supply, which can be cheaper and more reliable. While more wires may make sense in some situations, more local distributed production and storage will reduce the need for those wires.

  • Jonathan Prendergast

    I have seen many cases where solar and storage is much cheaper than network solutions. So I suspect less centralised and a more distributed local energy system could achieve the same outcomes much more cheaply, not to mention energy efficiency.

    • brucelee

      I agre, this “recommendation” does seem like a wolf in sheeps clothing, when greater stability could be brought by distributed storage

  • disqus_gF5uXVTUbL

    Underestimating the role of storage results in keeping coal turbines turning longer and another misadventure to gold plate the network. This is why local targeted integrated RE/storage is so important. It overcomes the fears for large backup generators and large diameter HV transmission lines.

  • DJR96

    Demand will be much closer to the increasing scenario, simply due to a transition from petrol/diesel cars to EVs.

    They harp on about how expensive battery storage is, but I really wonder how it compares with the cost of installing a new inter-connector.
    Not only could mass storage avert the need for more inter-connector capacity, but it could well provide the stability and security required.
    With less and less synchronous generation, it is folly to continue to rely on it for the stability and security. The decline will continue way past their forecasts too. We have to come up with a different system altogether.

    • Calamity_Jean

      “They harp on about how expensive battery storage is, but I really wonder how it compares with the cost of installing a new inter-connector.”

      Good point. There’s also the consideration that the cost of an inter-connector is stable or rising, and the cost of batteries is falling & expected to continue to fall for some time.

      • DJR96

        Too right. The cost of an inter-connector is a reasonably easy thing to define, and we all know that cost will slowly increase over time. Estimates of $500m to $1b have already been in the media. If something went ahead it would invariably be closer to the higher end.

        So that gives us all a base-line price to compare any other solutions.
        A big peak-shaving, network stabilising inverter and battery storage system, even at 20% of SAs capacity, could easily be done for similar prices. And that’s at todays ‘expensive’ battery prices. Such a system could provide all the stability and reliability needed, and facilitate as much renewable generation as can be built. Eventually, the existing inter-connector could be exporting back to Victoria.
        So no one is prepared to spend $1000/kW on storage at the moment. But even that price doesn’t seem too stupid compared to the only alternative (a new inter-connector) being put forward. So much so it is looking pretty stupid not to make this investment.

        • Calamity_Jean

          “… it is looking pretty stupid not to make this investment.”

          Well, if there’s anything that fossil fuel fans are capable of, it’s looking pretty stupid!