AEMO: Cheapest way to replace coal is solar, wind, storage

Print Friendly, PDF & Email

AEMO says 70TWh of coal is to retire by 2040, and the cheapest way to replace it is with solar, wind and storage, and just a tiny bit of gas. And no coal. But it wants more transmission lines and renewable zones to manage this transition.

Print Friendly, PDF & Email

The Australian Energy Market Operator, in a ground-breaking study, has confirmed that the cheapest and smartest replacement for the country’s ageing coal-fired generators will be in solar, wind and storage technologies.

In the long awaited release of its Integrated System Plan, AEMO says much of Australia’s coal capacity will retired by 2040 because the assets will have reached the end of their life. That will equate to around 70TWh of lost generation by 2040.

Based on its “neutral” scenario, which comprises existing federal and state government policies, the lowest cost replacement will be solar (28GW), wind (10.5GW) and storage (17GW and 90GWh). Just 500MW of flexible gas plant will be needed, and no new coal.

It says this portfolio in total can produce 90TWh (net) of energy per annum, more than offsetting the energy lost from retiring coal fired generation.

AEMO says, however, that new transmission infrastructure is urgently needed to reinforce existing links between states and create new ones – such as between South Australia and NSW. It also want to create renewable energy zones so that this transformation can be properly managed.

“We are in the midst of transformative and unprecedented rate of change in this sector,” AEMO managing director Audrey Zibelman says in a statement accompanying the 100 page report.

“We are witnessing disruption across almost every element of the value chain.”

(Please listen to our Energy Insiders Podcast interview with Zibelman recorded today. either below or here).

Chief among those disruptions is the shift to distributed energy resources, notably the record uptake of rooftop solar, the growing interest in battery storage, and the opportunities of demand management.

The conclusions from AEMO are, needless to say, not what many conservatives and the fossil fuel industry want to hear, particularly as the core scenario, based around current Coalition policies, still points to a share of almost 50 per cent renewables by 2030.

AEMO and Zibelman have both been attacked over their views around the energy transition, and their recognition that renewables and smart technology offer a cheaper, cheaper, cleaner and more reliable future.

But the conclusions are unequivocal.

“The ISP’s analysis is predicated on sound engineering and sequenced approaches to investments in the transmission system, providing an identified least cost pathway to managing the transition,” it says.

“The ISP applies probabilistic scenario-based analysis and system optimisation to project the reliability and security needs of the power system while simultaneously identifying the lowest cost combination of resources to meet system and consumer needs.”

This graph below illustrates how the grid will be transformed. Note the huge reduction in black (coal) in NSW in particular, and Queensland as well, along with the reduction of brown coal (brown) in Victoria and gas (red) in South Australia.

In their place emerge yellow (solar) light green (distributed or rooftop solar), dark green (wind) and purple (storage).

AEMO estimates that between 14GW and 48GW of large scale renewables will be developed across the NEM – which excludes W.A. and the Northern Territory, depending on the growth in electricity consumption.

This will be supported by 4GW and 23GW of new flexible, dispatchable resources at utility scale by 2040, mostly in the form of utility-scale storage.

AEMO’s says its modelling shows that the total investment required to replace the retiring generation capacity and meet consumer demand has an NPV (net present value) cost of between $8 billion and $27 billion, depending on assumptions made around economic growth and rate of industry transformation.

“This level of capital investment is going to be needed, irrespective of this plan,” it notes.

But its foremost message – apart from the shift towards decent tallied generation and renewables, is the need for transmission investment. By spending 8-15 per cent of this sum on transmission, cost savings will be between $1.2 billion and $2 billion.

AEMO says it makes sense to keep existing thermal generators operating until the end of their lives, but not longer. It says existing generators will need to be flexible and are able to ramp up and down given the availability of lowe cost renewables.

The less flexibility, the more need of storage. Interestingly, AEMO says consumer-driven distributed storage systems are expected to provide a strong opportunity for demand management, even though the storage itself is relatively shallow.

“The ISP analysis assumes only a proportion of distributed battery penetration is controlled to manage demand at a grid level, with the remaining capacity operating to the householder’s own objective to minimise grid consumption (particularly when paired with a rooftop PV system),” it says.

AEMO says that while wind generation is typically available overnight and at higher annual energy contributions than solar generation, solar generation is more predictable during daylight hours.

And it also models a “fast change scenario” which incorporates faster emissions reduction scenarios, higher consumption, greater uptake of rooftop solar, more electric vehicles.

The faster emissions scenarios are now paired with the CSIRO-Energy Networks Australia low emissions roadmap which points to a 52 per cent cut in emissions by 2030. But less details are forthcoming apart from the general picture of the graph.

Perhaps this is an attempt to take the politics out of modelling, although given that conservative attachment to new coal generation that appears forlorn.

“The objective was to test the risks and benefits of candidate transmission plans under a scenario where consumption was higher and more peaky, to check that reliability and security could still be maintained.”

It was. But it ended up with even more renewable energy developments, additional storage capacity and greater consumption according to its modelling, and a greater focus on energy efficiency.


Print Friendly, PDF & Email