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

“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.

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 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.