AEMO models “step change” shift to renewables for 20-year planning blueprint

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AEMO to model “step change” in renewables, the only scenario in its 20-year planning blue-print that fits in with Paris climate targets.

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The Australian Energy Market Operator has confirmed that it will model a “Step Change” shift to renewables that will include rapid adjustments in technology costs and a “well below 2°C” Paris climate scenario as part of its 20-year planning blueprint known as the Integrated System Plan.

The Step Change is one of five scenarios to be modelled by AEMO in its ISP, including business as usual (current federal and state policies and targets); Slow Change; a consumer-led shift to distributed energy resources (rooftop solar, battery storage and electric vehicles); and a technology-led “Fast Change” that focuses more on grid-scale investments.

But it is the Step Change scenario that promises to be the most interesting, and possibly controversial.

Firstly, because it recognises the climate change imperatives implicit from the science and in the Paris climate treaty, and also because it will show what is possible with technology and grid integration, an important consideration in an Australian political and media debate that seems to regard the horse and cart as a modern invention.

Secondly, because it will specifically show the fastest rate of technology cost reductions for zero/low emissions technologies, and the policies that would drive the uptake of renewable generation resources “well in excess” of current state and federal ambitions to 2030.

This is based on the introduction of a “carbon budget” needed to ensure average global warming remains within the 1.4°C to 1.8°C range. The double ticks in the right hand “step change” column (in the table above) reflect the fact that the targets are considered to the minimum achieved, because of that carbon budget.

The “slow change” assumes catastrophic average global warming of more than 4.5°C by 2100, while the current policy assumes an equally bleak average warming of 3.0°C to 4.5°C. Interestingly, the consumer-led transition scenario assumes less warming (2.5°C to 2.7°C) than the grid-led fast transition (3.0°C to 3.5°C).

The implication here is important. Current policies have us on target for a huge rise in temperatures, but as we have seen this week at the Pacific Islands Forum, Australia’s current Coalition government is not prepared to sign up for anything better, and certainly not a scenario that entertains capping temperatures well below 2°C, or the 1.5°C contemplated here.

“This (step change) scenario includes a step change in response to climate change, supported by technology advancements and a coordinated cross-sector plan that efficiently and effectively tackles the adaptation challenges,” the AEMO document states.

In this step change scenario, domestic and international action rapidly increases to achieve the urgent objectives of the Paris Agreement, digital technology takes a greater role, and much of the transport sector is electrified, either by batteries or hydrogen or both.

It will also look at “ambitious” energy efficiency policies that could deliver substantial savings in energy, and it will also assume a higher population, a higher take up of distributed energy resources, a greater EV uptake, and a greater focus on energy management.

The ISP itself will not likely appear until the end of the year, at least in draft form. The first iteration has been crucial for laying out some of the basic infrastructure needs – new and expanded inter-connectors, renewable energy zones, sub-station upgrades – that are necessary to accommodate the shift to renewables.

Unfortunately, much of this is still to be acted on, delayed by a painfully slow regulatory process, and by what appears to be growing resistance in the other key energy institutions – the AEMC and the AER – to renewable technologies, possibly aided and encouraged by the Coalition government.

The AER, for instance, has stunned the industry by taking court action against four wind farm operators over their software setttings at the time of the South Australia blackout, while the AEMC and AER are suggesting that wind farm variability be labelled a “contingency event” – a move described by many in the industry as “bizarre” and a sign that they don’t understand the technology.

Meanwhile, energy minister Angus Taylor has refused to engage with the states through the COAG energy forum, reducing the opportunities for a coordinated and considered plan of action.

In its new report, AEMO highlights the importance of infrastructure planning, for any of the scenarios.

“The role of government and public policies can influence the ultimate direction and scale of action affecting the energy sector,” it notes. “These policy settings collectively may influence the infrastructure developed to support the consumption of energy, and each scenario will include a differing degree of policy-driven change.”

The slow change scenario considers the horrifying prospect that Australia goes even slower on renewables than it is now. It assumes the Victoria and Queensland targets are not met, because state governments have scaled back their ambition in the absence of a carbon budget.

Coal closures are delayed only in the “slow change” scenario, but may be brought forward for economic reasons in the current policy scenario, and for both economic and climate reasons in the other scenarios.

Still, its “sensitivity” analysis will include unexpected coal closures, delays to the Snowy 2.0 pumped hydro scheme, an early start for Tasmania’s “battery of the nation” program, and the dropping of the Queensland renewable target, as the state LNP opposition has vowed to do.

Other inputs focus on a range of assumptions for the uptake of rooftop solar, household battery storage and electric vehicles, along with infrastructure needs, system strength requirements, and technology and fuel costs.

Rooftop solar PV is assumed to reach more than 40GW of capacity in the Step Change scenario but installations come to an almost complete halt in the Slow Change scenario.

Battery storage is seen taking off quickly under the Step Change and high DER scenarios, and then booming again in the high DER in the 2030s, while again remaining flat in Slow Change.

A similar story is told in the EV predictions, expressed here as grid demand rather than absolute numbers of EVs, although in the case of this technology growth is inevitable, and roughly equal by 2050 in three of the scenarios.

The document was originally due to be released in May, but due to the complexity of the modelling assumptions, and the input of a range of stakeholders, has been twice delayed until now.

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