AEMO to model rapid transition to renewables, quicker exit from coal

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AEMO urged by major utilities and others to model rapid transition to renewables and quicker exit from coal, along with “real” Paris climate commitment.

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The Australian Energy Market Operator is to include modelling for a rapid transition to renewables, a quicker exit from coal generation, and even a zero emissions grid as part of its next Integrated System Plan.

The commitment to a “step change” scenario – as it has been tentatively named – has been made by AEMO in a series of workshops and consultations with industry members over the past few weeks to discuss what inputs should be included in its next ISP, which is designed to be the 20-year blueprint for the electricity grid.

Importantly, this call for scenario planning to a more rapid shift to a renewables-dominated grid comes not from climate activists, green groups or renewables advocates, but from the incumbent fossil fuel generators and utilities themselves – who admit that the current planning blueprint does not take into account climate change and the realities of Australia’s ageing coal fleet.

“AEMO should contemplate a national CO2 emissions budget for all economic sectors, and include a scenario where the electricity sector delivers deeper cuts than currently contemplated,” the Australian Energy Council, long the principal lobby group for the incumbent coal-dominated generation companies, says in its submission.

The AEC, along with other generators, say that the current modelling assumes that all coal generators survive to the end of their nominated 50-year life. Everyone knows this won’t happen, because of the emissions challenge and because of the cost of maintenance and the competition from cheaper wind and solar and storage.

Transgrid, which runs the major transmission link from Queensland to Victoria, says it is clear that wind and solar are the cheapest option to replace retiring coal plants, and that the level of storage required is lower than most people think.

“Large scale wind and solar can supply energy with a lower levelised cost than new coal and gas fired power stations, in the timeframe required by the anticipated retirement of existing coal fired generation,” Transgrid’s submission states. 

“CSIRO analysis finds that neither system costs nor firming requirements rise significantly until renewables are providing over 60% of power generated in the NEM, suggesting that even a majority renewable-based system will deliver lower costs in future than a system powered by new thermal generation.”

Nearly all the submissions called on AEMO’s ISP to reflect the real target of the Paris climate pact, which seeks to cap average global warming to a maximum 2°C and hopefully as low as 1.5°C, and which infers a zero carbon grid by 2050 at the latest.

This contrasts to what the Australian government describes as its “Paris commitment – a 26 to 28 per cent reduction in emissions by 2030 – which as Professor Ross Garnaut and other climate and energy experts have pointed out is just a “downpayment” in the form of Nationally Determined Contributions (NDCs), which will have to increase rapidly in coming years.

Dylan McConnell, from the Climate and Energy College, said in his submission that Australia’s electricity grid would emit twice its Paris climate “budget allocation” under the two emissions scenarios previously considered.

“Expressed differently, the emissions budget for the NEM would be exhausted by 2028 or 2031 in the two scenarios respectively,” he wrote.

“This approach amounts to planning for failure to meet our Paris Commitments.”

McConnell was one of many to urge the zero emissions scenario planning, which effectively calls for a 100 per cent renewable energy grid well before 2050. AEMO has been urged to update is 2013 study of 100 per cent renewables, and to put in an action plan.

The pressure on AEMO to consider this modelling comes as UK’s National Grid commits to significant changes in its electricity management system to reflect the fact that its grid could be 100 per cent renewable for significant periods by 2025.

The International Energy Agency is also under pressure to downplay its core modelling scenarios, which ignore any ongoing climate action and which are often used by fossil fuel proponents, and conservative politicians, to justify their faith in coal and oil.

But the international market is changing rapidly, and new analysis – such as the latest from Finnish-based LUT University and Germany’s Energy Watch Group – point to a cheaper, cleaner and more efficient grid if powered by renewables, and transport, heat and manufacturing are electrified.

AEMO currently plans to announce which scenarios it will model on May 16 – just two days before the election. But this may be moved given the sensitivity of the subject and the Coalition’s refusal to believe that even a 50 per cent renewable energy share would be anything other than “economy-wrecking.”

Or perhaps it would shed important light on the debate. The added complexity of the task now means that the draft ISP will not be released until around December, with the final report due early next year.

A presentation made by AEMO to the first of two workshops held in the past two weeks points to the majority concerns about taking a realistic approach on emissions, and on the retirement of coal generators.

That wasn’t their only beef. Most of the companies making submissions pointed to the need improve the modelling to distributed energy resources (DER) – such as rooftop solar, battery storage and demand management – which is expected to be a key component of the future grid, accounting for up to 50 per cent of supply.

Interestingly, not everyone agreed on this point – reflecting the fact that while most consider the end of coal is inevitable and imminent, many are divided about the uptake of DER and how it should be managed, because so many utilities have yet to figure out how their business models will work.

This was a major focus of Tesla, which urged AEMO to consider modelling that combines a high rate of DER, high uptake of utility-scale storage, strong emissions policy scenarios, and rapid decreases in renewables and storage costs.

The modelling to date, it said, had been inflexible because when it assumed a fast-change it did not necessarily dial in cost reductions.

Tesla also recommends modelling that reflects longer duration for battery storage – such as four hours, reflecting the falling costs of storage and the interest in longer storage times – and factoring in great demand response mechanisms.

“As recognised by AEMO, and supported by Tesla’s experience to date, more rapid uptake of behind-the-meter battery storage will help drive faster reductions in utility-scale battery costs and as such are highly correlated.”

  • Other points of contention included the assumption that the $5 billion (and counting) Snowy 2.0 pumped hydro project is a “done deal” and committed project, despite the fact that it has yet to receive final approvals. This project will have a significant bearing on the future of rival installations.
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