AEMO to model “step change” in energy transition and major emission cuts

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AEMO confirms plans to model “step change” scenario that will include dramatic emissions reductions and an accelerated transition to a clean energy grid.

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The Australian Energy Market Operator has confirmed that it will model a significant “step change” in Australia’s clean energy transition as part of its long term blueprint, and has also produced analysis showing multi-billion cost savings from a co-ordinate planning, and pointed to the potential early exit of coal-fired generators.

As the federal government struggles to put together coherent policies for either the short or long term on energy and climate, AEMO is leading – through its Integrated System Plan and with the support of Energy Security Board and other key institutions – a detailed, 20 year blueprint that will guide how the grid operator can navigate the “unstoppable” shift to renewables.

AEMO’s modelling includes neutral scenarios and even slow scenarios – based around certain policy actions by state and federal governments – but the key new element will be a “step change” scenario that represents strong action on climate and the acceleration of technology, and other scenarios based around a very high uptake of distributed energy resources (rooftop solar and battery storage).

This is significant. Australia’s public and policy debate is hamstrung by the views of conservatives who simply don’t believe that a clean energy transition to a renewables-based grid can occur without the lights going out and the economy grinding to a halt.

This is the fundamental justification of the Coalition’s go-slow on climate policy, and its refusal to lift emissions reduction targets, along with its branding of Labor targets as “reckless”, economy-wrecking, and a recipe for higher bills.

AEMO’s work will challenge those assumptions. Already, it’s modelling suggests having a co-ordinated plan, and investing in infrastructure, will lead to consumer savings of $3.8 billion, based on the work of consultancy Aurora.

Other scenarios modelled by Aurora suggest savings of between $1 billion and $4 billion, and these are from network investments only.

The first version of the ISP, released in 2018, looked at how the grid could absorb Labor’s proposed target of 50 per cent renewables by 2030, and went beyond that, looking at how increased uptake of rooftop solar and storage could deliver a 60 per cent share around the same date.

The next version of the ISP – due at the end of this year – will go even further, and it canvassed these ideas at a workshop and webinar earlier this week.

“AEMO presented a number of scenarios during this workshop, from a central scenario incorporating current federal and state energy policies, to slow and fast change scenarios that factor in lower/higher than expected uptake of distributed energy resources and large scale renewable investment,” it said in a statement on Friday.

“Also presented were scenarios based on very high uptake of distributed energy resources, and a significant ‘step change’ that represents strong action on climate and acceleration of technology.”

According to attendees at the workshop, this “step change” scenario is not yet finalised, but will likely deliver some astonishing conclusions – at least for those still hanging on to the idea that little will change in the grid.

The proposal is to use a “carbon budget” approach, in line with Paris Agreement. This is the model adopted by the Climate Change Authority (while it was allowed to contemplate such matters), and the UK equivalent (which still is allowed).
That would infer indicative carbon reductions of around 95% reductions by 2050 and – wait for this – up to 80 per cent by 2030, at least in the electricity sector. These, it was stressed during the webinar, were just indicative numbers, and will be confirmed once the scenario report is  released, which according to the AEMO statement will be June 28.
It is important to note that this is not AEMO and some modellers going rogue. As the submissions to the ISP reveal, and as we noted when we wrote about this initially last month, the grid operator is being urged to model step change scenarios by the industry itself, and particularly by those heavily invested in fossil fuel generators.
There are clear reasons for this. These major players don’t believe the nonsense spouted in much of the media about climate science being an elaborate hoax. They recognise that wind and solar and storage are clearly the cheapest options to replace ageing, expensive and dirty coal fired power station.
And they want to be able to understand the scenarios so that they can properly plan what to do with these assets, and where and when to invest in new technology.
There has been much pleading from the energy sector for the federal Coalition government to get real about the transition ahead, rather than being distracted by ideological nonsense – such as the calls for nuclear energy by its backbench and some ministers.
The NSW Coalition government’s new energy minister Matt Kean, on Friday called on his federal colleague to dump ideology and populism and get real about the climate and energy transition issues. Kean wants the National Energy Guarantee to be revived with an emissions component. Most others, want that emissions target to have some link to the science and reality.
AEMO, along with the ESB, the Australian Energy Market Commission and the Australian Energy Regulator, are moving forward regardless. This includes quick action on rule changes to facilitate the transition, new rules on generator retirements and a longer term effort to totally re-write the National Electricity Rules, with 21st century technologies in mind.
In its statement today, AEMO said it will consult further before the release of its scenario plans, and its second ISP later in the year, but in the meantime released two new independent reports that analyse the potential reduction in power bills if the ISP is implemented and if the ISP needed to assume more rapid closures of coal generators.

Aurora put the potential bill savings of the 2018 ISP’s neutral scenario – and the investment in transmission infrastructure – to be around $3.8 billion. For the other ISP scenarios entertained in last year’s document, the savings were put between $1 and $4 billion. There could be more savings, from reductions in ancillary service costs and the benefits of emissions reductions, but these were not counted.

On coal, Aurora suggested that not all coal generators would prosper in the future, particularly if costly repairs were needed, and if demand fell (such as in slow economic growth). The departure of one, however, could be good news for the rest, because wholesale prices would likely rise after an unplanned closure.

Still,the incumbents are urging AEMO to consider what happens if the coal generators should exit quickly. None of them really expect their plant to last the nominated 50 years. The economics don’t work, and they acknowledge it wouldn’t be great for the climate. But most are getting just a little tired of having to proceed softly softly for the sake of the Coalition and its populists and ideologues, as Kean describes them.

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