AEMO warns any further delays in renewables transition could hit gas supplies | RenewEconomy

AEMO warns any further delays in renewables transition could hit gas supplies

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AEMO report indicates delays to roll out of renewables could set back the grid’s low-carbon transition and force it to lean more heavily on costly and polluting gas.

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Australia’s Energy Market Operator has warned that any delays to the at least 30GW and up to 47GW of new renewable energy capacity required to realise its draft Integrated System Plan could set back the grid’s low-carbon transition and force it to lean more heavily on costly and polluting gas.

Actually, it’s a bit more complicated than that. AEMO says that if the development of new renewable generation is delayed, or if more gas power generation is built instead, there may be greater reliance on gas to meet electricity demand than the market operator had forecast would be needed to replace retiring coal. And this could result in a gas supply shortfall when coal plants start retiring in 2023.

Which sounds a bit like warning that we should stock up on more domestic gas supplies, just in case we need them to bridge the gap between coal plant retirement and renewables build-out, the latter of which might get delayed by a misguided policy and market focus on building more gas power generation capacity, in turn, driven by warnings of a gas power supply shortage.

But let’s start from the start. The warning was issued as part of the AEMO’s annual Gas Statement of Opportunities, or GSOO, report which forecasts the supply-demand balance for Australia’s east and south-east coast gas sector over a 20-year outlook period.

The 2020 GSOO, published Friday, concludes that Australia is running low on domestic gas, with a projected shortfall of supply on peak winter days in the southern states from 2024, unless more southern sources are developed, or pipeline capacity limitations are addressed.

And as Tim Forcey noted on RenewEconomy this time last year, the theory that “the world’s top gas-exporting nation” is running out of gas is a bit of a recurring theme for AEMO. And it is each year lapped up by mainstream media and the oil and gas industry as a “call to… explore for more gas, frack for more gas, build more gas pipelines.”

In its 2013 GSOO, New South Wales was forecast to suffer from ongoing gas shortages starting in 2018. The 2015 GSOO pointed to gas shortages across eastern Australia. The 2017 GSOO warned of acute gas shortages that would cause electricity blackouts in the 2018/19 summer, Forcey says.

Last year’s GSOO, like this year’s, said that additional sources of gas supply would be required to address a forecast gap in meeting long-term gas demand from 2024.

This year, the call for more supply also happens to fit nicely with the Victorian Labor government’s heavily criticised decision to lift its moratorium on the exploration of onshore conventional gas reserves, while keeping a permanent ban on fracking and coal seam gas exploration.

A Victorian-specific report released alongside the GSOO (the March 2020 VGPR Update) rather presciently says that committed supply in the state is forecast to reduce by 37% from 2022 to 2024 due to field decline.

Without additional supply, or “removal of pipeline constraints, or a liquefied natural gas (LNG) import terminal,” then gas supply restrictions and curtailment might be necessary from 2024, the AEMO VGPR Update says.

Sounds scary. But of course, the main concern driving AEMO’s forecasts of gas supply shortfalls is around the timing of coal pant retirements – most particularly the exit of the NSW Liddell power station in 2023, when it is due to be retired.

And the good news is AEMO has a plan for that. It’s called the Integrated System Plan. And as AEMO reasserts in this year’s GSOO, the ISP’s scenarios have established that investment in a portfolio of renewable energy, storage and new transmission is the lowest-cost way of replacing Liddell’s generation.

The scenarios range from “slow change” – which would deliver a catastrophic rise in average temperatures – to a “step change” scenario that considers what must be done in line with the science that says we must keep average global warming as close as possible to 1.5°C.

In that scenario, AEMO outlines a plan to reach around 90 per cent renewables by 2040. The bulk of this 47GW of new generation comes from large-scale wind and solar, supported by distributed (mostly rooftop) solar, along with hydro power, and “dispatchable” technologies such as pumped hydro, big batteries, and household batteries aggregated in “virtual power plants”.

But the key message is, there is no time to lose. As RenewEconomy editor Giles Parkinson explained here, at least two thirds of coal generators will be gone by 2040, and Australia has already fallen behind in its development of supporting infrastructure and market rules.

What AEMO is saying in this latest GSOO is that any further delays – be they due to malingering federal policy uncertainty, fall-out from the Covid-19 pandemic, or a shift in focus and federal support to the development of more fossil fuel power generation – will translate into an increased reliance on gas power. And while that is good news for the gas industry, it is terrible news for the climate, and not the best outcome for consumers.

“As the energy industry transforms, the growing linkages between Australia’s gas and electricity sectors mean that events occurring in one sector, could have strong impacts on the other,” said AEMO CEO Audrey Zibelman.

“Any delays to the projects identified in AEMO’s Integrated System Plan, a further reduction in availability of Australia’s coal-fired generation fleet, earlier than forecast depletions of gas fields, long-term changes in industrial activity, changes to the global LNG markets, or the ongoing effects of COVID-19 could all heavily impact current forecasts.

“Close collaboration between AEMO, market bodies, industry and state and federal governments will be a critical component to the success of our energy transformation,” Zibelman added. “AEMO will continue to work closely with all parties in the best interest of consumers, and to shape a better energy future for all Australians.”

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