CoAG takes major step forward on renewables, despite NEG standoff

The split between the federal government and the Labor states and territories over the controversial National Energy Guarantee may have taken the headlines, but Friday’s CoAG energy ministers meeting took a major step forward on the integration of renewables.

The NEG is in deadlock mostly because of Energy Security Board modelling that seeks to claim that the roll-out of large scale renewable energy – and even utility-scale storage – will come to a crashing halt in 2021 if there is no NEG, and in 2022 if there is a NEG.

That may be either a perfectly ridiculous proposal, or a truly scary one, or both. Almost as barmy as the idea put forward by the Coalition and conservative commentators that they could use the ACCC proposals for a reverse auction to support a new coal generator, or to kill rooftop solar subsidies.

But the Integrated System Plan, released a few weeks ago by the Australian Energy Market Operator, has an altogether different outlook, and expects high penetration of renewables by 2030 come what may, in recognition of the lower costs and the acceptance that – despite the NEG modelling – you can’t stop the future, but you can plan for it.

The ISP says that on current targets and state-based plans, and the huge uptake of rooftop solar by households and businesses, Australia is likely to have at least a 46 per cent share renewables by 2030, and possibly more than 60 per cent.

The ISP is touted by AEMO as a blueprint for what needs to be done to accommodate that transition. It was feared that it could be yet another significant document left to gather dust, but the CoAG energy ministers – to their credit – have other ideas.

On Friday, they instructed the ESB to come up with an action plan by December on how the first phase of AEMO’s recommended measures can be put in place, and also come up with suggestions on how the Group 2 recommendations can also be progressed.

These are significant items.

The Group 1 recommendations from AEMO’s report include upgrades for the links between Queensland, NSW and Victoria, and also to address system constraints in Victoria.

The Victoria upgrade is critical, and urgent, because as we reported last month the lack of capacity and emerging network constraints threaten to impede the development of wind and solar projects in that state, or force them to spend money on equipment such as synchronous condensers.

Group 1 measures also include measures to address “system strength” in Victoria, and CoAG also asked the ESB for a review of the so-called “regulatory investment tests” for new network investment, which are considered too narrow to actually get things built.

The Group 2 measures include more major infrastructure, including the proposed Riverland link that will add a second inter-connector from South Australia, this time to NSW and through to Wagga Wagga.

This new link will likely unlock several major wind, solar and storage projects, including one major solar and storage facility proposed for near the NSW-SA border that would currently be isolated from any major network connections.

Also included in the Group 2 lists are the creation of so-called “renewable energy zones”, which seek to group wind and solar projects in certain areas so they can be more easily catered for by transmission infrastructure.

Among these zones are the New England region, centred around prominent wind and solar enthusiast Barnaby Joyce’s electorate, where there is a huge amount of investment now being made or in the pipeline.

Group 2 projects also include upgrades of existing links between Queensland and NSW, and Victoria and South Australia, and the co-ordination of distributed energy in South Australia, which AEMO believes will face considerable constraints as the share of wind and solar increases and rooftop solar output accounts for all of minimum demand on certain days.

Group 2 also includes the transmission investment needed for major projects such as the Snowy 2.0 pumped hydro project and Tasmania’s proposed “Battery of the Nation” wind and pumped hydro scheme.

“The council requested that the ESB report to the December 2018 meeting on how the Group 1 projects identified in the ISP can be implemented and delivered as soon as practicable and with efficient outcomes for customers,” the communique said.

“The ESB will also report on how the Group 2 projects will be reviewed and progressed. Any modifications that may be needed to existing processes for these projects to be delivered should be clearly identified and a way forward recommended.

“Ministers also asked that in addition to the consultation on the current ISP that is underway, the ESB should identify a work program (including possible changes to the RIT-T) and convert the ISP to an actionable strategic plan. The ESB Chair should take the lead on its delivery and report back to the December 2018 meeting.”

That outcome will no doubt be satisfying to AEMO boss Audrey Zibelman, who noted at the recent Clean Energy Summit in Sydney earlier this month that it was time to stop reviewing, and take some action.

“We’re exhausted. We’ve been reviewed out. We do need to start taking some action,” Zibelman said.

Indeed, some retailers – particularly the smaller ones – complain of being “beaten into submissions” because of all the submissions they have had to make to the myriad different inquiries and reports that have been flying around for the past year or two.

“We are seeing this transformation occur faster in Australia than anywhere else,” Zibelman told the conference. “The cost structure in terms of wind and solar is making them attractive … we need to start to think about the network infrastructure we need to integrate that.”

Zibelman is not the only one to recognise the implications and opportunities of a green energy transition. The CoAG meeting also heard from chief scientist Alan Finkel, who has led a report into the so-called “hydrogen economy” and its potential in Australia.

Finkel made a 10-minute presentation at Friday’s meeting and it appears it has been enthusiastically received. And while the report itself has yet to be released, CoAG has asked Finkel to come back in December with a more detailed proposal about how his recommendations can be implemented.

RenewEconomy understands that Finkel’s report looks at the domestic opportunities for hydrogen – where there are a few pilot projects emerging, including in South Australia at Port Lincoln and Adelaide – but focuses mostly on the export opportunities.

This – like the forecasts of the likes of Clean Energy Finance Corp chief Oliver Yates, leading economist Ross Garnaut, and others – looks to the potential of tapping into Australia’s huge wind and solar resources to deliver cheap and clean fuel to export markets in Asia.

Hydrogen also has a ready-made storage alternative in Australia’s gas networks, and it is interesting to note that the country’s gas lobby – acknowledging the potential of a significant decline in gas usage due to its costs – is now embracing the hydrogen idea to protect its infrastructure investments.

The idea of a hydrogen economy has been around for decades, but as the cost of wind and solar continues to plunge, and with advancements made in electrolyser and other conversion technologies, its time is nearing, particularly for long-term or seasonal storage, and for exports.

Hydrogen, according to a study co-authored by David Leitch, ITK analyst and co-host of RenewEconomy’s Energy Insiders podcast, may struggle to match battery storage and pumped hydro in short duration storage, but will likely win out in longer term storage.

This is one of the ideas being discussed by Australia renewable energy developer CWP as it contemplates a massive 9GW wind and solar complex in the Pilbara region of Western Australia. That project is looking to a physical link to south-east Asia, encouraging local manufacturing, and also exporting wind and solar in the form of transportable fuels.