Energy crisis reminds us why we need a rapid shift to renewables, says AEMO chief

AEMO chief Daniel Westerman, second from right, in a AEW panel discussion

The head of the Australian Energy Market Operator has stressed the continued, rapid build-out of large-scale renewable generation capacity must remains the nation’s top priority, both to drive down energy costs and to get the grid to net-zero emissions.

Speaking at the Australian Energy Week conference in Melbourne on Tuesday, AEMO chief Daniel Westerman said “getting enough energy into the system” is top of the list of things he worries most about.

And the cheapest way to do that, he added, is to ramp up the rollout of large-scale solar and wind energy to the tune of a nine-fold increase – from 15GW today to 140GW by 2050 – which is what is being forecast in AEMO’s latest Integrated System Plan.

Alongside this, AEMO says the grid will also need a tripling of “dispatchable firming capacity” – from 20GW today to 60GW by 2050 – which will come from a combination of technologies, including big batteries, pumped hydro energy storage and demand response.

“I’ve said this before, that this energy transition is not just about environmental benefits, it is a kaleidoscope of economic, technical, political, and environmental factors,” Westerman said during a plenary address at the conference later on Tuesday.

“And these recent weeks have really reminded us about the economic benefit of the transition to low-cost, firmed renewables.

“Today, many homes and businesses struggling with increased energy costs and that is a very real challenge and certainly one that strikes right at the heart of everyone at AEMO.

“But we know through the work that’s gone into developing an integrated system plan that firmed renewables will provide the most economic form of new energy going forward.

“And the ISP that will be formally released later this month, will contain the roadmap to 2050 on how we integrate greater levels of cheap, clean renewable energy, and the right levels of firming capacity for them,” he said.

“And the sooner we can move the nation to higher levels of firmed renewables, the sooner we can electrify more of the economy, the sooner we can decouple energy costs from international factors and the sooner we can reduce stress on Australian households and businesses.”

Happily, Westerman says that despite current “challenging market conditions,” new large-scale renewable energy projects – including the nation’s first offshore wind projects – are still queuing up to be built.

“I know that supply chain costs are an issue for all infrastructure projects at the moment – transmission, renewables and other infrastructure,” he said.

“But from AEMO’s perspective, what we see is a really big pipeline of people wanting to connect. We don’t really see a shortage of capital at the moment.

“I think our NEM is 60-odd gigawatts in capacity and AEMO has, at the moment, 130-odd gigawatts of potential projects in our pipeline of potential connections.

“Of course, they won’t all come through, but they you know… the ideas are there and the projects are there,” he said.

On the rollout of firming capacity, however, the message was a bit different.

“We are on a step change. There’s sort of no way of going backwards. And so the question is, are we resilient enough to accelerations in coal fired power station closures and and other events?” Westerman said.

“We need sufficient firming technology, and that is to iron out the lumps and bumps of intermittent and variable renewable generation, so that the energy is there when homes and businesses need it.

“That firming capacity, which includes dispatchable storage is absolutely critical. And to be frank, one of my worries is that we’re not seeing sufficient investment in firming capacity today.

“The Energy Security Board is developing a capacity mechanism which I think will help to provide the right market signals which will properly incentivise dispatchable capacity, but different depths and different durations of that type of storage will be needed.

“We see this comprising utility scale batteries, hydro storage, gas fired generation, smart behind the …meter batteries and vehicle-to-grid services from from EVs and, of course, complemented by flexible loads from wholesale demand response.”

Sitting alongside Westerman on the panel at Australian Energy Week was Australian Energy Regulator chair Clare Savage, Australian Gas Infrastructure Group CEO Craig de Laine, and CEO of Transgrid, Brett Redman.

Savage, who gets an honourable mention for being the only panellist to mention the importance of energy efficiency in the future market landscape, was vocal about the importance of new rules to drive change, and in particular the use of a “capacity mechanism,” an ESB favoured tool that has been the topic of much debate.

See also: What is the real cause of our energy crisis – and what should we do about it? by Tristan Edis

“I think Australians love what we call our ‘energy only’ market,” she told the conference. “It’s a passion that is evident probably for many people in this room.

“When you look around the world, though, there are really not any markets that are trying to navigate this transition without a capacity mechanism.

“We need lots of investment in variable renewable energy and we need lots of investment in dispatchable capacity, and those two things go hand in hand to deliver the energy transition.

“So our capacity mechanism is a critical part of making sure we’ve got sufficient investment in dispatchable capacity where and when we need it to keep the lights on to keep prices low, and to support the energy transition,” Savage said.

Transgrid’s Redman, predictably, was pushing the barrow for more transmission – “no transition without transmission,” was his motto for the day.

“Transmission … is a tremendous example of where we’ve been talking about it for a long time and agonising about it – and we’ll keep agonising about the detail. But I think it’s a great example where we need to start to put some markers down and get it done.

“Because otherwise if we try and wait till everything is solved perfectly, nothing will really happen. So we need to keep moving forward and projects like Energy Connect are a good example of moving forward,” Redman said.

De Laine, meanwhile, made a plea for more resources to be channelled into transitioning to “renewable gas,” claiming the gas industry was well behind electricity on the decarbonisation pathway due to a “policy imbalance” in Australia.

“We need to start unlocking the benefits that renewable gas is going to bring to the energy transition,” de Laine told the conference.

“What I get really excited about with hydrogen is that it allows us to start thinking ‘energy’ and stop thinking ‘electricity’ and/or ‘gas,’ because hydrogen sits in the middle of the gas system and the electricity system to create an energy system. And that’s exciting.”

Speaking just before the panel discussion, Origin Energy CEO Frank Calabria also had a bit to say about gas, which he said would be “critical to the energy system for the foreseeable future.”

“The role of gas in the energy system will undoubtedly reduce over time as more sectors electrify and as alternative renewable fuel sources mature and this will be crucial for getting the economy to net zero emissions,” he told the conference.

“But in the meantime, we simply cannot remove a fuel from the energy system for which there is no viable alternative today. And, indeed, I would go as far as to say it is irresponsible for people to suggest we can.”

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