Has AEMO downplayed speed of clean energy transition?

We’ve come a long way in just one year.

Last June, modelling for the Finkel Review was telling Australians that allowing coal generators to continue well beyond their 50-year life offered the cheapest path to a transition to a low-carbon economy.

Clearly, the modellers had no sense of urgency. Their modelling suggested there was still an additional  decade or two of life in these old clunkers, which they must have somehow imagined could be held together with bandaids and stickytape.

Now we are told, by modelling conducted by the Australian Energy Market Operator, that the cheapest way will be to call a halt to coal generators when they get to the end of their technical life – 50 years, and only if they make it that far.

This was a significant point to be made by the institution that runs the grid and whose responsibility is to keep the lights on, now and into the future.

And in doing so it smashed two prevailing myths that continue to strangle political debate in Canberra: first that new coal is an economic proposition. It is certainly not, and AEMO says solar, wind and storage are patently cheaper.

The second myth is the idea that having a target of 50 per cent is “reckless,” as many in the Coalition – all the way down from Prime Minister Malcolm Turnbull and energy minister Josh Frydenberg, to the agit-prop in the Business Council of Australia – would have us believe.

But AEMO’s core scenario, based on current federal and state policies, is that a 46 per cent share of renewables will be the bare minimum by 2030, and more than 60 per cent is likely should a higher emissions reduction target –  say, a 45 per cent cut by 2030 – was introduced.

In RenewEconomy’s Energy Insiders Podcast this week, we asked AEMO chief executive  Audrey Zibelman if the grid would still be secure and stable at these level of renewables. “Absolutely,” she said.

That answered a question we were almost embarrassed to ask, but such is the level of debate in this country.

What we regret not asking Zibelman is what would the situation be if we needed to go faster. And we do need to go faster, because it is clear that climate change demands a more focused response.

And this leads us to the disappointing part of the AEMO document. For sure, it went further than the ACCC and Finkel reports, and the government’s energy white paper, because at at least it entertained an emissions target that was not enshrined by right-wing dogma.

But there are many who think it does not go far enough, including the farmers federation, the core constituency of the reactionary National Party.

In reality, the transition is likely to happen a lot quicker than what AEMO is modelling. That’s because the cost of installed capacity used by AEMO is drawn from an old report (early 2017) prepared by the CSIRO.

As the Australian PV Institute pointed out in its submission, solar is already about 25 per cent lower than modelled. Some say it is even lower than that.

This, of course, means that the transition is likely to be quicker, because the cost pressure on coal fired generation is likely to be more intense.

But now is probably not the best time for AEMO to scare the chooks. One step at a time for the ancient mariners in the Coalition.

AEMO is half owned by the government and half owned by the major incumbent utilities. The fact that it got this far to describe the transition in this much detail is a breakthrough enough.

That said, the developers of renewable energy would not be getting too excited over its forecasts – of 28GW of solar and 10GW of wind to be installed over the next 20 years. That’s just one big wind farm, or two medium ones, a year.

For the foreseeable future, they are effectively limited to the Victoria and Queensland renewable energy targets, the push by the corporate sector into the market – vividly highlighted by Bluescope signing on for a major solar deal – and the retirements of coal plant in NSW.

Indeed, it is one of the ironies that NSW – with no state-baed target, and the site with probably the highest dependence on coal generation in the world – will likely experience the most dramatic transformation.

That’s because all but one of its coal fired generators will reach the end of their technical life over the coming 15 years. After Liddell in 2022, Vales Point, Eraring and Bayswater will follow, leaving only Mt Piper.

This graph illustrates the change – that big chunk of black (coal) becomes a mere slither in 2040 and energy minister Don Harwin can afford to say that he is “technology neutral.”

He has already made pretty clear what he really thinks of the “base-load” coal mantra of his Coalition partners. It is a change that is pretty much unstoppable, unless by obstinacy and stupidity.

As Labor’s Mark Butler notes, AEMO’s 46 per cent renewable share should now be the starting point for government policy.

The NEG, on the other hand, is predicated around a share nearly 10 per centre points lower than that, which if it eventuates, would result in prices 20 per cent higher than they would be otherwise, a new report from Reputex points out.

“This report is a significant blow to the Turnbull Government and their baseless anti-renewables fear campaign,” Butler says.

“Not only does it confirms that Labor’s 50 per cent 2030 renewable energy target is achievable and responsible, but it also confirms it will deliver cleaner and cheaper power, with more jobs and investment.”

Even the National Farmers Federation is calling the Coalition’s 26 per cent emissions reduction target for the electricity sector by 2030 weak and unfair.

Most analysis say it will be met soon after 2020, thanks to the renewable energy target and corporate buyers that now include Bluescope, who having railed against renewable and carbon schemes for years, is now clearly alive to the benefits (cheap solar).

Imagine, then, the sort of report that Zibelman’s team at AEMO could have produced if Australia was governed by a party that accepted the world was not flat, that climate science is to be respected, that cheap renewables offer all sorts of economic opportunities.

It might look something like what Bloomberg New Energy Finance recently produced in its New Energy Outlook.

BloombergNEF is finely attuned to the falling cost of renewables. “Every time I look up from my screen, the cost has fallen again,” said analyst Leonard Quong when presenting the Australian version of the report recently.

Some of its core assumptions are remarkably similar to AEMO’s – 45-50 per cent renewables by 2030, nearly half of all demand supplied by distributed solar and storage by 2040/2050 (see, the democratisation of energy), and 50 per cent of the car fleet fully electric by the late 2030s.

By 2050, BloombergNEF says coal is long gone, and the share of renewables ins 92 per cent. Consumers emerge as the most potent force in the energy market, thanks to the enormous capacity of solar and storage they have installed behind the meter – and that includes households and business.

“The most significant (impact of rooftop solar) is … pushing coal out of the system,” BloombergNEF’s Kobad Bhavnagri says.

“You can forget about the carbon price, you can forget about the NEG (National Energy Guarantee), what will push coal out of system is rooftop solar PV.”

That’s one thing that is clear. The transition is inevitable, only the pace of it is under question if politicians and vested interests seek to erect road blocks in the form of a National Energy Guarantee, an abolition of rooftop solar support, or the power and inertia of the incumbents.

Basically, all we need to do is get out of the way, and let the investors and grid operators get on with their work.