“The world’s fastest energy transition.” That’s how the Australian Market Operator describes the outcome of the Integrated System Plan, its 20-year blueprint for what needs to be done over the next 20 years as Australia’s ageing coal fleet comes to the end of its life.
AEMO’s focus is on engineering and economics, and four of its five scenarios assume a dramatic transition away from fossil fuels to the cheapest and most reliable replacement, which is wind, solar and storage, and its scenarios range from a renewables share of 70 per cent to 94 per cent by 2040 (and 96 per cent by 2042).
It’s not a climate action plan, but the “step change” scenario does have the happy outcome of doing roughly what the scientists say must be done, at least in the grid. And while AEMO’s ISP is designed to underscore the sheer scale of the task at hand, and the detailed planning that is needed to effect the fastest change in what some argue might be the world’s most challenging grid – just how much of a step change or stretch target is it?
Well, as these graphs – courtesy of Simon Holmes à Court, senior advisor to the Climate and Energy College – illustrate below, it may not be as much of a stretch target as some people might think.
The first graph shows what has been installed over the past decade or more in new wind and solar (in black), what is forecast for the next two years (in grey), and what would be needed on a graduated path to meet the step change scenario.
As you can see, it’s been a bumpy ride so far. Growth after Fiscal 2014 was arrested by the Abbott government’s RET Review. And then drought was followed by flood as developers scrambled to seek opportunities, even from a reduced target. And even though the RET is effectively met, construction is still going on, thanks to strong corporate demand and state-based policies.
The increase in renewable generation from 2010 to 2020, despite all those bumps, was an average of 12 per cent, compound year on year growth. The task from 2022 to 2040 is much less, a compound growth rate of 1.2 per cent.
This graph above, showing the accumulated renewables share, may show that better. It means that the projection to take Australia’s grid to one based on fossil fuels to one overwhelming dominated by renewables requires a compound annual growth rate of renewable generation just one tenth of the last decade. The Central scenario (current policies) assumes a contraction (dotted green line).
But here’s the caveat, and it’s a big one. This is the amount of generation – expressed in terawatt hours, not megawatt of capacity – that will be needed to deliver on the step change target. The challenge comes in not building new wind and solar – but in making sure the infrastructure is there so that this new capacity and generation can be accommodated.
As Alex Wonhas, AEMO’s chief engineer, noted in a webinar hosted by Transgrid last week: “We need to rebuild the grid.”
That’s what the ISP is all about, making sure that the infrastructure is in place, and that regulators, rule-makers, policy makers and developers and investors are thinking and planning ahead. The cost of not doing so is now being felt by the growing list of new projects that either cannot be fully commissioned or are facing huge delays before they can even by built or connected.
And many are not happy. Really not happy. The problems this is causing are reflected in new data that shows investment falling off a cliff in the last quarter, to the lowest levels since the index was begun in early 2017. Only three new solar farms, and no wind farms, reached financial close in the last three months – and just one battery storage project.
These graphs, however, are a demonstration that “step change” is not heroic from an installation perspective, as some people would make out – but it might be heroic from a transmission and integration perspective.
Which makes it interesting that the incumbents and their spokes-people are now complaining of “central planning” on an enormous scale, a veritable “coup d’état” by the market operator, claimed the former head of the incumbent’s lobby group.
Really, you can’t make this stuff up. Let’s not forget that those same incumbents are making money built from central planning decades ago, and have been operating, and profiting enormously from, a market that was designed to deliberately exclude any form of environmental and climate considerations from its rules and regulations. And now everyone is paying the price, in dollars and in health.
As AEMO boss Audrey Zilbelman writes in response to that claim, the market doesn’t just need new infrastructure, it needs new rules that sufficiently value the need for firming and other services needed to support the “free electrons” from wind and solar and keep the system operating.
“Without an ISP we will see more and more situations – such as those we are working through in some weaker parts of the network in eastern states today – where even the best engineering analysis and effort cannot keep pace with market demand, creating adverse consequences to investors and consumers,” Zibelman writes in an op-ed published in the AFR on Tuesday.
Now, it could be argued by some that “logistic growth” would slow down as we approach the level of 100% per cent renewables – given that it is widely accepted that making the last few percentage points of a 100 per cent renewables grid will be the most difficult part.
And given the growing number of export projects, and the belief by the government of Tasmania that it should be “200 per cent” renewables by 2040, and the ARENA boss’s suggestion that we should be aiming at 700 per cent renewables, the chances are that we will sail past that number with ease in a couple of decades time.
And here’s one last thought, from Holmes à Court.
The ISP’s step change scenario has the grid at around 30 kgCO2/MWh in 2042 — a 95 per cent reduction from where it is now, and lower than where nuclear dominated France is now. In other words, in the time it would likely take to build one nuclear power station (bipartisan political support, planning, building etc etc), the whole grid can be nearly completely decarbonied.
And, he adds, even Victoria would be coal free in 2037, and 99.6% renewables in 2042, according to the ISP scenario.