The Energy Security Board has hailed the “remarkable” growth in both utility-scale wind and solar and rooftop solar over the past year, but has delivered several thinly disguised brickbats to the current federal government over the lack of policy certainty and the absence of a coherent plan to reduce emissions.
In the ESB’s annual Health of the National Electricity Market report, chair Kerry Schott also emphasised the need to enact the new rules and a system blueprint to ensure the transition to a low carbon grid can occur with lower costs and with the lights staying on.
Schott notes that the share of large-scale renewables reached more than 16 per cent in 2018/19, will reach 27 per cent by 2022 and get to 40 per cent by 2030.
These figures do not include rooftop solar, and with that rapidly growing resource and the accelerating shift to decentralised energy, Australia is already at more than 20 per cent renewables and will be at 50 per cent by 2030. Even the federal government – despite attacking Labor’s 50 per cent aspirations – has conceded that and dialled 50 per cent renewables by 2030 into its forecast and emissions assumptions.
“Over the last year the transformation of the National Electricity Market (NEM) has progressed at a remarkable pace and scale,” the report notes, observing the 3,184MW of large-scale wind and solar added to the grid in 2019.
“Equally remarkable is the growth in distributed energy resources or rooftop solar PV, batteries and smart meters,” the report says. It notes that over the last year the number of such installations remained at 140,000 – 160,000 per month; but the size of rooftop solar had jumped and the most popular size – 6.5kW to 9.kW – compares to the sub 2.5kW and then sub 4.5kW that dominated the early years of the rooftop solar rollout.
“This size and pace of change places Australia in an international cohort that includes Ireland, California, Germany, Spain and Portugal,” the report says, noting that Tasmania, thanks to its hydro resources, is effectively at 100 per cent renewables and South Australia is already at more than 50 per cent wind and solar.
“What is uniquely Australian is the high proportion of rooftop solar PV generated. This is now about 5 per cent of total NEM generation and by 2030 it is expected to be 10%.” And it notes that this influx of renewables has had a clear impact by reducing costs.
The question for the market is how quickly the grid could transition beyond “business as usual”, and what would need to be done to meet the science, which the federal government says it accepts, and the Paris target of trying to limit average global warming to well below 2°C.
The ESB makes clear that emissions reduction goals for 2030, and beyond, consistent with the 1.5° to 2°C degree Paris Agreement goals are needed, because the current targets imply relatively rapid decarbonisation beyond 2030. In other words, the country should be doing more now.
It notes the impact of policy uncertainty needs to be monitored, and it delivers another barely disguised brickbat to the current government’s position, noting that “inappropriate investment, including lower investment” may lead to less competition, lower reliability, and higher long-term pricing because of inefficient investment decisions.
But the country needs a plan, he ESB notes, and one that is actually acted on – just in case a government does decide to take some serious action.
The grid is already at a critical juncture because in some cases the transition has gotten ahead of the planners and the rule-makers. That has created risks for reliability and security and required off-market intervention by the likes of the Australian Energy Market Operator.
AEMO has already produced a draft report, the Integrated System Plan, that provides a 20-year blueprint that manages five different scenarios, including a 1.5°C target that results in around 90 per cent renewables by 2041/42.
Commitments to some of the “must-do” infrastructure needs are starting to stir, and AEMO and the networks are working on new standards for inverters and measures to improve “visibility” and management of this resource. But the pace of change is frustrating to many investors because it cannot catch up with the opportunities missed over the last few years.
Investors are also concerned about the uncertainty created by changes in market rules, mainly because until these become clear it makes it hard to get finance and backing, a situation that the ESB acknowledges.
“New renewable generators are experiencing some difficulties with network constraints emphasising the need for this work and the ongoing reconfiguration of the grid,” it says. “There are large transmission projects in the future and making this investment in a timely manner that is efficient and affordable will be a challenge.
“The distribution networks are challenged by the rapid uptake of rooftop solar PV. These networks were not originally designed to manage dynamic two-way flows from rooftop solar. Networks are shifting to become platforms for service provision rather than dumb one way electricity flow carriers.”
The ESB is also coordinating work on a complete re-write of the National Electricity Rules, in recognition that the design created more than two decades ago for a grid dominated by coal and gas is no longer fit for purpose. For a start, it needs to think about the environment, a measure that was inexplicably dropped at the last moment when the current rules were finalised in the late 1990s.
“Interim measures will be reported in March 2020 and longer term design measures for 2025 and beyond will be reported later in 2020,” the ESB report says.
Interestingly, the ESB report looks at a couple of key indicators – lack of reserve notices (above) and performance against the reliability standard (Below).
The ESB says the LORs have been increasing in recent years. But they are both below where they were a decade ago.
The ESB explains those decade-ago spikes as the result of the drought of and its impact on hydro generation. But I guess the point is that a decade ago the grid was arguably more weather dependent than it is now with variable wind and solar, although the ESB is clearly concerned about the impact of rising temperatures on the ageing coal fleet.
One metric that has increased dramatically is the number of “market interventions”, mostly to ensure that there is enough synchronous generation online to deal with any eventualities. Despite the increased number, the total cost has declined and remains relatively modest – $15.7 million in the last year.
But these interventions will largely not be needed, at least in South Australia, once new synchronous condensers are brought on line in the next 12-15 months. Schott notes the need for new markets that encompass various grid-based services, including inertia, voltage control and system strength.