The Australian Energy Market Operator (AEMO) has published its 2020 Electricity Statement of Opportunities (ESOO), forecasting electricity supply reliability over the next ten years.

The latest analysis observes an improved reliability outlook across the next few years, driven by the rapid development of distributed and large-scale renewables, increased transmission capacity and reduced peak demand, while also foreshadowing significant changes in minimum operating demand profiles across the National Electricity Market (NEM).

The forecasts have been developed to help inform the decision-making of market participants, investors and policymakers.

This ESOO incorporates the uncertain impacts of the unfolding COVID-19 pandemic, and as a result, includes a forecast short-term reduction of peak demand and energy consumption over the coming summer in most scenarios.

Federal Minister for Energy and Emissions Reduction, Angus Taylor, said, “Like all sectors of the economy, the energy industry is not immune to the impact of COVID-19.

“The Government will continue to work closely with industry and energy market bodies to manage the impacts on our energy sector and ensure the lights stay on.”

AEMO Managing Director and Chief Executive Officer, Audrey Zibelman, said that for the 2020/21 summer, the ESOO observes unserved energy is not expected to exceed the reliability standard or the Interim Reliability Measure (IRM) in any NEM region.

“It is great to see how industry’s investment in new resources improves the reliability outlook for this summer,” Ms Zibelman said.

Ms Zibelman also noted that an additional 4,300MW of new variable renewable energy (VRE) capacity will be operational this summer, compared to what was available last summer.

“In future years, the declining reliability of the aging coal fleet and scheduled plant closures contribute to projected increases in unserved energy, particularly in New South Wales, and to some degree in Victoria,” Ms Zibelman said.

“Timely investment in transmission projects identified in AEMO’s latest Integrated System Plan (ISP), and projects such as those announced under the New South Wales Emerging Energy Program, will help address this risk.

“While the outlook has improved, it is clear from last summer’s extreme weather events and devastating bushfires that summer readiness planning remains as important as ever, including obtaining short-notice Reliability and Emergency Reserve Trader (RERT), to ensure we have all the tools available to mitigate challenges if they arise.”

In New South Wales, reliability and resilience risks identified during high demand periods, coupled with declining plant reliability and forecast plant closures, prove the need for timely commissioning of new generation, storage and transmission investment in development, including the Queensland to New South Wales Interconnector (QNI).

Mr Taylor said the ESOO highlighted that the NEM is well positioned to deliver the secure, reliable and affordable power businesses and households need this summer.

“Energy reliability has been a key focus of the Federal Government,” Mr Taylor said. “Blackouts during Australian summers have been far too familiar and far too common in recent years, and we have taken strong action to minimise this.

“Beyond this summer, we are aware of some challenges which is why the Government is committed to the $1 billion Grid Reliability Fund and the Underwriting New Generation Investment program to address these.”

The ESOO also forecasts rapid declines in daytime minimum operational demand levels in all NEM regions, as a result of continued strong uptake of rooftop solar installations. 

In South Australia, it points to the importance of Project EnergyConnect in helping alleviate system security risks under certain conditions when minimum operational demand is low.

Ms Zibelman said that the continued market transition, including challenges associated with minimum demand in the afternoon and high demand in the evening when the sun sets, highlight the needs for increased power system agility and resilience with a focus on working with industry and government to continue supporting regulatory and market-based reforms including the Energy Security Board’s Post 2025 Market Design reforms.

“With minimum demand carved out during the day, there’s an opportunity for innovative solutions and technologies to enter the market and utility-scale energy storage is likely to become increasingly important for daily operation,” Ms Zibelman said.

“As we continue to see the increasing shift towards non-traditional generators and the increasing take up of household rooftop PV, we are encountering new challenges of managing voltage, system strength, and inertia.

“To solve these, AEMO is collaborating with industry, jurisdictions and market bodies to develop new standards and to support cost-effective regulatory and market reforms that are required to keep the power system secure and reliable while lowering costs across the energy landscape.”

The Australian Energy Council Chief Executive, Sarah McNamara, said the ESOO shows the traditional reliability standard would be met in all NEM regions through this decade, even assuming no additional generation or storage is built.

AEMO also assessed supply against both the existing reliability standard and a more stringent interim reliability standard agreed by energy ministers in early-2020.

“We don’t believe that an interim standard was required, given it is extremely conservative and represents additional costs for energy users by imposing further obligations on market participants,” Ms McNamara said.

“Pleasingly, supply from generators is expected to meet both standards in the coming period.

“This latest assessment shows, with the existing supply, NSW will continue to meet the traditional reliability standard after the closure of Liddell.

“On the face of it, NSW may not meet the new tighter interim standard from 2023-24 because these reviews don’t include additional supply beyond what has already been committed to being built. 

“When you include expected additional new supply, as well as transmission options recommended in AEMO’s Integrated System Plan, we should confidently expect that even the tighter standard will be met in future supply assessments.”

To read the ESOO, click here.

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