The Australian Energy Market Operator (AEMO) has released its annual Electricity Statement of Opportunities (ESOO), providing technical and market data for the National Electricity Market (NEM) and allowing for investment in solutions for future energy supply shortages.

The ESOO looks ten years ahead to let markets and policy-makers know if it forecasts any times where consumers may not get the electricity they need. This informs the planning and decision-making of market participants, new investors, and jurisdictional bodies. 

The ESOO includes a reliability forecast identifying any forecast reliability gaps in the coming five years, defined according to the Retailer Reliability Obligation (RRO), and an indicative projection of any forecast reliability gaps in the second five years of the forecast. 

A key focus of this year’s ESOO is on managing an accelerating transition towards high instantaneous penetration of renewable generation, thermal generation withdrawal, and ‘green’ hydrogen consumption.

Continued rapid development of new large-scale and distributed renewable resources and dispatchable firming capacity (battery storage and gas generation) has helped improve the reliability outlook for summer 2021-22 and the first five years of the outlook. 

Existing and committed future electricity supply is projected to be adequate to support forecast demand under most conditions prior to the expected closure of Victoria’s Yallourn Power Station in 2028, although the power system is also becoming more exposed to extreme weather events that could lead to supply scarcity.

Multiple interrelated drivers are accelerating the energy transition in the NEM and making the management of system reliability and security more complex:

  • Accelerated deployment of large-scale and distributed renewable resources 
  • Accelerated exit of coal and increasing risk of plant failures 
  • Accelerated interest in hydrogen production and greater electrification

The interim reliability measure is forecast to be met. Expected unserved energy (USE) is forecast to remain below the Interim Reliability Measure (IRM) in all regions this summer. 

Both peak demand and energy consumption are generally expected to be lower than was previously forecast for this summer, due to lower growth from the business mass market sector in line with recent trends and, in some regions, less large industrial load growth

Optimism met with industry support

The Australian Energy Council (AEC) welcomes the optimistic outlook from AEMO, and says the latest assessment of electricity supply presents a confident picture for Australian energy consumers in the near term, and an exciting picture in the long-term.

AEC Chief Executive, Sarah McNamara, said, “The market operator’s near-term outlook has been progressively more positive about supply and reliability in recent years, and that is good news for the industry and consumers, who will benefit from the stability.” 

Ms McNamara said AEMO’s forecast of oversupply in all regions of the market in the first six years of its outlook should take pressure off institutions and government to intervene and provides time to develop good market mechanisms that will support the NEM in the long-term. 

“The outlook beyond six years is more complex when ageing thermal plants are forecast to close. 

“However, the 2021 Electricity Statement of Opportunities is just that: a statement of opportunities to fill the gaps that those closures create,” Ms McNamara said.

“AEMO identifies many generation and transmission projects likely to go ahead before then, which would fill the gap, but have not yet reached the appropriately conservative committed status to be incorporated into AEMO’s forecast.”

Ms McNamara said the 2021 Electricity Statement of Opportunities also illustrates the major transition under way in the electricity market.

“More than a quarter of the new dispatchable capacity coming online this summer is forecast to be battery storage capacity,” Ms McNamara said. 

“With the accelerating interest in hydrogen and the potential for greater electrification, this is all good news for the evolution of the NEM and emission reductions.”

Phasing out fossil fuels possible

Climate Council Senior Researcher, Tim Baxter, said, “Wind and solar energy are the cheapest way to add new capacity to the grid, and continue to generate clean, affordable electricity as unreliable coal and expensive gas decline.

“Record rates of rooftop solar uptake and massive investments by state and territory governments in large-scale wind and solar are driving a bright outlook.

“By 2025, we should see the grid being able to handle 100 per cent renewable electricity at certain points in time.”

Climate Councillor and Macquarie Law School Senior Lecturer, Dr Madeline Taylor, added, “For the first time, AEMO also examines the role of renewable hydrogen in meeting consumer and industry needs, outlining exciting opportunities for setting up zero-emissions, all-electric industries and creating hundreds of new clean jobs.

“Consumer behaviour, industry decisions and economic trends all point to one fact: Australia can have a grid powered by renewables, backed up by battery storage and pumped hydro, with the need for fossil fuels to be phased out of the electricity mix.”

Queensland’s overflow of coal

The Queensland Conservation Council also responded to the report, stating that it confirms Queensland will have enough generation capacity to meet forecast demand for the next decade.

Queensland Conservation Council Director, Dave Copeman, said AEMO’s modelling confirms that the state has an oversupply of coal units and does not need to rebuild Callide C4, which exploded in May 2021. 

“This AEMO report demonstrates we have enough capacity without rebuilding C4. Why should we waste government money rebuilding a carbon polluting, coal burning turbine when it could be better spent on renewable energy or storage?” Mr Copeman said. 

The Council said that AEMO’s forecast also shows that the absence of Callide C4, which will be out of action for the peak period of summer 2021-22, will have a negligible impact on the reliability of Queensland’s electricity supply.

The Council added that the report shows the state’s current oversupply of coal fired power stations will make it harder to operate the system securely, as minimum demand plummets to 2025. 

“The renewable energy future is already here and the transition is progressing faster than previously predicted,” Mr Copeman said.

“Queensland’s coal power stations will need to be phased out and we will need to invest in more flexible technologies such as batteries, to allow our state to achieve the longer term benefits of green export industries.”

Read the full report here.

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