AEMO Flags Reliability Risks Amid Net Zero Transition

A small electrical substation is seen in a rural area near Albany, Western Australia, on Nov. 24, 2023. (Susan Mortimer/The Epoch Times)

The Australia Energy Market Operator (AMEO) flagged in its latest National Electricity Market report an increase in reliability risks in the power grids for New South Wales, Victoria, and South Australia.

The regulator says these risks stem from the push to increased demand, delays in battery projects, mothballed generators, and transmission limitations in each state.

According to AEMO, the forecasted risks have led to the organisation calling for tenders for Interim Reliability Reserves (IRR) to support the two most populous states, NSW and Victoria, to minimise risks over the coming summer.

Yet the organisation said consumers may not be willing to pay more for this.

The report also said that both federal and state governments can bump up investment in renewable infrastructure it can cushion any potential risk.

“The AEMO ESOO shows that if transmission, generation and storage build out proceeds per the timelines considered typical by AEMO, alongside committed investments in coordinated consumer energy resources, NSW and Victoria are forecast to breach the reliability standard over most of the outlook period,” said Johanna Bowyer, Lead Australian Electricity Financial Analyst of the Institute for Energy Economics and Financial Analysis (IEEFA).

“It will be key for governments and the energy industry to install new energy projects at pace and ensure strong uptake of consumer energy resources to maintain reliability.”

In a separate annual consumption report, AEMO projected that electricity consumption in Australia is expected to increase across different states.

This growth is most evident in Queensland where consumption is expected to grow by 9 percent in the 20-year forecast period. Whereas other states are expected to have a flat growth of more than 4 percent in the same period.

Eraring Closure Could Increase Reliability Risks

The AEMO report said that it continues to forecast reliability gaps over the 10-year outlook in all mainland National Electricity Market regions.

“If a larger number of energy projects are included in the outlook, and these projects are assumed to be installed on time as per the developer-advised schedule, while coordinated consumer energy resource uptake grows more strongly, the reliability standard is maintained except for in NSW in 2025-26 and some of the later years in Victoria,” Ms. Bowyer said.

She recommended the government and energy sector build new energy projects at pace to ensure reliability.

Minister for Climate Change and Energy Chris Bowen said the Albanese government’s $22.7 billion “Future Made in Australia” package would transform Australia into a “renewable energy superpower.”

However, the AEMO report flagged the possible retirement of the Eraring Power Station could increase reliability risks in New South Wales.

The Eraring Power Station has been the leading power supplier in NSW for over 35 years, the state government has only recently extended its deadline to close by another two years, costing NSW taxpayers $150 million per year.

Eraring coal-fired power station, the largest in Australia, on the shores of Lake Macquarie southeast of Newcastle in New South Wales, Australia. (Nick Pitsas/CSIRO)

“For Eraring to exit on time while staying within the reliability standard, all the energy projects in AEMO’s ‘federal and state schemes’ modelling would need to be built on schedule, while coordinated consumer energy resource uptake grows, and additionally, the 2025-26 reliability risk in NSW would need to be addressed by quickly bringing in additional energy supply, storage or demand-side projects,” Ms. Bowyer explained.

Eraring Extension Not Necessary

In a separate report by the IEEFA, the organisation claimed the plan of the Albanese government to attain its 82 percent renewable energy target will leave no room for the Eraring to operate.

The IEEFA model shows that keeping Eraring open beyond 2025 is no longer necessary, and may negatively impact other coal-powered power plants.

Tim Buckley, director of Climate Energy Finance, also expressed similar sentiments.

“The real reliability gap here is the failure of authorities to accelerate the rollout of renewable energy, transmission and grid connections needed to ensure cheap and reliable energy to consumers statewide,” Mr. Buckley said.

“It is beyond time AEMO responded with a level of urgency consistent with tackling the energy, cost of living and climate crises smashing NSW energy households and businesses. These concurrent crises will only be solved by an accelerated transition to firmed renewables and a decarbonised, connected grid.”

Some Believe the Focus on Renewables is Unreliable

Aidan Morrison, the energy program director for the Centre for Independent Studies, cast doubts on the AEMO’s modelling and report.

“Please, tell me why we can’t just build nuclear,” Mr. Morrison said, as he emphasised the list of schemes such as the $14 billion pumped hydro project at Borumba.

“AEMO’s message is firmly one that doubling down on the proposed renewables. Only the transition is going to fix the imminent mess.”

“I think this is a really serious flaw in the reliability modelling. Basically, with a footnote, they’ve traded true reliability for an unrealistic ‘perfect foresight’ assumption, which ultimately isn’t reliable. I don’t think this transition is going to go well,” said Morrison.