The Australian Energy Market Operator (AEMO) has released its key report, 2017 Electricity Statement of Opportunities (ESOO), warning that additional investment and 'targeted actions' will be needed to avoid interruptions to power supply, with particular threats to South Australia and Victoria in the coming summer months.
AEMO said that the necessary targeted actions would include an additional 1000 megawatts (MW) of strategic reserves across Victoria and South Australia to prevent shortfalls this summer, as well as an innovative program of demand response with ARENA.
"The overall responsiveness and resilience of the system is at risk from increased vulnerability to climatic events, such as extended periods of high temperatures, and the risk of loss of, or reduction in output of, major generation units."
The report noted that the risks for South Australia and Victoria beyond the 2017-2018 summer would progressively decrease as renewable energy generation increased.
The ESOO provides a projected outlook to 2026–27 of electricity supply adequacy under a number of scenarios, including additional renewable generation in response to Australia’s federal and state renewable energy targets. It provides a state-by-state assessment of capacity, risks and new developments.
The report warns that electricity reserves have “reduced to the extent that there is a heightened risk of significant unserved energy (and loss of customer supply) over the next 10 years”.
"We face an increasing and unacceptable risk that there will be insufficient capability in the system."
The report shows that the NEM’s current existing installed capacity is 47,016 megawatts (MW), a net reduction of approximately 1,100 MW from the 2016 ESOO. However, at 1 July 2017, there were 21,721 MW of connection requests in train in the NEM21, comprising 10,678 MW for large-scale wind and 11,043 MW for large-scale solar.
Currently, only 1,331 MW of this meets AEMO’s commitment criteria, although the report notes that “Project development lead times are now sufficiently short for some renewable generation technologies that it may be possible for generators not yet ‘committed’ to be operational within short timeframes”
AEMO's Managing Director and Chief Executive Officer, Audrey Zibelman, said the a variety of responses to maintain balance on the power grid could include generation on the grid, storage, demand resources behind the meter, flexible demand, or flexible network capability. She said that AEMO's primary role was to maintain system balance and it was indifferent to what fuels or technology resources are utilised.
“Australia’s energy system is undergoing unprecedented transformation. Evidence of these radical transformations can be seen in the portfolio of supply resources in the NEM over the last decade. Since 2014, new supply resources entering the National Electricity Market (NEM) have been predominantly renewables”.
The planned retirement in 2022 of the Hunter Valley Liddell Station owned by AGL will increase the potential for power outages in NSW and Victoria.
The Minister for Environment and Energy, Josh Frydenberg, speaking on the ABC's Radio National, said the government is in discussion with AGL and other providers about the possibility of purchasing the power station so as to keep it operating beyond 2022.
Mr Frydenberg refused to rule out the possibility of the government supporting existing coal-fired power station, or investing in new capability.
The report, along with the Finkel Review of the future security of the NEM, will feed into the Australian Government's long awaited decision on energy policy and climate change response.