AEMO forecasts 20 years of coal

Coal fired plants could go on producing energy for more than 20 years, according to a new report by the Australian Energy Market Operator (AEMO).

Existing coal generators should be allowed to live out their lives to ensure an affordable and reliable electricity supply, AEMO’s ‘Integrated System Plan’ report recommends.

“AEMO’s analysis confirms that we are in the midst of transformative and unprecedented rate of change in this sector. We are witnessing disruption across almost every element of the value chain. Due to the vital importance of affordable, reliable and secure power as the engine of a strong economy, care must be taken now more than ever to manage this transformation in order to minimise costs and risks and maximise value to consumers,” said AEMO Managing Director and Chief Executive Officer Audrey Zibelman.

AEMO’s analysis displays the fundamental changes occurring in the energy sector:

  • Grid demand is flattening due to the growth of rooftop photovoltaic (PV) and increasing use of local storage, as well as overall increases in energy efficiency. This is true even with the anticipated electrification of the transport sector over the period.

  • Over the next 20 years, a percentage of the NEM’s existing coal resources will be approaching the end of their technical lives, and will likely be retired, which highlights the importance of mitigating premature retirements as these resources currently provide essential low-cost energy and system support services required for the safe and secure operation of the power system.

  • The investment profile and capabilities of various supply resources have changed and are projected to continue to change radically.

  • In particular, costs of new renewable plant continue to fall, and advances and availability of storage technologies, particularly pumped hydro, flexible gas-powered generation and distributed energy resources (DER) are emerging as core components to a low cost and reliable energy future.

AEMO looked at various transmission reinforcement options, assessing the costs and time to implement these relative to modelled benefits, to determine the optimum immediate investments and staging of future development. The ISP delivers economic benefits under all scenarios. The timing of some elements varies under different assumptions, particularly relating to the rate of change and the progress of proposed major energy storage initiatives. Group 1: Near-term construction to maximise economic use of existing resources

  • Immediate action is required to maximise the economic use of existing low-cost generation. Investment is also required to facilitate the development of projected new renewable resources to replace retired and retiring resources, and to provide essential system security.

  • Immediate investment in transmission should be undertaken, with completion as soon as practicable, to:

  • Increase transfer capacity between New South Wales, Queensland, and Victoria by 170-460 MW.

  • Reduce congestion for existing and committed renewable energy developments in western and north-western Victoria.

  • Remedy system strength in South Australia

Group 2: Developments in the medium term to enhance trade between regions, provide access to storage, and support extensive development of Renewable Energy Zones (REZs)

  • The ISP shows that an interconnected energy highway would provide better use of resources across the NEM, through both access to lower-cost resources and realising the benefits of diversity from different resources in different locations with different generation profiles.

  • Action should be taken now, to initiate work on projects for implementation by the mid-2020s which would:

  • Establish new transfer capacity between New South Wales and South Australia of 750 MW.

  • Increase transfer capacity between Victoria and South Australia by 100 MW.

  • Increase transfer capacity between Queensland and New South Wales by a further 378 MW.

  • Efficiently connect renewable energy sources through maximising the use of the existing network and route selection of the above developments.

  • Coordinate DER in South Australia.

  • AEMO will coordinate work with project proponents on a design for transmission networks to support strategic storage initiatives (Snowy 2.0 and Battery of the Nation).

Group 3: Longer-term developments to support REZs and system reliability and security

  • In the period from 2030 to 2040, a significant amount of the NEM’s coal-fired generation is expected to reach end of technical life and retire. As noted, given the scale of the investment and building time required, it will be important to retain existing coal-fired generators until the end of their technical life to maintain reliability.

  • In the longer term, to the mid-2030s and beyond, the capability of the grid should be enhanced to:

  • Increase transfer capacity further between New South Wales and Victoria by approximately 1,800 MW.

  • Efficiently connect renewable energy sources through additional intra-regional network development.

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