Reforming Australia’s energy future
Renewables sector concerns around a “fit-for-purpose” grid are expected to be tempered by the latest recommendations of the Energy Security Board, its Chairman Kerry Schott tells the AFR as part of Westpac Institutional Bank’s Reforming the Grid discussion.
By Mark Eggleton
Australia is readying itself for a clean energy future but it’s not going to happen overnight say a number of the nation’s energy leaders.
Speaking to The Australian Financial Review as part of Westpac Institutional Bank’s Reforming the Grid discussion, senior executives from some of Australia’s leading energy companies as well as the Chairman of the Energy Security Board (ESB), Kerry Schott, agreed Australia is heading in the right direction, with about 30 per cent of Australia’s energy needs powered by renewables today.
This number is a significant increase considering renewables were virtually non-existent in the national electricity market just over a decade ago.
As Schott points out, 90 per cent of the new generation investment over the past decade has been in renewables. “The change is happening very quickly and, not surprisingly, there are a few hiccups here and there,” she says.
Right now those hiccups include ensuring all the renewables coming online are connected to the grid, although last year’s update to the Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP) does lay out a fairly comprehensive roadmap for the future.
Moreover, the Plan is updated every couple of years to keep pace with the constant change in the sector.
A key part of the ISP is for further upgrades to the grid to ensure uninterrupted supply to the eastern states through a series of improvements to the interconnectors between states, as well as ensuring the grid is fit-for-purpose so all the renewables coming online can be connected and exported between the states.
These upgrades to the interconnectors will also allow younger, more efficient coal-fired power stations in Queensland, for example, to stay online and allow firming power to get into New South Wales when it’s needed in a decade or so.
Beyond the big interconnections between the mainland states, Tasmania is also upgrading its links to the mainland with the new Marinus Link that will have the potential to deliver renewable firming power into Victoria if needed.
Optimising generation
Keen eyes are currently on Europe and, in particular, the UK where a raft of challenges have included shortages and inconsistency in energy supply. This highlights the importance of a coordinated, long-term approach to energy policy and planning. It is important to strike the right mix of affordable, flexible, dispatchable generation, coupled with a fit-for-purpose grid, especially as the economy emerges from COVID-19 and demand increases from new consumption areas like manufacturing and electric vehicles.
Schott says the Energy Security Board’s most recent recommendations now endorsed by national cabinet are about setting some rules and guidelines around planning Australia’s energy future and ensuring new resources are well integrated into the system as we transition to a clean energy future.
A key part of the ESB’s recommendations is ensuring we optimise renewable generation by removing congestion in the grid, so renewable generators can get their energy to market and have their power dispatched.
According to Schott, managing that congestion does mean all the states as well as the energy industry need to work together.
She believes we’re heading in the right direction and, while the renewables sector gets frustrated with the slow connection process, AEMO is working hard to get the process of connection to the grid faster.
“It's all very frustrating, but everybody's learning, including the operator,” Schott says.
Part of that learning curve is due to the asynchronous nature of wind and solar power, which is different from the synchronous power coming from thermal and hydro sources. It has to be managed into the grid more carefully.
And when it comes to synchronous power, Tasmania – which is already 100 per cent self-sufficient in renewable energy – is suggesting it can become the “battery of the nation” as part of its Tasmanian Renewable Energy Action Plan. The goal of the plan is to produce 200 per cent of its energy needs by 2040 through renewable sources, with an intermediate target of 150 per cent by 2030.
According to TasNetworks General Manager Strategy, Finance and Business Services, Ross Burridge, the state’s goals are ambitious and the best way to get there is to invest heavily in “our infrastructure to connect the new renewable energy generation that's on our books down here”.
There’s already a lot of development happening and Burridge sees most of the nation’s thermal generation retiring in the not-too-distant future.
He suggests we need to make those grid investments right now, because if we're not ready to firm up the new sources of “very real renewable energy then there's going to be some issues with stability of the network”.
Bearing this in mind, he says the Marinus Link is an excellent investment for “Australia as a whole, because hydro is a great source of firming generation.
“With Marinus, we can back up with certainty, the intermittent generation in Victoria and New South Wales, for example,” Burridge says.
Commenting on Tasmania’s renewable energy plan, Acting Chief Executive Officer of Hydro Tasmania, Ian Brooksbank says that the beauty of hydropower in conjunction with variable renewables is that we can firm them to the required customer demand while providing the essential system services that keep the grid stable.
Economic sense
“Combining hydropower with renewables means that Hydro Tasmania can be a large source of the firming power that will be needed in the national electricity market,” Brooksbank says. “And, importantly, it makes much more sense economically to do this with renewables.
“So it’s not so much driven by just environmental concerns, it's really the economics driving the displacement [of thermal generation] now.”
Chief Executive Officer of Victorian distribution system operator, CitiPower, Powercor and United Energy, Tim Rourke, says the poles and wires or distribution network is now the backbone of our clean energy future.
“If we work together collaboratively with transmission networks and new generation sources, we can enable this target of net zero emissions,” he says.
According to Rourke, it is critical we optimise all the capacity available within the existing transmission and distribution networks as the first priority so as to ensure customers get affordable, safe and reliable power.
“This means maximising the utilisation of capacity in our assets and only building new transmission and distribution assets once the latent capacity of existing infrastructure is exhausted.
“If we do that, the future for net zero emissions with renewables doubling to what they are today, we will be in a pretty good position,” Rourke says.
And, once we’ve gone beyond the current distribution capacities, Rourke adds there will be the potential through the deployment of electrical vehicles across our networks to utilise these mobile batteries within the distribution network to further enable residential solar export and sharing.
“In time, we could have agreements with electric vehicle owners to discharge their batteries and use that supply of electricity within the network – maximising that infrastructure, rather than building new distribution or transmission lines and larger-scale generation sources a long way from where it's being consumed,” Rourke says. “Enabling customers to drive this reform is a critical part of the solution.”
Chief Financial Officer of Victoria’s largest diversified energy network business, AusNet Services, Mark Ellul says if we don’t make changes to our existing grid capacity, we’re in danger of not meeting our renewable energy targets.
“Right now, the change in the generation mix is accelerating with more large-scale renewable energy and more distributed energy in terms of rooftop solar, as well as advancements in battery and other storage technologies.
“At the same time, our previous generation capacity may become less reliable heading towards end of life. Also, with renewables investment accelerating, the problem is the grid was not designed to accommodate generation on the fringes of the network.”
Fears tempered
For Ellul, we need to change the grid and energy consumers are demanding that change. He says managing the transition is the key.
Part of the ESB plan does include ensuring we don’t shut down all the thermal generators overnight. But this doesn’t mean providing incentives to build new facilities, despite concerns within the renewables sector around the ESB’s recommendation to create a capacity market that subsidises ageing generators.
According to Schott, a “lot of the fears of the renewable sector will be tempered” when they see the detail.
“It is a capacity mechanism, not a move to a capacity market, which is a whole different ball game, and the difference is that the existing energy market would continue, so that within that market, the renewables will get dispatched in front of hydro and thermal because they're cheaper, and that will certainly continue,” Schott says.
“What this means for coal generators is at present they have to burn coal all day because of the nature of the technology they have. But because the new renewables are there, and they're cheaper, they get dispatched first.
“What we’re suggesting is a capacity mechanism that makes sure when we need dispatchable power, like when there's no wind or sun, we will have firming power that can be dispatched and can also be flexible.”
She says what will get most rewarded with the capacity mechanism won’t be coal but firm power that’s also flexible “and that's batteries, pumped hydro and gas”.
“All of those technologies can be turned off and on and you want something that you can turn on immediately, and that's what batteries do. Gas and hydro can come on just after that but coal has to lumber around all day, and it's going to continuously be the least commercial of all the generation in the network,” Schott says.
For TasNetwork’s Burridge, the opportunities are enormous if we further reform the grid and Australia will pay from an economic perspective if we don’t move now.
Hydro Tasmania’s Brooksbank agrees, adding that what we’re doing right now is cleaning up our energy mix, and solving the grid challenges can be simple as long as we understand the need to create an integrated suite of solutions involving better distribution and higher capacity storage.
Ellul believes we need a nationally integrated strategic planning framework that is clear on what investments are required and where they're located so we can all work towards the same plan.
Furthermore, he says we need to ensure transparency of decision-making so every stakeholder and community understands and is engaged in the energy transition process.
Schott agrees it’s about everyone working together because “nobody wants more expensive power hanging around more than necessary, and the key to decarbonising the economy is decarbonising electricity so, at the end of the day, that's where it's all headed”.
“Delay is not an option because this has been driven by consumers wanting green power, government and business contracting with renewable providers to build plants and to take their power.
“Nothing is going to stop this - it's happening,” Schott concludes.
‘Reforming Australia’s energy future’ can be accessed on the Australian Financial Review here
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