AEMO’s Draft 2024 Integrated System Plan

Electricity substation at sunrise, representing the transition in Australia's National Electricity Market as per AEMO's 2024 ISP.

AEMO recently released its Draft 2024 Integrated System Plan (ISP), which serves as a roadmap for the energy transition in the National Electricity Market (NEM) over the next 20-plus years in line with government policies aimed at achieving net zero by the year 2050.

The plan outlines a cost-effective strategy for essential energy infrastructure to meet consumer needs, ensure reliability and affordability, and achieve net zero. AEMO highlights the urgency for action as the NEM shifts from coal-fired generation dependency. With the closure of coal-fired power stations, the draft proposes using renewable energy supported by storage and gas as the most economical solution for Australia’s energy transition.

The policy set by the Federal Government aims for a 43% reduction in emissions compared to 2005 levels by the year 2030. Additionally, the policy targets 82% of electricity supplied in the NEM to come from renewable sources.

Previous ISPs established ambitious trajectories for investment, and it is imperative that projects are now executed according to the plans. AEMO’s most probable future scenario predicts about 90% of NEM’s coal fleet will retire before 2025, and the entire fleet will retire before 2040.

The energy transition is already well underway, with coal retiring faster than initially announced. The ISP continues to stress the need for urgent investments in generation, firming, and transmission to maintain a secure, reliable, and affordable electricity supply. The retirement of coal-fired generators necessitates a transition to low-cost renewable energy, supported by firming technologies like storage and gas-powered generation.

AEMO has stated that the NEM must almost triple its capacity to supply energy by 2050 to replace retiring coal capacity and meet increasing electricity demand. Every government within the NEM is actively endorsing the transition. The Federal Government has broadened the Capacity Investment Scheme, while various states have their initiatives supporting the transition to net zero.

The 2024 ISP outlined three future scenarios for 2050, which included Step Change, Progressive Change, and Green Energy Exports. All these scenarios involve the retirement of coal, aligning with government net-zero commitments. AEMO has assigned likelihoods of 43% for Step Change, 42% for Progressive Change, and 15% for Green Energy Exports.

Under AEMO’s optimal development path (ODP) for the Step Change scenario, there is a call for investment that would triple grid-scale variable renewable energy by 2030 and increase it sevenfold by 2050. The plan emphasises grid-scale generation within Renewable Energy Zones, quadrupling firming capacity, supporting a four-fold increase in rooftop solar capacity, and leveraging system security services to ensure reliability.

In terms of transmission, nearly 10,000 km of transmission is needed by 2050 for the Step Change and Progressive Change scenarios, with over twice that to support the Green Energy Exports scenario. The annualised capital cost for all infrastructure in the ODP until 2050 is $121 billion, with transmission projects constituting 13.5% of the annualised cost.

The NEM faces several risks in transitioning from coal to renewable energy. Key challenges that AEMO has identified include uncertainty in infrastructure investment, early coal retirements, markets and power system operations that are not yet ready for 100% renewables. Additionally, consumer energy resources are not adequately integrated into grid operations, the social license for the energy transition is not being earned, and critical energy assets and skilled workforces are not being secured.

In summary, AEMO’s Draft 2024 Integrated System Plan charts a crucial path for Australia’s energy transition, aligning with net-zero goals. With an urgent focus on retiring coal-fired stations, the plan advocates a swift move to renewables backed by storage and gas solutions. The plan also outlines the significant challenges faced by the industry that are required to be overcome in order to reach net zero by 2050 while ensuring a reliable and affordable energy supply.

Queensland’s SuperGrid Infrastructure Blueprint: A Bold Vision or a Tall Order?

Engineers in safety vests and helmets discussing renewable energy solutions on a laptop at a wind turbine electricity plant during twilight

In September 2022, the Queensland government unveiled its SuperGrid Infrastructure Blueprint, a comprehensive plan aimed at transforming the state’s energy landscape. With ambitious targets of achieving 70% renewable energy by 2032 and 80% by 2035, the blueprint sets out to revolutionise the state’s historically coal-dependent energy sector. But, as the initial excitement subsides, concerns regarding feasibility and practicality have begun to surface.

At the heart of the blueprint are six Renewable Energy Zones (REZs), designed to harness the state’s abundant wind and solar resources. These zones have been hailed as the cornerstone of Queensland’s renewable energy future, yet the involvement of various stakeholders, including First Nations people and local farmers, introduces complexities that may impede progress.

One of the primary concerns surrounding the blueprint is the intermittency of renewable energy sources. To address this issue, the plan proposes a significant investment in long-duration storage, complemented by an additional 3 GW of grid-scale storage. However, questions linger regarding the sufficiency of these measures to ensure a stable power supply during periods of high demand. With further delays to Snowy 2.0, the optimism of pumped hydro projects being completed on time has plummeted.

Furthermore, while the blueprint mentions low to zero emission gas-fired generation, the vagueness surrounding the term “low to zero” raises doubts about the commitment to truly reducing emissions. This ambiguity could undermine public trust in the project and create uncertainty for investors.

Another point of contention is Queensland’s continued reliance on its connection with New South Wales. Although this relationship provides a safety net, it also suggests a possible lack of confidence in the state’s independent capability to meet its energy needs.

Powerlink, the entity responsible for facilitating community engagement, faces the daunting task of balancing diverse interests and opinions. While the blueprint’s emphasis on collaboration is laudable, experienced observers may view this approach as a potential hindrance to timely decision-making.

Despite reservations, the SuperGrid Infrastructure Blueprint offers numerous opportunities for innovation and growth, particularly for those familiar with navigating regulatory frameworks. Nevertheless, the magnitude of the challenges ahead cannot be ignored. Bureaucratic obstacles, coupled with the weight of expectation placed upon Renewable Energy Zones, leaves room for doubt regarding Queensland’s ability to deliver on its promises.

In conclusion, the SuperGrid Infrastructure Blueprint represents a bold vision for Queensland’s energy future, but its success hangs in the balance. Either the state will emerge as a leader in the global transition to renewables, or it will serve as a cautionary tale of overambition. Only time will tell if Queensland has taken a confident step forward or a tentative shuffle into the unknown.

Electricity Grid Faces Challenges Amid El Niño’s Return, Warns AEMO

Australia’s electricity grid is bracing for potential disruptions this summer, particularly in Victoria and South Australia. The Australian Energy Market Operator (AEMO) has expressed concerns about the imminent El Niño, which is anticipated to bring about a season of extreme heat and wind-less days.

This latest warning from AEMO (2023 ESOO) presents a very concerning picture. The slow pace of transitioning from old coal plants to cleaner energy sources, coupled with potential coal and gas shortages, has heightened the risk of blackouts. AEMO’s annual 10-year outlook emphasizes the urgency of investments. With nearly two-thirds of Australia’s coal power fleet expected to shut down by 2033, the need for swift action to ensure uninterrupted power supply is paramount.

The challenges of transitioning to a greener economy are becoming more evident. The scenario in NSW, following the proposed 2025 closure of the massive Eraring coal generator, is particularly urgent. AEMO strongly recommends postponing such retirements to avoid blackouts. Contrasting their optimistic report from February, the upcoming summer may see Victoria and South Australia facing with power shortages. These shortages can be attributed to a mix of factors, including periods of low wind, recurring generator breakdowns, and the gas plant shutdown.

The latest AEMO report indicates that roughly 3.4GW of new generation and storage capacity is projected by this summer. Furthermore, initiatives like Snowy 2.0 in NSW and the Borumba pumped hydro project in Queensland are aimed to bolster capacity by 2032-33. However, there are concerns as projects like Snowy 2.0 confront delays and rising costs.

With the re-emergence of the El Niño pattern, the electricity grid is anticipated to be under significant stress, especially following three comparatively milder summers due to La Niña. The growing popularity of electric vehicles and electric heating, notably in states like Victoria, will add to the strain on the grid.

Sarah McNamara, the CEO of the Australian Energy Council, perceives this both as a challenge and an opportunity. She is optimistic that the market can overcome these obstacles with the appropriate price signals to stimulate investment.

In conclusion, while the journey to a low-emission economy might be lined with challenges, with the right strategies and investment, Australia can ensure a reliable and sustainable power supply for its citizens.

Hydrogen-Electric Powertrains on the horizon as Ecotricity launch the first ever electric airline

Edge2020_Hydrogen-Electric Powertrains

This week’s launch marks the first step towards Hydrogen-Electric Powertrains.

The hydrogen transition continues to evolve with the UK’s Ecotricity CEO this week launching the first Electric airline. The 19 seater plane will operate the roughly 400mile (650km) route between Southampton and Edinburgh.

The initial phase will see the plane run on a kerosene-based fuel but the hope is, within a year, they will transition to a “hydrogen-electric powertrains.”

The Fuel Cell construction is similar to that of a battery, and the compressed hydrogen gas will feed the stack, which does not burn the fuel but converts the chemical energy into electrical energy.

What does that mean – well imagine you have a lunchbox, and inside this lunchbox, you put sandwiches made of hydrogen gas. Now, these sandwiches aren’t like your normal sandwiches, because you don’t eat them, you just put them into this lunchbox.

This lunchbox is the fuel cell or stack. Instead of you eating the sandwich, the lunchbox eats it. But the lunchbox doesn’t eat it like we would, it turns the hydrogen sandwich into electricity. This electricity is then used to power the aeroplane’s engines.

It all seems quite logical, and the new “sustainable” air travel could be the key to the issue which has plagued the airline industry for so long, how do we travel without the emissions.

Australia will be watching this with interest as transport is the second-biggest greenhouse gas-emitting sector in Australia. It is estimated airline emissions make up about 12% of that sector. However, getting past regional flights into long haul may create other challenges the industry is not yet able to overcome.

With the idea of hydrogen cells being used for a range of industries now, China launching their Hydrogen fuel cell powered boat, “the Three Gorges Hydrogen Boat No 1” in April and BOC and BP already developing hydrogen service stations, the first to be placed at Lytton in Queensland the hydrogen future is already starting to move past the theoretical and into the reality.

2023 Federal budget: slight update SA and VIC named for cap scheme

Melbourne, Victoria

Further to Edge’s update on the 2023 federal budget shared last week, more information has become evident from Hon Chris Bowen’s MP office around the actual schemes to be introduced and their allocation of the budget.

There is no doubt Australia, as in much of the world, they are pinning their hopes on a Hydrogen Economy. The governments ‘modernised’ energy economy is being underpinned by a technology which yet is not to scale and is unproven, can anyone say carbon capture and storage (CCS)! Now I do not believe Hydrogen is another CCS boondoggle, but the amount being invested, and the legislation changes to allow it to occur are akin to those of its previous silver bullet government neighbour.

The budget has allocated half of the $4bn green energy package, $2bn, to the Hydrogen Fund. The idea is the investment will assist in the commerciality of these projects and allow for 1GW of capacity to be on the system by 2030. The allocation of this will come in the form of “production credits” and as was later confirmed these will be allocated via a ‘competitive process’ however details of this are scarce. The funding is likely to have come in part to keep up with our European and US counterparts who have signaled similar investment in the industry through their own budgets (the US giving a $3/KG (USD) tax rebate if it relates to H2 production.

This will be supported by the new REGO or Renewable Energy Guarantee of Origin scheme which was first floated in the papers released at the end of last year.  $38million has been allocated to the project which will be used to certify the energy and emissions from these projects.

The details around the controversial capacity scheme continues to be scarce. With ‘commercial sensitivities’ being touted as a reason for non-disclosure. However, we do expect these to be run state by state and through auctions, so we hope for more detail to be shared on this in the future, especially given SA and VIC have already been named to lead the charge on this later this year. The choice of these states is unsurprising given the high renewable penetration on those grids.

We have also seen a little more information come out around the function of the “Net Zero Authority” who received $83m on Tuesday. It is anticipated that they will be working with local state and territory governments as well as lobbyists and stakeholders to create a roadmap to net zero in those regions, focus will naturally sit in heavy mining regions such as Queensland, the Hunter Valley and Latrobe Valley. From the 1st July the executive agency will be established and they will be tasked with supporting those in heavy industry to transition into a low carbon economy, assist with policies around this and assist with investment in the regions. No small feat to say the transition is already well underway.

Chubb report

Chubb report carbon offset

The long-awaited Chubb report was published on Monday 9th January 2023. Its purpose to “ensure Australian Carbon Credit Units (ACCUs) and the carbon crediting framework maintain a strong and credible reputation supported by participants, purchasers and the broader community.1”

The government has agreed (in principle) to enact all the proposed recommendations.

But let’s start at the beginning. The Chubb review came about following claims that the scheme was not robust, being managed badly and not fit for standards, especially on the international stage.

Following the King report in 2020 this view was exacerbated by the Clean Energy Regulator (CER) taking on an even larger role in this opaque market, holding the keys to the design of ACCU methodologies, registration and regulation of those projects, a data source for the “independent” ERAC (the Emissions Reduction Assurance Committee – the independent committee overseeing the ACCU market) and buying ACCUs on behalf of the Australian Government. Some may say it was a keys to the castle type deal.

Therefore, transparency and independence were unsurprisingly the key focus for the Chubb review. Both from the regulatory and data access standpoints, obviously maintaining privacy where required. With upcoming changes in the Safeguard Mechanism expected to come into force in the new financial year and increasing interest in ACCUs from the Hydrogen industry (to ensure certification meets international standards such as CertifHy) the robustness of the scheme must be unimpeachable.

I think the most interesting part of the review is the u-turn from the previous Morrison government’s stance, which mandated in 2021 that their own Climate Active standard would have required members to increase their “carbon neutrality” through a minimum of 20% or 30% ACCUs dependant on size. This reversal, to no such mandate, is showing the business community at least that an international certification is enough for this government. Not the strong climate stance that is being pitched from the floors of Canberra.

As with many of these papers I am finding little accountability and more future safeguarding. Especially around human-induced regen (noting that ends this year), carbon capture and storage and landfill waste gas, with no individual projects reviewed, the current standard of certification cannot be confirmed, yet it is likely to be significantly tightened if the advised transparency is enforced.

Overall, I can’t help feeling this was not more than a necessary boondoggle, yes some interest groups have had some wins, but it was necessary to achieve its end – it is going to undo a significant number of the controversial King review and Morrison Government changes.

Reversal however will come at a price, there will likely be a significant amount of funding put in place to reduce the both “real and perceived,” burden on both the CER and especially the Emissions Reduction Assurance Committee (ERAC). The latter of whom will be dis-banded and renamed the Carbon Abatement Integrity Committee (CAIC), moved out from the CER with full data access restored and with a remit which, if enacted within 6 months, could see them as an Independent Statutory Authority, a level the ERAC currently hold but are handcuffed from enacting upon.

Personally, I think any changes which bring transparency to this market, its accreditations and oversight can only be positive. There is still the government tender for an ACCU exchange to be developed which would further assist this transparency, but I also fear it has stopped short of really making the Carbon Market in Australia un-penetrable.

With Climate Active still supporting accreditations from Certified Emissions Reductions (CERs), Verified Carbon Units (VCUs) amongst others and an increasing number of lesser regulated Carbon Neutral certificated (iRECs etc) being used for Carbon Neutral Claims, I think this review could have used its opportunity to ensure the Australian Carbon Neutrality Certification would be seen as a world leader. Instead, I fear it is trying not to shake an already leaking boat, with pressure for ACCUs likely to increase with Safeguard changes and the HIR methodology ending in 2023, as well as the new “REGO” scheme being touted as “voluntary surrender only” with no regard for the impact to the LGCs market. Another knee jerk could have put too much price pressure on a market which is not only opaque but likely to come under significant demand, and that is before the increased scrutiny once data is widely available.

No, the Chubb review has done its job, it has unwound a lot of the misgivings people had. It should increase transparency, a feat which has been loudly called for in this market since its inception 11 years ago and not ruffled too many feathers in the process. I guess I just hoped for more.

References: 1: https://www.dcceew.gov.au/climate-change/emissions-reduction/independent-review-accus

Kate Turner is Edge2020’s senior manager markets, analytics and sustainability. Through a passion that renewable energy solutions are key to any climate change solution, Kate supports our clients to manage their portfolios and any associated risk within traditional markets as well as complex renewable energy portfolios. Kate is hands on in procurement development and implementation for our clients and leads our market regulatory and advisory sustainability services. If your business is interested in wholesale or retail renewable PPAs we’d love to help you. Contact us on: 1800 334 336 or email: info@edge2020.com.au

Green hydrogen

Green hydrogen

In the brightest day and the blackest night, no opportunity shall escape my sight.

Ok, bar the bad Green Lantern pun, Green Hydrogen is the superpower on everyone’s lips at the moment. From the USA releasing its draft National Clean Hydrogen Strategy and Roadmap a few weeks ago, to the announced changes in the Hydrogen regulation in Europe, even Queensland has jumped on the press release bandwagon, announcing it as a cornerstone within its new Jobs and Energy Plan.

But what is this superpower? How can it help and what does it really do?

Well let’s start at the beginning, what is Green Hydrogen, why is it different to Grey or Blue Hydrogen and why is that important?

Green Hydrogen is produced by electrolysis, by splitting water into its base elements of Hydrogen and Oxygen. The reason it is Green is this process is done using renewable energy. The most preferred approach is to have this PPA (green energy) onsite and therefore Behind the Meter, however it is equally classified, at the moment, from other sources, with both the PPA and electrolyser being grid connected. Noting that there are additional costs if this is not co-located BTM generation as Network costs come into play.

The differential between this and Grey and Blue Hydrogen isn’t the process, but the fuel used to power the electrolysis. Grey Hydrogen comes from Natural Gas and Blue is from Gas but that is coupled with Carbon Capture and Storage (a technology which has been the silver bullet since I was at Uni and despite millions being pumped into the technology remains uneconomic and therefore unused).

Why is this important – well to truly move towards a clean energy future, and for Hydrogen to play a large part in that, the technology used to create the hydrogen must be green, otherwise the end product (the hydrogen) is just an energy transition of the non-renewable source which was used to create it. This is why the Europeans (CertifHy) amongst others, will only allow Green Hydrogen certification from real PPA sources, not greenwashed with carbon credits, and certainly not from any other forms of electricity.

So how can the green hydrogen transform our supply? Well ignoring other uses of the fuel and export at the moment, transportation being a key area which could benefit as their fuel is hard to abate without a viable alternative as well as Ammonia and Methanol production. There is the obvious use if the fuel can be used for power supply.

This is moving closer with the planned Tallawarra B 200MW dual fuel power station (natural gas and green Hydrogen) due online in the summer of 2023/ 24. If this technology can be proven, this will be a huge source of clean energy which can be used for grid stability and baseload generation, it could also remove any bumps from the transition away from coal.

To give a sense of scale though 1KG of hydrogen is equivalent to about 33.3KWh of electricity. Last year the NEM supplied around 204TWh of electricity, so we would require around 6.2million tonnes (or 6.2billion KG) of Hydrogen to power the NEM.

Now the part to blow your noodle, to produce that 1Kg of Hydrogen we need to put into the electrolyser around 50KWh of electricity (taking a 67% efficiency rate for an Alkaline or PEM electrolyser, noting Solid Oxide electrolysers can have higher efficiencies.) Using this 67% efficiency rate we need to put in 310TWh of electricity to be able to produce the 240TWh required for the NEM. This is without factoring that Hydrogen which can be used for transportation and that which will be exported (with Japan underpinning many domestic projects how much will be available in Australia initially? But I said I wouldn’t be diverted to this today!).

This means the Hydrogen power industry alone has the capability to more than double the capacity requirements of the NEM. However, this requirement and thirst for power could be its real secret superpower.

Network constraints are the words every solar and wind operator hates, the renewable energy is being produced but either cannot be transported to the load centres or cannot be used in the local distribution zone and as such is wasted. Although the Hydrogen industry may not be able to use all this excess volume, especially in the near term, it certainly can absorb a large amount of it. Thus, reducing curtailment and increasing the renewable penetration to the grid.

But that isn’t its only superpower to assist with the balance of the grid, cast your mind back to this winter with curtailment being requested from every corner of the NEM. Rather than being the off-taker, the electrolysers can provide demand side management. They will naturally be programmed to react to the price and renewable energy generation signals anyway to be efficient. Therefore, turning up and down at these strained periods without needing market intervention will be a benefit we have not previously been able to tap into.

Hydrogen certainly looks to be the silver bullet this industry has been craving, and no one wants to be left behind when this train leaves the station. However, with so much in theory and nothing as yet proven to scale, we all hope that it doesn’t turn out to be the Aquaman of the superhero world.

Edge2020 provides energy management and advisory services to buyers and sellers of physical and financial energy products. We specialise in electricity, gas, renewable, environmental, and carbon products. Edge2020 can help ensure you achieve your business sustainability goals by supporting you with strategies that focus on minimising consumption and responsible purchasing of renewable energy. Reach out to our passionate team for support to improve your sustainability outcomes – email: info@edge2020.com.au