The Australian Energy Market Operator has downplayed fears of the lights going out after the fast-tracked closure of the country’s biggest coal generator in 2025, but says it does depend on the success of the NSW governement’s renewable infrastructure plan.
Origin Energy announced earlier this year that the 2.8GW Eraring coal plant would be closed in 2025, rather than 2032, sparking fears from the federal government, who were kept in the dark about the plans, that the lights would go out.
Not so, says AEMO, in a special update of its Electricity Statement of Opportunities, its annual assessment of what investments might be needed to maintain grid reliability and power supplies to consumers.
As usual, AEMO warned that if anticipated investments are not made, then there will be a problem, and the newly tightened reliability standards may be breached. But if they are made, and NSW delivers on its promises, then they won’t.
“If the pipeline of anticipated investments, as well as projects in the ISP and NSW Government’s energy roadmap, proceed to expected schedule, then forecast reliability outcomes in the NEM would meet or exceed the reliability standard in 2025-26,” says Merryn York, AEMO’s newly appointed head of system design.
These investments include the so-called Waratah Super battery, a 700MW/1400MWh network standby facility announced by the NSW Treasurer and energy minister Matt Kean immediately after the Eraring closure announcement, as well as batteries such as those proposed at Eraring and Liddell by their respective plant owners.
The conclusions are important because, at some stage in this federal election campaign, the issue of grid reliability will emerge.
One of the last acts of federal energy minster Angus Taylor was to introduce a new rule that would require coal companies to give five years notice, rather than three and a half years in the case of Origin, of any coal plant closures.
The move is seen as a stubborn retaliation by a minister humiliated by his exclusion from the Eraring coal closure talks. Even coal operators say it will change nothing without a broader, coherent transition plan. And none currently exists, except those of individual states.
The question around any coal closure is now dependent on ensuring enough capacity can be built beforehand, a tricky balance given that new renewables and storage capacity risks accelerating any closures.
It was the fundamental pitch of billionaire Mike Cannon Brookes in his joint bid for AGL, and ironically also the position of AGL. It’s just that two disagreed on how quickly enough capacity could be built.
That remain the big question for the industry. There is no shortage of projects in the pipeline, and AEMO’s databank documents 138GW of them, and NSW has been overwhelmed with more than $100 billion of project proposals for its first four renewable energy zones.
But as York points out, the wind and solar farms have to be not just built, they have to be connected with transmission and supported by storage. Transmission is becoming increasingly important to transport power from one region to another.
“Anticipated projects, including 1,700 MW of grid-scale wind and solar generation, along with transmission developments, improve forecast USE (unserved energy) in NSW to within the reliability standard in 2025-26,” she noted.
Transmission projects were key because they would increase the ability to transfer power from regions into the Sydney, Newcastle and Wollongong area. Additional generation and storage investments without further transmission investment would have limited impact.
“NSW’s reliability will further improve following the completion of the Sydney Ring (July 2027) and HumeLink (2026) transmission projects, which allows more southern NSW generation capacity, such as Snowy 2.0, to reach Sydney, Newcastle and Wollongong during times of supply scarcity,” York said.
Kean’s long term plan is build at least 12GW of wind, solar and storage by 2030 because he knows that four of the five remaining coal generators are likely to close within a decade, possibly all of them. And he is now fast-tracking the process to get the REZs built.
He won’t have a shortfall of projects. The REZ process has already attracted up to ten times more capacity than needed for each zone, and there are moves to increase capacity by improving transmission proposals.
One of the things he has announced after the Eraring closure is the new Waratah super battery, which will be located on the central coast.
AEMO says if this Waratah battery is built as expected, another 880MW of two hour storage could be needed, which might be met by the 500MW battery announced by AGL at Liddell, or the 700MW battery by Origin at Eraring itself.
Another alternative would be the addition of 2,000MW of wind capacity available to the major load centres on the east coast at times of peak demand.
It warns, though, that any delay in the NSW renewable infrastructure plans that focus on long duration storage would require an additional 90 MW of 4-hour storage depth, or 130 MW of 2-hour storage depth, or approximately 360 MW of wind generation that is accessible to the Sydney-Newcastle-Wollongong area during peak events.
AEMO says it will conduct a more detailed assessment in the next ESOO to be released in August. It warns that if the announced projects, like the Waratah battery, and the transmission projects, do not move forward to “committed status”, then it could take further action.
“Unless sufficient new generation or transmission capacity reaches the criteria to be considered committed ahead of the 2022 ESOO publication, AEMO will be required to raise a T-3 reliability instrument at that time,” it notes.
It also notes that in Queensland, South Australia and Victoria, reliability is forecast to improve with anticipated generation and storage and the availability of inter-regional support.
But it also notes, as per its previous assessment, that without further investment, Victorian USE is forecast to be above or close to the reliability standard from 2028-29 after the retirement of Yallourn Power Station.
Victoria, however, has put in place plans for another renewable energy auction, the creation of several REZs of its own, and placed a target that will see the first offshore wind energy delivered by 2028.
