New South Wales is set to bear the brunt of reliability risks in Australia’s biggest electricity network as mass coal-fired power exits hit before sufficient replacement capacity can be built, the system operator has warned.
Key points:
- AEMO warns of power “gaps” hitting NSW from 2025 and all states from 2027
- The system operator says urgent investment is needed in new generation, transmission and storage
- The call comes amid a forecast mass exodus of coal-fired power over the coming decade
The Australian Energy Market Operator said that while the overall forecast security of the national electricity market had improved since August, there had been a deterioration in the country’s most populous state.
Driving the slip were delays to a new gas-fired power plant being built by the federal government at Kurri Kurri, near Newcastle, along with the planned closure of Australia’s biggest generator – the coal-fired Eraring – in 2025.
The assessment was contained in an AEMO planning blueprint from August that was updated to account for “material changes” affecting the expected supply of electricity over the next 10 years.
AEMO’s boss, Daniel Westerman, used the findings to reiterate calls for the urgent development of new generation, transmission and “long-duration” storage to replace the coal leaving the system.
Supply ‘gaps’ emerge from 2025
The call came as network provider Transgrid revealed a high-voltage power line between NSW and Victoria had been fast-tracked by the Andrews government to ensure more renewable energy could be hooked up to the grid.
In a statement, Transgrid said it had received a ministerial order for the 500kV VNI West project to help accelerate its development for 2031.
“Transgrid is accelerating the energy transition by delivering these major projects — enabling the integration of renewable generation — delivering cheaper, cleaner and secure electricity to millions of Australians,” Transgrid boss Brett Redman said.
Mr Westerman said that even though the outlook had improved slightly over the past six months, the fundamental challenge of keeping the system stable during the transition away from fossil fuels remained daunting.
“Urgent and ongoing investment in renewable energy, long-duration storage and transmission is needed to reliably meet demand from Australian homes and businesses,” Mr Westerman said.
“Reliability gaps begin to emerge against the Interim Reliability Measure from 2025 onwards.
“These gaps widen until all mainland states in the NEM are forecast to breach the reliability standard from 2027 onwards, with at least five coal power stations totalling approximately 13 per cent of the NEM’s total capacity expected to retire.”
Helping the supply outlook, AEMO noted, was the decision by Origin Energy to defer the closure of its Osborne gas-fired power plant by three years to 2026, along with the commitment of a new gas plant – both in South Australia.
‘Firm’ generation the key: AEMO
On top of this, AEMO said it was also now counting on a raft of new green energy projects, including the Waratah Super Battery in NSW and more than 1,300MW of wind farms.
Despite this, the agency warned that the longer term picture looked less secure courtesy of delays to critical new generation and storage capacity – notably Snowy 2.0 and the Kurri Kurri gas plant.
By contrast, it said major chunks of coal- and gas-fired power were almost certain to leave the system over the forecast period, heightening the need to build the new kit.
Mr Westerman said there was a “strong pipeline” of projects, mostly made up of wind and batteries.
However, AEMO noted that less than five per cent of the capacity in the project pipeline – or just 10 gigawatts out of 209GW – had been committed by developers.
What’s more, Mr Westerman said the need for “firm” generation that could be called on at will to back up intermittent wind and solar power was more pressing than ever.
“Investment in firming generation, such as pumped hydro, gas and long-duration batteries, is critical to complement our growing fleet of weather-dependent renewable generation to meet electricity demand without coal generation,” Mr Westerman said.
Think tank calls out ‘mismatch’
The release of the updated forecast coincided with research from think tank the Australia Institute showing a big plunge in renewable energy investment.
According to the Australia Institute, the value of green energy projects started has fallen from $8 billion in 2018 to $4 billion a year since.
At the same time, the group said there had been a surge in the number of projects being registered for carbon credits under the Commonwealth’s scheme.
It noted that from a low of 39 in 2019, the number of projects registered to produce Australian Carbon Credit Units had soared to 385 last year and was on track to go even higher in 2023.
Polly Hemming, the institute’s climate and energy director, questioned the growing disconnect between “direct decarbonisation” and offsets.
“The federal government is now at the policy crossroads between investment in renewables and genuine decarbonisation, or the previous government’s creative accounting tricks,” she said.
“Currently Australia has no policies that drive investment into real decarbonisation projects.
“Policies like the renewable energy target drive permanent decarbonisation in industry, while offset purchases simply allow polluters to delay this change.”
