By Jess Turnbull
Last month the Australian Energy Market Operator (AEMO) released its 2012 Electricity Statement Of Opportunities (ESOO), a forecast of electricity supply adequacy and corresponding investment trends over the next decade. The ESOO is an important planning document for the energy industry. Quite accessible, the ESOO is a mildly enjoyable read for both renewables enthusiasts and anyone who really enjoys acronyms (AWREA).
While the AEMO contemplated six different possible future energy market landscapes, the ESOO report is focused on the results of forecasts based on a scenario referred to as the ‘medium’ or ‘Planning’ scenario. This scenario incorporates the Treasury’s core scenario (of a graduating carbon price starting somewhere around $20), contemporary estimates of rates of technological development and assumes the continuation of other carbon related legislation, the most oft-mentioned of which is the ‘Large-scale Renewable Energy Target’ (LRET), implemented through the Renewable Energy Certificates (RECs) scheme.
The findings of the ESOO which made it in to the executive summary included the forecast decrease in national electricity demand growth. This slower growth will delay “Low Reserve Conditions” (when the minimum reliability standard of supply capacity exceeds maximum demand) by a four to seven years in VIC, SA & QLD. No low reserve conditions are forecast for NSW or Tas before 2021-22.
The report finds that there is continued investment in wind and peaking generation (non-base load generation that can be fired up at times of high demand), mostly gas turbines. Since last year, new 67MW and 53MW capacity windfarms have come online in VIC and SA respectively as well as a 566MW gas turbine in VIC.
While some new windfarms planned for VIC have been cancelled since last year (most likely due to controversial state government legislation), there are still 588MW worth of committed wind projects planned (across VIC and TAS) as well as 13 000MW and 11,000MW worth of publically announced (but not locked in) wind and gas proposals. I think this is just winderful.
The full ESOO report outlines the extraordinary uptake of rooftop solar in the past 3 years -a 13 fold increase in just 2 years. Predicted to provide 3.4% of national energy needs by 2021-2022, rooftop solar was identified as a contributing factor to the decrease in demand for commercial electricity. Rooftop solar installation in 2009 and 2010 is also responsible for the current surplus of RECs which have not yet been submitted by energy companies for counting towards their quotas. After these are all used up (probably around 2016), the ESOO forecasts that Australia will start to fall short of our Renewable Energy Target. With admirable positivity, the AEMO ESOO describes this as a ‘significant investment opportunity’. However, with the support of the Solar Flagship Program, bigger solar projects (such as the one contemplated in Mildura, VIC) will hopefully be able to contribute RECS to fill the gap after the rooftop solar surplus is used up.
While output from wind and biomass/waste generators are growing quickly (37% and 19% annually, respectively), hydro is still the leading renewable contributor to the national energy supply. However, the ESOO regional investment outlook mentions the predicted decrease in output from the Snowy River Hydro scheme set to affect VIC and NSW. While the reasons for this forecasted output decline were not given, the adverse consequences of drought (such as that occurred in 2007-2009) on hydro power output was noted in another part of the statement. Seemingly, hydro can’t be relied upon to compensate for the possible reduced generation capacity of coal power in dry conditions as it suffers a similar vulnerability.
In summary, the ESOO suggests that gas and renewables are developing quickly with lots of investment interest, partly due to government legislation such as the LRET. While we need not worry about the lights going out anytime soon, we should be concerned about falling short of our Renewable Energy Target (20% renewable energy by 2020).
