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Urgent investment needed for electricity reliability: AEMO

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Australian Energy Market Operator (AEMO), Media Release, 21 May 2024

AEMO has today published an update to the 2023 Electricity Statement of Opportunities (ESOO) report, the 10-year reliability outlook for the National Electricity Market (NEM).

The update was triggered due to material changes impacting reliability risks since the 2023 ESOO was published last August, including new commissioning dates for Project EnergyConnect, and mothballed gas and diesel generators in South Australia.

The addition of approximately 4.6 gigawatts (GW) of new generation and storage projects that have sufficiently advanced was also considered in this ESOO update.

AEMO CEO Daniel Westerman said the report’s findings again call for timely investment in projects to generate, store and share electricity to manage reliability risks driven by retiring coal plants.

“Australia’s energy transition is well underway,” Mr Westerman said.

“Industry and governments are responding to the reliability risks from retiring coal by investing in new infrastructure to ensure a reliable and secure electricity supply going forward.

“The urgency for the timely delivery of transmission, generation and storage, and use of consumer electricity resources to support the grid, remains to meet consumers’ energy needs,” he said.

Today’s report forecasts varying reliability gaps in all mainland regions of the NEM over the ESOO outlook period in the ESOO central scenario, which only considers existing, committed1 and anticipated projects.2

However, this assessment does not include federal or state government energy programs or approximately 280 GW of proposed generation and storage projects in the development pipeline, 4.5 times today’s NEM capacity.

Compared to the 2023 ESOO central scenario, reliability risks have increased in New South Wales and Victoria from 2024-25 to 2027-28 and increased in South Australia in 2026-27. Due to newly considered generation and storage developments, reliability risks are forecast lower than the 2023 ESOO central scenario towards the end of the horizon in all mainland regions.

“While new generation and storage capacity continues to increase, project development and commissioning delays are impacting reliability throughout the horizon,” Mr Westerman said.

“Reliability improves when considering actionable transmission projects3 – those listed to proceed as soon as possible in the Draft 2024 Integrated System Plan – and when forecast grid support from consumer energy resources are applied.

“Adding new generation and storage projects through federal and state government programs4 then shows that reliability risks have the potential to be managed within relevant standards over most of the next 10‑year horizon,” he said.

As a result of the reliability gaps forecast, AEMO will tender for Interim Reliability Reserves in New South Wales and Victoria to minimise reliability risks should low reserve conditions emerge over summer 2024-25.

For the first time, AEMO’s reliability report includes new information on generation and storage locations which have the potential to improve regional reliability risks.

With further transmission development, including VNI West and HumeLink, this analysis shows the locations in each mainland region that can provide the most reliability benefit through new generation and storage development.

The next ESOO will be published in August 2024 in accordance with the National Electricity Rules requirements, using further information from developers and market participant surveys, which feed into the Generation Information and Transmission Augmentation Information files.

1. Committed projects meet all five of AEMO’s commitment criteria (land, contracts, planning, finance and construction) but have not yet met the requirements of their first commissioning hold point.
2. Anticipated projects have made progress towards at least three of AEMO’s commitment criteria and have provided AEMO confirmation or update of project status in the last six months.
3. HumeLink, New England Renewable Energy Zone (REZ) Link Part 1, Hunter Transmission Project, Gladstone Grid Reinforcement, Victoria – New South Wales Interconnector West (VNI West), Marinus Link, and Queensland SuperGrid South.
4. Including the first stage tender of the Capacity Investment Scheme in South Australia and Victoria, Queensland Energy and Jobs Plan, New South Wales Infrastructure Investment Objectives (IIO) Report and the Victorian Renewable Energy Target Auction 2 scheme.

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