AEMO ISP Update: Insights and Ambition

Post by Bright New World’s resident Senior Advisor, Dr. Oscar Archer, looking at the Australian Energy Market Operator’s Integrated System Plan’s Insights Paper and the role of plans like this in a deep decarbonisation pathway.

In 2018 I examined the Integrated System Plan (ISP) from the Australian Energy Market Operator, and offered a number of criticisms while applauding the overall ambition and initiative in the face of an evolving electricity supply system.

An Insights paper was recently published which briefly examines three factors: pumped hydro storage, major new transmission, and the resilience benefits of expanded transmission. I’ll concentrate on the matter of storage here.

1. The Neutral Scenario

Previously, I proceeded with analysis based on the ISP Fast Scenario, it being the most ambitious for halting emissions from the National Electricity Market (NEM). The Insights paper settles on the Neutral Scenario which is forecast, by the beginning of the 2040s, to be dominated by solar and wind energy, partnered with energy storage capacity “at a scale not seen before in the NEM”, consisting on “deep” storage exemplified by Snowy 2.0 (2 gigawatts, 350 gigawatt hours), and smaller, “shallow” storage of 6 to 8 hour capacity which we know from the modelling assumptions (and Figure 3 in the paper) is also pumped hydro. The energy capacity can be appreciated in Figure 1, as can the fact that distributed battery storage is negligible.

Forecast NEM generation capacity.png

Storage-wise, the Insights paper modelling expects some 4.1 gigawatts (GW) of power capacity in 2030, and over fifteen after 2040. Minus Snowy 2.0 and the existing Tumut 3 facility (2 plus 1.5) leaves 0.6 GW. A footnote assigns this to a portion of the capacity of the Battery of the Nation initiative. Alternatively, the 0.25 GW Kidston K2-Hydro project will be online by then, having been proposed in 2015 with completion expected in 2022. The remaining 0.35 GW would seem achievable in the next 10 years.

The decade after that is expected to deliver at least a further 10.9 GW. Notwithstanding the Battery of the Nation and expanded transmission capacity, this will probably require more than twenty sites.

2. Persistent Fossil Fuels

The Neutral Scenario installed capacity, totalling some 120,000 megawatts, has grown since the 2018 ISP which was just over 110,000. While the only hint at why is subsequent stakeholder consultation, it doesn’t significantly impact this analysis.

Figure 2 illustrates a few modelled days on the NEM in winter in 2030, the “half way point”, starkly revealing the dominating and persistent role for coal generation. This isn’t surprising when the economic lifespans of the NEMs major coal-fired units are appreciated.

Winter NEM profile.png

Typical summer NEM generation would be important to see since daily solar generation dramatically increases in this season and the expected power capacity of NEM storage appears maxed out each day. The coal power stations are expected to operate more flexibly but, conversely, the deep storage is also assumed to minimise this tolerably. By analysing the modelled capacity and annual generation in 2029-30 under the Neutral Scenario, it appears NEM coal operates at an average 67% capacity factor. Along with natural gas, fossil fuel combustion supplies a total of 50% of annual demand.


3. Hypothetical Ambition for a Climate Emergency

In Figure 2 we can see an evolution of a nation-scale electricity supply system incorporating substantial intermittent generation sources – principally solar energy* - where the idea of serving a large base load with constant year-round output from conventional power stations is decreasingly relevant. These power stations instead ramp up and down, saving the marginal cost of fuel each day as solar (and wind) supply energy.

Recent work from researchers at MIT, published in Joule, has modelled grids in the US supplied by large proportions of solar, wind and storage, with and without conventional capacity, under a range of allowable greenhouse gas emissions limits.

Jenkins et al chart.png

The type of storage they considered was batteries, but the maximum duration happened to match the 6 hours assumed by AEMO.

The only other major difference was the inclusion of nuclear energy, in the “conventional” category. The modelling indicates that average costs of supply in both grids are kept from dramatically escalating when low-carbon firm capacity is included:

“In more than three-quarters of cases with emissions limits less than 10 gCO2/kWh, the least-cost resource mix includes at least one technology that operates in a flexible base mode. In higher carbon cases, combined-cycle natural gas plants operate as flexible base but emit too much CO2 to continue in this role at low emissions limits. The availability of a cost-effective low-carbon alternative to combined-cycle natural gas plants substantially reduces average electricity costs as the emissions limit approaches zero.”

The researchers also found that exclusion of this firm flexible base resulted in “outsized” capacity mixes, driven by oversizing of wind and solar capacity. This appears to be consistent with AEMO’s future mix in Figure 1.

A representative week from a modelled least-cost mix limited to 1 gram of carbon dioxide per kilowatt hour is shown here. For context, the NEM in 2018 was 710 gCO2e/kWh.

Jenkins et al graph.png

We now have a tantalising what-if. Australia is already a nuclear nation, with world class nuclear medicine and research capability. If Australia made the decision now, the process of regulatory preparation, engagement with the IAEA Integrated Nuclear Infrastructure Review service, and workforce development, along with competitive tendering, siting, and community engagement and the installation of the first unit(s) could conceivably be accomplished by the 2030s, consistent with a previous inquiry finding of 10 years at the earliest. Contentions that the process would take considerably longer than this were not accepted by South Australia’s Nuclear Fuel Cycle Royal Commission, which stated that they “reflect a business-as-usual approach and do not account for a targeted focus on achieving an outcome to address a recognised need.”

“In the event that fast and rapid action is required by Australia after 2030, nuclear power might play a useful role. This becomes particularly significant if the nation makes only modest progress in reducing emissions before 2030 and is required to commit to eliminating carbon emissions from electricity generation by 2050. In pursuing a policy of rapid decarbonisation, nuclear power might be a useful and significant contributor.”

Reducing that 50% of the NEM served by coal and gas from that point on would be the goal, so that the 24.3% still remaining in 2040 in the Neutral Scenario is instead 0%. Based on the annual coal capacity factor this would be anything from at least 9 GW of modern nuclear capacity operating as flexible base.


4. Deep Decarbonisation

The what-if described above is futile without first taking care of two things: the removal of Australia’s unjustifiable nuclear energy prohibition, and establishing a sensible capital cost estimate for new reactors. AEMO currently uses an absurd $16,000 per kW-installed based on a CSIRO estimate for a non-existent model not offered by any actual vendor.

Removing the first problem would unlock the door for real vendors to invest their valuable time in engaging with Australia, effectively solving the second problem.

Then the real work can finally begin.

Illustrative addition of SMRs to the NEM for deep decarbonisation, based on two completions per year after First-of-a-Kind build in 2032-33

Illustrative addition of SMRs to the NEM for deep decarbonisation, based on two completions per year after First-of-a-Kind build in 2032-33

Further information on this approach to technology-inclusive deep decarbonisation can be viewed here.

*The Neutral Scenario forecasts an additional 3 GW of wind (versus 15 GW of PV solar). As noted previously, this the ignores upcoming retirements of the NEM’s first windfarms.