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More gas needed to avoid AEMO predicted shortfall - Appea

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31st August 2023

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) - The Australian Petroleum Production and Exploration Association (Appea) said on Thursday there was an urgent need for more gas supply after the Australian Energy Market Operator (AEMO) said there was an "urgent and ongoing" need for investment to retain energy reliability in Australia.

In its '2023 Electricity Statement of Opportunities' (ESOO) report, the AEMO said the “ongoing availability” of energy sources such as gas “will be critical to the reliability” of the National Electricity Market (NEM).

“This year’s report highlights the pace of Australia’s energy transition and the urgency needed to deliver new investment to ensure reliable, affordable and cleaner energy for consumers,” AEMO CEO Daniel Westerman said.

“Over the 10-year outlook, we continue to forecast reliability gaps, which are mostly due to the expectation that 62% of today’s coal fleet will retire by 2033.

"To ensure Australian consumers continue to have access to reliable electricity supplies, it's critical that planned investments in transmission, generation and storage projects are urgently delivered,” he said.

In the next 10 years, electricity consumption and peak demand are predicted to grow owing to population growth and economic activity, but also the electrification (fuel switching) across all sectors of the economy, including transportation and residential heating and cooking.

Considering only existing, committed and anticipated projects as per the ESOO’s ‘central scenario’, reliability risks are forecast to exceed the relevant reliability standard in Victoria from this summer, in New South Wales from 2025/26, South Australia this summer and then again from 2028/29 and Queensland from 2029/30.

AEMO said that the reliability gaps identified through the ‘central scenario’ form an important part of the electricity planning process, as they provide the signal, and in some cases the obligation, for electricity retailers to contract sufficient capacity to provide for a reliable power system.

“While our central scenario shows increased reliability risk, it does not reflect the reliability potential from the 248 GW pipeline of proposed generation and storage projects, actionable transmission projects and government energy programs underway,” Westerman said.

"Federal and state government initiatives, including transmission projects identified in the Integrated System Plan, and mechanisms delivering firming capacity, such as the Commonwealth's Capacity Investment Scheme, can address many of the identified risks over most of the 10-year horizon, if delivered to schedule.

“There is also the opportunity for consumers’ rooftop solar, batteries and electric vehicles to actively participate in the power system, which would further reduce reliability risks,” he said.

Compared to last summer, around 3.4 GW of new generation and storage capacity is expected to be available this summer, which is forecast to be hotter than previous years, meaning electricity demand may be higher than observed in recent years.

“We’re expecting an elevated level of risk compared to recent years, mostly due to hotter and drier conditions, and coal-fired generation reliability is at historic lows,” Westerman said.

“The entire industry is focused on managing the risks in the summer ahead, particularly during high-demand periods coupled with generation outages and low renewable output, but some risk will remain.

“In the longer term, AEMO will continue to collaborate with industry and governments to deliver energy projects to maintain reliable and affordable electricity for all consumers,” he said.

Appea CEO Samantha McCulloch said the report underscored the critical need for new gas supply and gas generation capacity to ensure energy security as part of the net zero energy transformation.

“Gas is one of the main sources of electricity generation in Australia and is crucial to keeping the nation running,” McCulloch said.

“AEMO has highlighted that gas will play an increasingly important role in our electricity mix, as a reliable partner to renewables and as coal generation is phased out.

“Gas is the safety net we need as we transform our electricity system and governments must start listening to the repeated warnings from independent authorities of the need for new gas supply.”

AEMO estimates that over 1.5 GW of new gas power generation capacity is needed in New South Wales and Victoria by 2026/27 in order to meet current reliability standards.

The report singles out Victoria, with retiring coal generation and underinvestment in new gas supply putting pressure on the electricity system and contributing to a significantly increased risk of inadequate and unreliable electricity for Victorian homes and businesses compared to the 2022 ESOO report.

“The report shows how illogical Victoria’s new home gas connection ban is by pushing households on to an electricity grid that is already struggling to meet demand,” McCulloch said.

“Within a few years, Victoria will fail to meet minimum reliability standards set by AEMO, increasing the risk of rolling blackouts.”

Edited by Creamer Media Reporter

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