Independent Review into the Future Security of the National

Independent Review into the Future Security of the National

SUBMISSION TO THE
Independent Review into the Future
Security of the National Electricity Market
MARCH 2017
AUSTRALIAN ACADEMY OF
TECHNOLOGY AND ENGINEERING
Executive Summary
Many of the challenges to energy security and affordability have been caused by a changing
technology landscape in the National Electricity Market (NEM). A diverse mix of proven and emerging
technologies is available to help address these challenges. Australia needs a reformed electricity
market that encourages planning for the long term needs of all consumers large and small, does not
inhibit new technology solutions, and fully accounts for the environmental impact of electricity
generation.
Key recommendations of this submission include:

Providing technologically neutral, market based mechanisms to reduce emissions and
maintain system security at least cost. The electricity market must value energy security and
reliability while, at the same time, fully accounting for the emissions produced by electricity
generation. This will require market mechanisms to drive investment in dispatchable generation
and the provision of essential system requirements, such as capacity or system inertia markets. It
is also important to ensure that there are no barriers for new entrants, new technologies and new
forms of services into the market.

Establishing a stable and unified national climate-change and energy policy based on
independent, expert science, technology and engineering advice. Policy uncertainty remains the
most significant barrier to investment in the NEM. Clear, long-term bipartisan policy settings are
essential to ensure the investments required for transition to a secure, equitable and low emission
electricity sector.

Establishing a body of independent experts to provide advice and guidance to optimise the
transition of the NEM and address whole-of-system (generation (including emissions),
transmission, distribution and demand) integration and transition challenges at a national level.
Providing open access to NEM system data and models to technical experts and researchers will
assist in improving transparency in the market.

Embracing technologies for energy generation, transmission, distribution and storage that
stand on their cost competitiveness, their contribution to system security and reliability,
and their environmental and health impacts, including life-cycle greenhouse gas emission
levels.
Responses to the report’s key questions
How do we ensure the NEM can take advantage of new technologies and business models?
ATSE strongly believes that technology choice should be neutral and governed by the market. That is,
policy and regulatory settings for the NEM should seek to incentivise the development and
implementation of technologies and services that can provide balanced solutions to the energy
st
trilemma (see Figure 11), where Australia is currently ranked 31 globally in the World Energy
Council’s index2.
Figure 1 – Balancing the energy trilemma (Image Credit: World Energy Council1)
It is clear that under technology-specific policies Australians and Australian businesses have already
decisively invested in new generation technologies (principally renewables) and new business models
are emerging (e.g. demand and distributed generation aggregators).
However, the application of technology-neutral policies would allow the NEM to meet the needs of
Australia’s electricity customers by taking advantage of new or existing technology at a price
determined by the market. This approach does not preclude market-based incentives, but requires
them to be applied across all technologies. Implementing market-based mechanisms that address
security, affordability and sustainability will lead to an optimised mix of electricity generation sources.
ATSE also believes that there are opportunities to enable innovation and efficiencies by enabling open
access to NEM system data and the Australian Energy Market Operator’s (AEMO) models, except
where privacy or security issues prevent their release. This would allow technical experts and
researchers to undertake research into NEM power system security issues and lower cost solutions,
including economic analyses of technology options. Additionally, the Clean Energy Finance
1 Image credit: World Energy Council 2015, [available at https://www.worldenergy.org/wp-content/uploads/2015/11/Trilemma-what-is-the-energytrilemma.jpg, last accessed 19 February 2017]
2 World Energy Council 2016, Energy Trilemma Index, [available at https://trilemma.worldenergy.org, last accessed 19 February 2017]
2
Corporation should not be restricted from financing the development and deployment of particular low
emissions technologies.
How do we ensure the NEM meets the needs of all consumers, including residential, largescale industrial and vulnerable consumers?
The implementation of well-designed market based mechanisms to address the energy trilemma for
the diversity of energy consumers in the NEM is essential to maximise system security and minimise
energy costs while transitioning to low emissions.
It is also essential that policy design considers the consequences of decisions on all Australians and
Australian businesses. Access and affordability should always remain a prime goal of NEM
governance, regulation and policy settings.
Tariff reform is an important issue that will need to be addressed in the future. Progressive tariff
structures that take into account the vulnerability of individual households may need to be introduced,
as electricity cost increases place a disproportionate impact on the most financially vulnerable
customers. This will also apply to equitably sharing fixed costs in the grid, where the predicted further
rise of distributed generation may lead to network costs falling disproportionally on less wealthy
consumers. Equitable access to storage and aggregation technologies could help to address this.
Government policies and subsidies must be carefully designed to ensure that they are not regressive.
Economically well-off Australians should not benefit from consumer subsidies, especially if the full cost
of those subsidies is paid for by all consumers.
What role should the electricity sector play in meeting Australia’s emissions reduction targets?
The electricity sector is Australia’s largest emitter of greenhouse gases. As such, it has a large
responsibility in meeting Australia’s greenhouse gas emission targets and COP21 commitments. The
NEM should be designed to enable Australia to meet these targets.
While not the only policy route available, a technology-neutral, market based mechanism, such as a
carbon price or an emissions intensity scheme, is essential to drive least cost decarbonisation of the
sector. The National Electricity Objective (NEO) should be amended to reflect Australia’s emissions
reduction commitments.
It is worth noting that greenhouse gases are not the only emissions from power generation that need
to be considered. ATSE’s 2009 report The Hidden Costs of Electricity3 explored the externalised costs
of environmental and health impacts from power generation in great detail.
What are the barriers to investment in the electricity sector?
Policy uncertainty is a key barrier to investment in the electricity sector. At all scales – residential rooftop solar photo-voltaic (PV) systems, large-scale storage, utility-scale power plants, demand and
distributed generation aggregators – investors making decisions on assets and business models with
3 Biegler 2009, THE HIDDEN COSTS OF ELECTRICITY: Externalities of Power Generation in Australia [available at
http://www.atse.org.au/Documents/reports/the-hidden-costs-of-electricity.pdf ]
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10-40 year lifetimes need confidence that policy and regulatory certainty will match investment
lifetimes. This will be increasingly important as the rapid rate of technological change will reduce the
payback period needed for new generation investments.
There must be both short and long-term consistency and certainty in the policy pathway for and
regulations of the NEM, from all levels of government, to encourage investment. The policy pathway
must balance the key apexes of the energy trilemma: security, equity and sustainability.
What immediate actions can we take to reduce risks to grid security and reliability?
The immediate grid security and reliability issues in the NEM evidenced in South Australia in 2016
appear to have already been addressed by changes to the ride-through settings for the state’s wind
farms. The load-shedding that occurred there on 8 February 2017 appears to have been caused by
lower-than-forecast wind generation, insufficient gas-fired generation bid into the market, and demand
that was much higher than predicted. If the Pelican Point gas-fired power station had been online, it is
likely that the load shedding could have been avoided.
The extreme weather events that triggered these incidents highlight that AEMO needs to operate the
system more prudently during extreme weather events. Necessary changes may involve tightening the
rules/actions taken under adverse conditions, better forecasting of variable wind and solar resources,
and a review of what constitutes a contingent and non-contingent event.
High levels of variable renewable energy (VRE) resources in the NEM energy mix present increased
grid security and reliability risks. There are many technologies that can manage and mitigate these
risks4, so technology-neutral and financially rewarding market mechanisms to encourage the least
cost provision of Frequency Control and Ancillary Services (FCAS), inertia, and system strengthening
are necessary.
Development of optimised mechanisms may be best informed by a nationally coordinated, systemwide and independent technical review to assess and evaluate the changing demand-supply balances
in the NEM; overall NEM system management; system synchronous inertia adequacy; dispatchable,
fast response, electrical energy storage capability; high voltage transmission and distribution
capability; and the adequacy of system ancillary services.
Recent announcements in Queensland indicate that some 1000 MW of large-scale renewables
(mostly solar PV) are approaching financial close for construction in north Queensland. Queensland is
closely following in South Australia’s footsteps with rapid development of renewables, putting pressure
on existing coal generating plant. There is a risk that southern Queensland could, in the next 5-10
years, have similar characteristics to South Australia, with a north Queensland generating hub
transmitting power over a long, thin transmission system.
Meshing the NEM network around SA – VIC – NSW – QLD – SA would strengthen the interconnected
grid. ATSE believes there is significant value to be created from a detailed investigation by AEMO into
the business case for a Queensland-to-South Australia interconnect that traverses a strategic route
through central Australia. This interconnect would enable development of Australia’s best renewables
4 The combination of existing coal-fired power plants and gas-fired OCGT generation has been utilised to date to manage supply security in the
NEM. If gas-fired generation is to continue as a prime mitigation mechanism for VRE sources then scale-up of supply of affordable gas supplies
in eastern Australia is required from conventional and unconventional resources [see, for example, Cook, P, Beck, V, Brereton, D, Clark, R,
Fisher, B, Kentish, S, Toomey, J and Williams, J (2013). Engineering energy: unconventional gas production. Report for the Australian Council
of Learned Academies, www.acola.org.au].
However, modelling by ATSE Fellows, Prof Simon Bartlett and Prof Andrew Blakers, suggests that a combination of HVDC transmission
interconnectors and pumped hydro storage would currently provide the lowest cost option for improved grid security & reliability under high VRE
penetrations. [References available on request]
4
and low-emission resources along the route (high insolation PV; potential geothermal energy; potential
concentrated solar thermal; undeveloped and substantial gas resources; wind power; and potential
pumped hydro resources around the Flinders Ranges). Land usage on this route is compatible with
innovative transmission line designs, which offer significant savings over traditional lines. Ecological
impacts could be minimised by following existing gas pipeline routes and tracks.
Is there a role for technologies at consumers’ premises in improving energy security and
reliability?
The structure of the NEM is in transition from a centralised system to a system with substantial
penetrations of distributed energy resources, often located behind the meter at consumers’ premises.
These technologies, which include solar PV systems, energy storage, smart control systems for
intelligent energy management, and technologies for enhanced energy productivity are expected to
play a role in improving energy security and reliability, reducing energy sector emissions, and reducing
customers’ bills.
Cost reductions in battery storage are accelerating this change and increasing the capacity factor of
these distributed systems. This should serve to increase the amount of renewable energy available at
peak demand periods such as the early evening while reducing the energy demand in the middle of
the day, given the same power capacity. By this mechanism, there will be an increasing role for
generation and storage technologies at consumers’ premises to smooth the diurnal demand curve.
Similarly, intelligent behind-the-meter systems will provide consumers with greater flexibility in
planning their use of energy throughout the day, depending on the known price. This will increase the
diversity of options for the consumer. Further, these intelligent, networked systems will improve the
ability of the network operators to manage supply to individuals or local areas. When combined with
local energy storage, this can enable network operators to remotely manage the available energy
supply and demand through price incentives or direct control agreements. There are companies in
Australia and overseas that offer technologies and services that help prosumers5 to manage their
power demand, self-generation and (increasingly) their storage capacity. As well as optimising the
prosumers’ energy management, some of these technologies have the ability to coordinate these
distributed energy resources to provide support to the electricity network by acting as a load or
generator in response to market signals. AGL’s virtual power plant trial in SA6 seeks to demonstrate
this capability in Australia. Later this year, Greensync is piloting a Decentralised Energy Exchange7
which aims “allow households and businesses generating renewable energy to access incentives and
reduce their demand on the grid by utilising technologies, like battery storage, during peak events.”
These developments have potential to improve energy security and reliability.
There is a need to have a greater understanding of the social, economic and environmental impacts of
high deployments of distributed energy resources. For example, there is potential for negative impacts
on consumers that are financially unable to take advantage of distributed energy generation and
5 “Active energy consumers, often called 'prosumers' because they both consume and produce electricity, could dramatically change the
electricity system. Various types of prosumers exist: residential prosumers who produce electricity at home – mainly through solar photovoltaic
panels on their rooftops, citizen-led energy cooperatives or housing associations, commercial prosumers whose main business activity is not
electricity production, and public institutions like schools or hospitals.”
European Parliament Think Tank 2016, Electricity "Prosumers", [available at
http://www.europarl.europa.eu/thinktank/en/document.html?reference=EPRS_BRI(2016)593518]
6 AGL 2016, AGL launches world’s largest solar virtual power plant battery demonstration to benefit customers [available at
https://www.agl.com.au/about-agl/media-centre/article-list/2016/august/agl-launches-world-largest-solar-virtual-power-plant]
7 GreenSync 2017, Arena & Greensync launch deX: a new renewable energy digital marketplace that will transform Australia’s energy industry
[available at https://www.greensync.com.au/arena-greensync-launch-dex-a-new-renewable-energy-digital-marketplace-that-will-transformaustralias-energy-industry/]
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storage at their residences. Market and policy designs should seek to avoid regressive crosssubsidies for distributed energy technologies at consumers’ premises.
However, it is worth noting that, while distributed technologies will play an increasingly important role
in the market, it is likely that the major role in dealing with system security and reliability will be played
by grid-scale solutions, which may include pumped hydro energy storage (PHES), large-scale
batteries, and increased interconnections.
What role is there for new planning and technical frameworks to complement current market
operations?
The Council of Australian Governments Energy Council (COAG-EC) was established in December
2013 to encourage a collaborative pursuit of national energy reforms and drive greater consistency
and coordination between Australian government energy policies. The Energy Policy Institute of
Australia has proposed that the COAG-EC’s decision-making processes be strengthened through the
formation of a National Energy Commission8. This Commission, which would comprise acknowledged
experts in both commercial and technical aspects of Australia’s energy supply, would report annually
to the nine participating governments on planning and market issues. ATSE supports the need for
greater independent expert advice and guidance to inform planning and policy developments, through
a Commission or similar body.
How can markets help support additional system security services?
The NEM is presently more a financial market than a commodity market. It is an energy-only, gross
pool market that invites strategic bidding by suppliers. It is open to use of market power and
manipulation by suppliers, and it exhibits poor price signalling for some services.
In the NEM, ancillary services markets have been established to provide Frequency Control, Network
Support & Control and System Restart services. Consideration should be given to the formation of a
capacity market and/or a system inertia market to supplement the current energy-only, gross pool
market. These markets would assist system security through valuing investment in capacity, network
services and network strength.
As an example, the UK has changed its market to be a net pool, capacity market where generators
can enter short and long term contracts outside the pool. This has made investment in dispatchable
generation more secure through long-term supply contracts. Similarly, the USA Pennsylvania–New
Jersey–Maryland (PJM) interconnect energy system has developed both a capacity market and an
ancillary services market (in addition to their energy only market) to facilitate investment in new
capacity and network services.
ATSE believes there are considerable benefits for the NEM and its customers in establishing a
capacity (or net-pool such as in the United Kingdom) market to facilitate long-term supply contracts
and thereby encourage major capital investment in dispatchable generation. Development of
optimised mechanisms for these markets may be best informed, in ATSE’s view, by a further,
independent review of the current NEM design by an expert body in the engineering and financial
details of such markets, such as a national energy commission.
8 Pritchard 2015, A Discussion Paper on Australian Energy Policy Formulation: The Implications of Climate Concerns, A Downturn in Energy
Demand and An Outmoded Process [available at
http://www.energypolicyinstitute.com.au/images/EPIA_EWP_Discussion_Paper_May_2015.pdf]
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How can we improve the supply of gas for electricity generation to contribute to reliability and
security?
Gas is expected to play an important role in the NEM for some time however, in discussing long-term
grid stability and reliability, ATSE recommends that the Review avoids picking technologies or energy
sources and focus on technology neutral policies, taking into account the three elements of the
trilemma outlined above.
The social concerns around gas exploration and extraction (particularly unconventional gas resources)
has impacted on the political landscape in Australia and led to policies of prohibition in several states
and territories. ATSE has publically stated its opposition to blanket moratoriums on unconventional
gas extraction, in favour of nuanced, leading-practice regulation.
ATSE acknowledges that there is vigorous debate about the level of fugitive emissions associated with
the sector9. While more research into the issue of fugitive methane emissions from natural gas
extraction and transmission can always, and should, be conducted, ATSE notes that the Australian
Council of Learned Academies (ACOLA) produced a report in 2013 on unconventional gas that
investigated this topic in depth and concluded that “the GHG emissions associated with combustion of
natural gas to generate energy are greater than emissions occurring during production processing,
transport and distribution, and these in turn are greater than those emissions generated during the
flowback stage and the pre-production stage. Total lifecycle analysis (LCA) emissions have limited
sensitivity to very substantial differences in emissions at well completion”. In short, the evidence
suggested that emissions from unconventional gas activities do not vary significantly from
conventional gas activities10. In 2015, ATSE convened a conference and international workshop on
unconventional gas to examine the latest evidence available. Key findings from this workshop 11
regarding fugitive emissions included:
 Fugitive emissions must be considered in the context of a life-cycle assessment of greenhouse gas
emissions, with uncertain estimates of the amount of fugitive methane emitted to atmosphere from
well to final consumer;
 The majority of fugitive methane is emitted from just a few points in the production –transport chain
(‘super emitters’). These can be remediated through measures such as green completions and
application of leading practice; and
 Baseline studies and monitoring of methane emissions during production and post well closure
phases are important in order to remove uncertainties regarding the magnitude of these emissions.
Creating a market for system inertia services may encourage the use of gas generation for ancillary
services and make it more economically attractive. High-efficiency, low-emission Combined Cycle Gas
Turbine (CCGT) plants could contribute to system reliability and security, since they are dispatchable
high-inertia, synchronous generators. They also have about half the carbon dioxide-equivalent (CO2e)
emissions of current black coal generators per MWh. However the economics of operation of CCGT
plants depend significantly on fuel price.
9 Melbourne Energy Institute 2016, A review of current and future methane emissions from Australian unconventional oil and gas production,
[available at http://www.tai.org.au/sites/defualt/files/MEI%20Review%20of%20Methane%20Emissions%20-%2026%20October%202016.pdf,
accessed 20 February 2017]
10
Chapter 10 in Cook, P, Beck, V, Brereton, D, Clark, R, Fisher, B, Kentish, S, Toomey, J and Williams, J 2013, Engineering energy:
unconventional gas production. Report for the Australian Council of Learned Academies [available at
https://www.acola.org.au/PDF/SAF06FINAL/Final%20Report%20Engineering%20Energy%20June%202013.pdf]
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ATSE 2016, Workshop Communiqué: Unconventional Gas: Opportunities & Challenges [available at
https://www.atse.org.au/Documents/reports/atse-unconventional-gas-workshop-communique.pdf]
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How can we ensure that competitive retail markets are effective and consumers are paying no
more than necessary for electricity?
The transition to low carbon energy sources will not be without cost. However when considering the
cost of externalities12 such as greenhouse gas and pollutant emissions, ATSE believes that the cost of
not transitioning would be far greater. The additional cost to reach a high proportion of VRE critically
depends on how well the system is optimised as a whole. It is critical that planning addresses the
whole-of-system (from generation, transmission and distribution along with demand side) at the
national level.
To ensure that decarbonisation occurs at least cost and consumers pay no more for electricity than
necessary it is important to implement competitive markets and carefully consider and manage any
incentives provided to any component to the system. It is also important to ensure that there is no
barrier for new entrants, new technology and new forms of services into the market.
As higher levels of VRE are incorporated in the generation mix, some regulatory and market changes
suggested are:
 Reduce the Value of Lost Load to reduce pool price volatility and its contribution to high prices in
South Australia and Queensland and allocate the reduced revenue into a capacity market similar to
the PJM market in the United States,
 Develop a synchronous inertia market similar to the one being trialled at PJM,
 Amend the Regulatory Investment Test – Transmission (RIT-T) for interconnectors sufficient to
deliver benefits greater than costs (rather than maximise net benefits), and
 Consider allowing mixed regulated/non-regulated interconnector investments to achieve a
competitive market and reduce regulated charges.
What are the optimal governance structures to support system security, the integration of
energy and emissions reduction policy, and affordable electricity?
The present governance structure of AER, AEMC and AEMO will require increased flexibility to
accommodate the rapid changes occurring in networks and markets. The AER’s economic and legal
expertise should be balanced with technological expertise, to enable it to more fully incorporate
aspects of technological advances in its decision making. Similarly, the pace of the AEMC’s rule
change process needs to align with the pace of change in the energy markets. Investment in new
technology solutions should not be unduly delayed through regulatory processes that are unable to
reflect market developments.
The current planning process for future interconnectors needs to be focussed to maximise national
benefits rather than that for individual States. System and planning studies should include
independent expert researchers who have access to NEM network models and data. Independent
experts should also be added to AEMO Operations and Planning committees to maximise expertise
and foster innovation.
12
8
Biegler 2009, THE HIDDEN COSTS OF ELECTRICITY: Externalities of Power Generation in Australia [available at
http://www.atse.org.au/Documents/reports/the-hidden-costs-of-electricity.pdf ]
Chapter specific comments
Technology is transforming the electricity sector
Services and technologies are emerging that are having a major bearing on the operation, and
potentially the design, of energy markets in Australia and overseas. Moreover, these technologies and
service offerings are changing rapidly over time. Knowing the metrics for technology costs and their
learning curves and regularly incorporating these into an agreed analytical framework by an
independent economics body will enable consideration of the relative costs of generation systems at
all levels, and their incorporation into scenario planning by governments and market operators. ATSE
recommends that the Australian Energy Technology Assessment13 – last undertaken in 2013 – be
regularly updated to help inform system planning and government strategy.
Energy storage is becoming more important. For large-scale storage, pumped hydro is the most
economic option when favourable locations can be identified, and Australia has a number of existing
reservoirs and new projects that could deliver very substantial storage at reasonable costs. Battery
storage is an important technology for management of distributed energy generation from residential
to commercial/industrial prosumers. The network implications of this increasingly important
development will need to be addressed ahead of time (the Electricity Network Transformation
Roadmap that is being produced by Energy Networks Australia and CSIRO 14 is a good start), as will
the equity considerations of the vulnerable consumers who will be excluded from this market because
of wealth considerations.
Behind-the-meter services will expand and improve based on information and communication
technologies. This will provide residential customers with greater choices as to how they demand
electricity to minimise their overall cost and maximise its utility. Again, scenario planning must take
into account the rapid developments in this area, and the opportunities and challenges that they will
present.
Other innovative technologies likely to support electricity supply trilemma objectives include:
 Synthetic inertial systems for providing system inertia,
 Large scale energy storage, including pumped hydro energy storage (PHES) and grid-scale
batteries,
 Reversible, variable speed pump turbines (for flexible pumped hydro storage and generation
systems),
 High temperature superconductor (HTS) cables, HTS Fault Current Limiters and Synchronous
motors with HTS windings,
 High Voltage Direct Current (HVDC) transmission systems and associated converters such as
Voltage Sourced Converters (VSCs), and
 Guyed Cross-Rope HVDC transmission structures with lower cost than conventional designs.
13
14
9
Office of the Chief Economist 2013, Australian Energy Technology Assessment [available at https://www.industry.gov.au/Office-of-theChief-Economist/Publications/Pages/Australian-energy-technology-assessments.aspx].
ENA and CSIRO 2016, Electricity Network Transformation Roadmap: Key Concepts Report.
Europe and China are developing HVDC-VSC interconnectors to strengthen and stabilise their AC
power systems. HVDC-VSC is more controllable, extremely fast response and can black restart dead
power systems. These are characteristics that will be required for the NEM with greater penetration of
variable renewables. For example, an HVDC-VSC interconnector connected to the northern part of
South Australia would provide rapid power injections, regulation of frequency response and dynamic
reactive voltage support.
ATSE notes that the uptake of new technologies in power generation has been significant under past
and current Commonwealth, State and Territory government policies, and uptake is likely to increase
rapidly in storage and transmission sectors. Policy development has typically lagged behind
technology developments, which is why ATSE supports enhanced access to independent expert
advice for the COAG-EC. It is critical that the Review take a strategic, forward-looking and systemwide approach to NEM design and planning, to ensure the system is prepared for future technologies
and not just responding to historical changes. There is value in independent economic assessments of
each of these technologies to assist in design planning.
Managing the transformation
Since the electricity sector is the largest contributor to greenhouse gas emissions in Australia, it must
play a leading role in reducing these emissions.
Currently policy uncertainty is a major barrier to investment in the NEM. A price on emissions would
provide a clear market signal, provided it has bipartisan support and is guaranteed as a policy
instrument for the life of a large capital investment in energy generation.
In the absence of an emissions pricing regime, ATSE does not support the abolishment of the
Renewable Energy Target (RET) or the regional curtailment of deployment of VRE sources. This
submission has outlined solutions throughout that would enable existing and future VRE penetration
into the market while maintaining system reliability and security.
Further, the International Energy Agency (IEA) and the International Renewable Energy Agency
(IRENA) have published extensively in relation to the challenges associated with high penetration
levels of VRE into power networks. These reports are based on extensive research, modelling and
, , ,
analysis of case studies in multiple jurisdictions 15 16 17 18. These publications and the associated case
studies suggest that a well-managed transformation including re-optimised mix of dispatchable power
plants, an optimised strategy for managing grid infrastructure and flexibility in the form of demand side
response can deliver 45 per cent VRE at total system costs of ~$11/MWh. This total system cost can
increase to three times that figure when the transformation is poorly managed and un-optimised.
Most firms generating electricity factor a future CO2e price into their investment decisions. It therefore
seems clear that companies will favour technologies that have low emissions in order to avoid CO 2e
price risk. The same applies to risk avoidance by financial institutions that provide capital to energy
generating firms. New, long lifetime generation capacity in Australia that is subject to CO2e price risk19
is unlikely to attract private investment.
15
IEA 2008, Empowering Variable Renewables, Options for Flexible Electricity Systems. IEA Special report prepared for the 2008
Toyako G8 Summit.
16
IEA 2011, Harnessing Variable Renewables: a Guide to the Balancing Challenge. IEA Book, ISBN 978-92-64-11138-7
IEA 2014, The Power of Transformation – Wind, Sun and The Economics of Flexible Power Systems. IEA Book, ISBN: 978-92 64-
17
20803-2
18
IEA-ETSAP and IRENA 2015, Renewable Energy Integration in Power Grids, IEA-ETSAP and IRENA Technology Brief.
19 For example, high efficiency low emission (HELE) coal-fired ultra-supercritical plants and CCGT plants.
10
Nuclear power generation is a demonstrated zero emissions generation technology that supplies
dispatchable, synchronous power generation, which could enhance system security and support
greater deployment of renewable energy generation. The Uranium Mining, Processing and Nuclear
Energy Review20, and the South Australian Nuclear Fuel Cycle Royal Commission21 both found that
nuclear power remains a future energy option for Australia. ATSE recommends that this Review not
make any recommendations that would limit the future deployment of nuclear energy. However there
is currently no legal or political licence for nuclear development in Australia. Any development would
require broad community consent, significant political support from government, and would have a
significant lead time due to the legal, social, economic and technical barriers that would need to be
resolved. ATSE has previously discussed the potential role of nuclear energy generation in Australia
(including future technology developments), and outlined actions for the resolution of these
outstanding barriers in its 2014 Action Statement on nuclear energy22.
20 Commonwealth of Australia 2006, Uranium Mining, Processing and Nuclear Energy — Opportunities for Australia?, Report to the Prime
Minister by the Uranium Mining, Processing and Nuclear Energy Review Taskforce.
21 Nuclear Fuel Cycle Royal Commission 2016, Nuclear Fuel Cycle Royal Commission Report, Government of South Australia.
22 ATSE 2014, Nuclear energy is an option [available at https://www.atse.org.au/Documents/policy/nuclear-energy-is-an-option.pdf]
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Nomenclature
ATSE
Australian Academy of Technology and Engineering
AEMO
Australian Energy Market Operator
AER
Australian Energy Regulator
CO2e
Carbon dioxide-equivalent
COAG-EC
COAG Energy Council
CCGT
Combined Cycle Gas Turbine
FCAS
Frequency Control and Ancillary Services
HELE
High Efficiency Low Emission
HVDC
High Voltage Direct Current
IEA
International Energy Agency
IRENA
International Renewable Energy Agency
MW
Megawatt (Power rating)
MWh
Megawatt-hour (Energy capacity rating)
NEM
National Electricity Market
PV
Photovoltaic
RIT-T
Regulatory Investment Test – Transmission
RET
Renewable Energy Target
VRE
Variable Renewable Energy
VSC
Voltage Sourced Converter
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