The rapid transition of Australia’s energy system to wind, solar and storage is a profound challenge, necessary for future prosperity.
The energy transition now underway is a generational technology change setting a path to the future. Policy settings and actions taken today are critical to the success of Australia’s future energy system and economy.
Today’s National Electricity Market (NEM) is characterised by large centralized coal generators unable to turn off on sunny days and quickly ramp to meet the evening peak load. This causes large day to day and time of day price volatility in the NEM, driven by abundance of solar energy in the middle of the day and scarcity in evening peaks.
As coal generators progressively close over the next decade, NEM system security will shift to energy storage in batteries and pumped hydro to absorb excess solar and meet nighttime peak demand. The NEM also needs to transform from a peaking market where peak or scarcity prices may be 100x regular evening peak prices, into a time-shift market requiring very large daily energy (MWh) transfers. If insufficient energy storage capacity is built, frequent weather dependent time-of-day energy scarcity will cause large increases in consumer energy prices.
The 10-year outlook from the Australian Energy Market Operator (AEMO) warns timely development is needed for a reliable post-coal electricity system, with consumption tipped to boom amid business electrification, a greater industrial load and the rapid expansion of data centres.
