With the NSW government’s announcement of its Electricity Infrastructure Roadmap, all NEM states have committed to a headlong charge towards their respective renewable targets by 2030. Just a quick recap:
- Victoria and Queensland have committed to a 50% renewable generation target (incl. grid and distributed).
- Tasmania will produce 150% green energy relative to its demand (an interim step to its 200% target in 2040).
- NSW will build 12 GW renewable capacity, in addition to projects that have already been committed.
- South Australia will deliver a near-100% renewable generation mix, although its 2030 target is unclear.
However, it is unclear if the states have consulted with each other on the overall impact of their individual policies.
This week’s ‘Chart of the week’ looks at the impact of the states’ targets on the overall NEM’s demand-supply profile. We start with the time-of-day average generation profile in 2020; add the extra renewable needed for the states’ 2030 targets; but also subtract coal and gas that are projected to retire based on AEMO’s data. To illustrate the challenges as well as opportunities, we have kept the average shape for each fuel type constant. This includes not speculating on the arbitrage impact of additional storage, which will undoubtedly play a crucial role in the future energy mix. Finally, the future demand pattern, based on AEMO’s central forecast for 2030, is illustrated by the red traces.
The starkest pattern is that every region has more supply than demand during mid-day as solar output reaches its peak. Summing across the NEM, there is nearly 12 GW excess generation waiting to go somewhere in the middle of an average day, but additional interconnectors are of no help if all regions are trying to export. So, other than sticking it into the ground, what else could be done?
Firstly, the excess supply can be transported across time by storage. However, the sheer 12 GW excess output dwarves the 2 GW snowy 2.0 and a few GWs of other storage planned by the government and the industry.
They could also push out coal and gas. It is now widely agreed that the exit of thermal plants will be faster than initially expected, as evidenced by Yallourn’s recent closure announcement (already captured in the chart). The survivors will also have to find different operating patterns. This could cause some challenges for grid security during the transition and the Energy Security Board is looking for a solution in its post 2025 market design package.
Finally, states can try to plan things better by taking a more holistic, NEM-wide view together. There could be less grid solar but more wind, as the former would inevitably compete with rooftop PV for limited mid-day demand, and the latter’s flatter shape might be a better substitute for retired base load plant. Or maybe states can utilise their comparative advantage better. For example, rather than focusing on generating more green energy within their borders, states with better pumped hydro resources could build more of those, which could help manage not just their own, but their neighbours’ excess energy as well. This in turn might support more renewable generation across the whole NEM (maybe even without increasing the total cost). Interestingly, this sounds more and more like the original design objective of the NEM, which is to promote long-term consumer interests through better trade and coordination.