AEMO CEO speech at CEDA Rewiring the Nation: Transmission – the vital link to net zero

4 min

Let me first acknowledge the traditional custodians of this land, the Gadigal people of the Eora nation.

I’d like to acknowledge their continuing connection to country and pay my respects to elders past, present and emerging, and to all First Nations people with us today.

I would like to thank CEDA for the opportunity to speak today and thank Minister Bowen for his remarks today.

As Australia moves rapidly away from its traditional dependency on coal generation, our energy future will be built on four pillars:

  • Low-cost renewable energy like solar, wind and hydro
  • Firming technology to smooth out the peaks and troughs, like batteries, pumped hydro, and gas generation
  • New transmission and modernised distribution networks to connect consumers to those new sources of energy; and
  • Power systems capable of running, at times, entirely on renewable energy.

Today I will focus on the third point, to explore what Australia will look like in the future, based on the choices we – as modern Australian society – make around transmission development.

Transmission wires strung between towers may lack the glamour of smart phones, electric cars and other modern miracles, but they are fundamental to solving one of Australia’s greatest modern-day challenges: the transition of our energy system to enable a net-zero economy.

Because achieving net-zero by 2050, the target of all Australian governments, needs a net-zero electricity grid as the first step to get there.

And there is measurable progress: the share of renewable generation in the National Electricity Market is hitting new highs, on average at 37% in Q1, peaking at 66% for a half-hour dispatch period, while greenhouse emissions for the first quarter of this year from the grid were at their lowest ever recorded.

But things could have gone even further.

AEMO’s latest market insights report shows how new transmission is needed to increase the flow of renewably generated electrons into the grid. And this need will continue to grow.

From our control room we can see that increasing amounts of solar and wind generation are being curtailed because there’s not enough transmission capacity to transport it.

Curtailment of renewable generation has grown by almost 40% from a year ago…mainly in Victoria and NSW, but also in parts of Queensland.

And the transmission links that run between states are maxing out.

From January to March, the links from Victoria to NSW and Tasmania were at their limits for 42% and 57% of the time respectively. And during those hours when the sun is producing free electrons, the links were binding for two-thirds of the time to NSW, and over 80% of the time to Tasmania.

In other words, parts of our energy highway are at gridlock.

As our coal-fired power stations retire, the replacement is firmed renewable energy.

And our operational insights confirm the early stages of why investment in several transmission projects are needed to connect these lowest cost electrons to Australian homes and businesses.

For Q1 this year, growing renewable output meant that wholesale prices in the National Electricity Market were negative or zero for 12% of the time.

But to be more specific, between 9.00 am and 5.00 pm, when the sun is shining on our solar panels in Victoria and South Australia, wholesale electricity prices were negative in those states for 50-60% of the time.

What we need is strategically located and economically justified transmission, to carry these low-cost, low-carbon electrons.

But how and where – since we know that any build of new transmission will take time, cost money, and undoubtably cause a level of disruption.

AEMO’s Integrated System Plan is a 30-year optimal development path – including transmission – for the National Electricity Market.

While it has our logo on it, it is a work of extensive collaboration – indeed co-design – between AEMO and hundreds of energy stakeholders.

The 2022 Plan is based on rigorous economic and engineering analysis, and almost two years’ in-depth engagement with over 1500 stakeholders including energy consumers, companies, state and federal governments, and energy regulators and analysts.

The most likely scenario sees a doubling of electricity demand to 2050, which will be met by a huge increase in low-cost, firmed renewable energy: nine times today’s capacity of grid-scale wind and solar, five times the rooftop solar on our homes, thirty times the storage capacity in all its shapes and sizes, and flexible gas firming capacity too.

And to connect these new sources of energy to our homes and businesses, the plan identifies 10,000 kilometres of new transmission that urgently needs to be built – a blueprint for $12 billion of investment that returns $28 billion in net market benefits.

This new transmission is needed because today’s transmission network was laid out 70 years ago to convey the huge amounts of power from coal generators in places like the Hunter and Latrobe valleys to the cities.

But our cheapest forms of energy today – firmed renewable energy – are being built in very different places; they are built where the sunshine and wind resources are strongest.

Efficiently building these identified transmission projects will set up our grid to share resources, bolstering reliability and lowering costs for all consumers, and taking advantage of a geographic hedge in weather patterns.

They will connect Snowy 2.0 to Sydney and surrounds, and to customers in Victoria via a second interstate connection. And they’ll connect the mainland to the vast resources of Tasmanian hydro via a second subsea cable.

Let’s take a moment to consider a future where we get these building blocks right.

It is a future where wind from the Bass Strait, sunshine from the Mallee, and waterflows from Derwent catchment efficiently power our homes and businesses from Port Augusta to Port Douglas.

It is a future where the later South Australian sun helps manage the evening peaks in major load centres like Sydney and Melbourne.

It is a future where excess renewable electricity is used to pump water uphill in the Snowy Mountains, and then on cloudy and still days – when renewable output is low – that water can be released and electricity brought back into power-hungry cities and regions using the same transmission lines.

And Australia is not alone in recognising the importance of transmission in reaching net zero.

In the UK, the energy regulator, Ofgem, is aiming to accelerate the build of new transmission to connect 50GW of offshore wind generation to help deliver the UK Government’s 2030 emissions reduction target.

This plan will reduce reliance on international energy supplies, which are subject to supply and price shocks stemming from situations like the war in Ukraine. We know this here, too.

In Australia, the Rewiring the Nation program puts major transmission firmly back on the public agenda.

But this is something that Australian communities have not encountered for decades.

The lack of recent large-scale transmission developments means unfamiliarity, and that translates to some challenges for all involved.

Regional and rural communities are being asked to shoulder the burden of construction and hosting transmission, while the benefits are shared with populations hundreds of kilometres away, even interstate.

In recent weeks I have travelled to the regions where large-scale transmission is needed.

I travelled to Western Victoria to meet the community, where farmers are concerned about the impact of new transmission on their lifestyle and their livelihoods.

Their concerns are genuinely held.

What we must do is to put the processes and resources in place to hear and understand communities’ concerns, and come up with a better way to work together and benefit together.

It is upon us all in the energy sector to build the relationships…and the social licence…that enables the infrastructure that enables the energy transition to serve all Australians.

Because in this energy transition, people matter most.

And we all have a shared objective of safe, reliable and affordable energy.

Thank you for your attention today.

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