AEMO CEO speech at Macquarie Green Energy Conference

7 min

Transitioning Australia’s electricity grid

I would like to begin by acknowledging the Gadigal people of the Eora Nation, the traditional custodians of this land on which we meet today.

I pay my respects to Elders past and present, and thank all Traditional Owners for the care they’ve shown as they’ve looked after this great country of ours for more than 60,000 years.

Thank you for inviting me to speak today on behalf of the Australian Energy Market Operator at this important Macquarie Green Energy Conference.

The Clean Energy Finance Corporation estimates that $120 billion of capital is needed to finance new wind, solar, hydro, storage and transmission in the National Electricity Market by 2030.

$120 billion. By 2030.

And the Clean Energy Investor Group and Bloomberg both quote a figure nearly four times that over the decades to 2050, to deliver a 1.5 degree aligned pathway.

We are standing on the cusp of an investment opportunity roughly twice the size of Australia’s LNG boom.

This investment will provide clean, reliable and affordable energy to Australian homes and businesses, it will create jobs, and it will deliver returns to investors.

Investment is needed because our coal-fired power stations are closing down, and the lowest cost energy future for Australian homes and businesses will be built on four pillars:

  1. Low-cost renewable energy, taking advantage of the abundant wind, solar and hydro resources that Australia has to offer
  2. Storage and backup technologies like batteries, pumped hydro, and flexible gas generation – to smooth out the peaks and troughs of that variable renewable energy
  3. New transmission to connect these low-cost sources of generation to our towns and cities
  4. Power systems capable of running, at times, entirely on renewable energy.

As you probably know, every two years we produce our flagship report – in wide and deep collaboration with industry, governments and consumer groups – the Integrated System Plan.

It is a comprehensive roadmap for the lowest cost, least-regret pathway to replace those retiring assets, to meet new growth from the electrification of homes, vehicles and industry, and to meet government targets as Australia transitions to a net-zero economy.

There are scenarios and sensitivities as you’d expect to help manage uncertainty, but the message from AEMO, from this report and others, continues to be consistent and clear: Australia needs urgent and sustained investment to ensure reliable, affordable and cleaner energy for consumers.

And investors tell me that they’re up for it.

In fact, Australia already has a substantial pipeline of proposed generation projects for the NEM, around 250GW, or four times the capacity installed today.

But what’s critical is to get these projects from concepts, through investment committees, and delivered as physical assets that generate, store and transmit electricity to Australian homes and businesses.

In generation, it means large-scale renewable generation, on shore and offshore.

It means hydro and pumped storage.

It means gas generation, to provide backup power for droughts in renewable energy production. Gas unlocks renewables, and it is an essential component of the energy mix into the future.

In storage, it means grid-scale batteries of different depths.

And there are investment opportunities not only in the generation and storage of power, but in equipment like synchronous condensers, including the conversion of existing or retiring plant, that provide essential services that help keep the heartbeat of the power system strong and stable.

And new technology like grid-forming inverters, which can be installed alongside either new or existing batteries, will enable more renewable generation into the grid.

There will also be distribution-level investments, like batteries and charging infrastructure as we electrify our transport fleet.

And it means harnessing and orchestrating consumer energy resources, like rooftop solar and batteries, which now make up the biggest generation fleet in the nation.

Australian households are continuing to make their own investment decisions in rooftop solar systems – at kitchen tables instead of boardroom tables – increasingly bolstered by battery storage and smart management software.

In fact, over the past 5 years the installation of rooftop solar has grown at an average rate of 25% year on year.

Rooftop solar is now the largest form of generation in the National Electricity Market, overtaking black coal and providing over 18 GW of capacity. That’s around a quarter of all generation capacity when the sun is shining at its brightest.

So orchestrating rooftop solar, batteries and the charging patterns of electric vehicles … that means helping this large and important segment of our national electricity market respond to market and operational signals … is critical to a successful energy transition.

AEMO is at the heart of Australia’s energy systems.

And the insights from our control rooms that manage the power system in real time, are the same as those from our engineering and our planning functions: that urgent and sustained investment is needed.

And wherever it’s possible for AEMO, we strive to make Australia’s energy transition as investable as possible.

But I’ve been a developer and an investor, and I know that deploying capital isn’t always easy.

Investors will have different risk appetites. Some will prefer exposure to market-based revenue, but many will need the greater revenue certainty that can come from existing and upcoming government schemes which aim to help unlock investment in renewable and firming generation.

At AEMO, we are pleased to be partnering with Commonwealth and state governments to evolve the investment frameworks needed to deliver that new energy infrastructure.

Schemes like the Commonwealth’s Capacity Investment Scheme to ensure there is enough generation capacity available to meet times of peak demand like the long, hot spells over summer…

… or the NSW LTESAs – the Long-Term Energy Service Agreements – that are underpinning investment to deliver the state’s Electricity Infrastructure Roadmap…

… or the capacity market tenders in Western Australia …

…and other schemes in Queensland, Victoria, South Australia, the ACT, Tasmania.

So the investment frameworks are continuing to evolve, to deliver the energy infrastructure that Australia needs.

But I know that other risks need to be overcome too.

Global supply chain constraints …

….on manufactured components, like wind turbine blades, control systems, and towers…

…on tunnel boring, earth moving, and construction equipment…

…on local skilled labour …

…and on planning and regulatory approvals.

While I know these and many more challenges exist, I do believe that there are pathways forward, through investment decision-making and project delivery.

I can assure you that at AEMO we are 100% committed to enabling your investment wherever we can.

One of our core functions is to operate the power system in real time, but I can tell you the NEM wasn’t designed for high levels of renewable generation. In fact no power system is.

That’s why we’re working furiously to understand what it takes to run the power system on 100% renewable energy, and to steadily remove the barriers to operating at high penetrations of renewable energy.

We’re a fair way down the road actually, and we’re collaborating with our international peers, leading academics and of course industry to continue to progress at pace.

We’ve published new standards for system strength, and an initial specification for grid forming inverters, and a technical settings compliance report for consumer energy resources.

Let me be clear though. Australia’s power system is one of the most complex machines in the world. And recent events in telecommunications have highlighted the value in making sure that each element works as intended and doesn’t disrupt the system.

So it’s important that the process to connect new generators is rigorous, but not cumbersome.

We’ve put a huge effort into working with the developer community to improve the connections process for all involved. And we’re not done yet.

AEMO and the Clean Energy Council have been working closely together to remove delays and simplify the process of connecting to the grid.

As part of the broader work, AEMO is working with developers, network companies and equipment manufacturers to cut months off the average time for our parts of the process – front-end approval process, registration and the commissioning process – and to make the overall connections process more transparent and predictable.

And this work is now bearing fruit.

Some projects are now getting their important technical standards approval in just one third the time that it used to take. That allows them to capitalise on pre-negotiated financing and construction arrangements.

We’ve launched a connection simulation tool that allows developers and equipment manufacturers to test their plant and control systems models directly on our model of the NEM power system.

That’s a world-first for a power system operator, and while we still need to work through some commercial issues, we know that access to this tool will further accelerate the grid-connection process.

And we’re not nearly satisfied – we know that working together, we can streamline our parts of the process even more.

And these improvements will help investors deliver the construction part of the project more efficiently and more quickly as well, delivering even greater time and cost savings.

But there’s one really critical factor in moving forward with the transition, and that’s community sentiment.

It goes for all assets, whether wind or solar farms and batteries, …

… and even more so for the 10,000 kilometres of new transmission lines are required to connect areas of renewable generation with demand centres.

I know it comes as a shock to communities that new infrastructure will be needed in places where they live and work, and that’s a situation not helped by the fact there has been so little new infrastructure, like transmission towers, built in the past few decades.

The energy transition is happening at pace, and we must help communities to understand and accept the essential need for new infrastructure to keep the system safe, reliable, at the lowest possible cost … and deliver that investment with minimal disruption, maximum care, fair process and appropriate compensation to those who are affected.

Without community acceptance and support, every project in this investment cycle will be harder, slower and more expensive than would otherwise be the case.

So my ask of everyone in this room and beyond, who have assets on the ground in construction, and in the pipeline for future investment, is to build support and help prepare communities for what’s ahead.

Not just for your projects, but for the ones that follow.

Because we are standing on the cusp of an investment supercycle in Australia’s energy systems.

Investment that will provide clean, reliable and affordable energy to Australian businesses, and stable returns to investors over many years ahead.

So let’s continue to work together to unlock this much needed investment, that will underpin Australia’s journey to a net-zero economy.

Thank you.


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