Good morning.
I’d like to begin by acknowledging the Traditional Owners of these lands, the Gadigal of the Eora Nation, and paying respect to their Elders past and present.
It’s great to be back at the AFR Energy and Climate Summit, particularly in light of all the developments and challenges that the energy sector has collectively navigated over the past 12 months.
Whether it’s the impact of the closure of the Strait of Hormuz, the rise of AI, data centres and cyber threats, challenges for investment in and delivery of new generation and transmission, or broader economic headwinds, it’s been a busy year.
But despite all these pressures, the resilience of Australia’s energy systems and markets has shown that energy security, sovereignty and clean power – the theme of this summit – can go hand-in-hand.
Unlike the 2022 energy crisis triggered by Russia's invasion of Ukraine, Australia’s energy systems and markets have proven resilient.
Gas supply and storage levels remained healthy throughout the winter.
And over the last financial year, a record 9.1 gigawatts of new generation and storage came online in the NEM alongside nearly 850 megawatts in Western Australia’s main grid.
In fact, the pipeline of new projects seeking connection to the NEM has grown to 40 gigawatts. That’s equal to more than half of the total capacity of the NEM today, although it’s also clear that new developments have many challenges to overcome throughout their delivery.
On the transmission side, Project EnergyConnect, the new link between South Australia, Victoria and New South Wales, has entered testing and is on track for full operation by the end of next year, opening a new route for the cheapest available electricity to flow to consumers across the three regions.
And records continue to fall as the energy mix evolves, including a 30-minute interval last month when renewable energy supplied a record 80% of all electricity generation in the NEM.
But the standout story for this past year is batteries.
Battery capacity on the transmission network has doubled in the past 12 months, and today there is more than nine gigawatts of grid-scale storage connected in the NEM.
It’s a similar story in Western Australia, which has grown from a standing start four years ago to almost one and a half gigawatts of battery capacity today.
To put that into perspective, that’s equivalent to more than a third of peak summer demand on the state’s main grid.
Australia is now a global leader in battery storage.
In real time, AEMO’s control rooms can see these big batteries flattening the peaks and filling in the troughs of the daily profile, storing abundant energy from the day and discharging it into the evening peaks.
In a remarkably short time, batteries have become some of the most versatile assets in the grid, dispatching power, providing critical system services and responding in milliseconds.
I know many in this audience are regular readers of our Quarterly Energy Dynamics report, and insights from the September quarter will be published next week.
Here are a few early insights on how batteries continue to change the dynamics of Australia’s energy systems and markets.
On average during the September quarter, grid-scale batteries in the NEM absorbed more than 13 gigawatt hours of energy during daytime hours. That’s nearly triple the amount absorbed in the same period last year, and that allowed for a higher utilisation of solar generation.
Most of that energy, around 11 gigawatt hours, was dispatched into the evening peak between 4 and 9 pm, which on average accounted for 8% of total consumption during the peak.
That’s a greater contribution to meeting peak demand than gas-fired generation.
Increasingly, grid-scale batteries are also determining the wholesale price of electricity, both when they charge and when they discharge.
In fact, grid-scale batteries set the wholesale price nearly half the time in Q3, up from just 18% in the same quarter last year, reducing both peak prices in the evening and the occurrence of negative prices during the day.
And overall, wholesale prices were lower for the quarter in all NEM regions.
So while batteries are fundamentally changing the way that energy is produced, consumed and priced in the grid, what they can’t do is generate electricity.
They can store and shift energy, but when they're empty, they need generation to recharge.
And that underscores the need for sustained delivery of new generation and the networks to connect them.
Right now, some of the greatest challenges are with developing new wind and gas generation, and there’s a mix of local and global factors at play.
Wind generation complements solar, making it particularly valuable at night and in the winter during periods of low sun, but new projects are navigating many challenges.
It’s common to hear from AEMO that gas is the ultimate backstop to reliability for our electricity grid, but developing new gas generation is also facing similar challenges.
Each of these technologies, and the new and upgraded networks that connect them, will play a critical role in meeting Australia’s future electricity demand, which is set to increase by 40% over the next decade.
And at the same time, the announced retirements of coal-fired power stations by their owners mean that around an additional third of the energy supplied in the NEM this year will also need to be replaced.
Data centres are often in the headlines, and their consumption is currently forecast to grow from 3% to 13% of grid-supplied electricity over the next decade.
That’s certainly a meaningful component of energy demand but not the largest.
Electrification is the dominant driver of long-term demand growth, including industrial processes and other business drivers, transport through electric vehicle demand, and households, although this is largely offset by growth in rooftop solar.
As you would expect, AEMO is working with industry, governments and market bodies to support both the growth in data centre demand, and their secure, efficient and cost-effective integration into the grid.
So far I've focused on what’s usually called the “supply side” of the energy system - power stations, grid-scale storage and transmission networks.
But with 30 gigawatts of rooftop solar across Australia, over 16 gigawatt hours of home batteries and increasing amounts of other flexible resources, it’s really the “whole energy system” that needs to be considered more than ever before.
And this “demand side” continues to grow quickly.
In fact, a new record was made over the weekend when rooftop solar contributed more than 17 gigawatts for a 30-minute interval into the NEM.
More than 700,000 household batteries have now been installed throughout Australia, with a combined capacity greater than 5 gigawatts and 16 gigawatt hours.
That’s more than half the capacity connected to the high-voltage transmission network in the NEM, and much of this has been installed within the last 12 months.
Projections from the Commonwealth government are that more than 2 million Australians will install a battery by 2030 which would multiply the current installed base by roughly three.
What’s really striking is how those household batteries are behaving today, and the difference they’re making to energy systems and markets.
For several quarters now – summer or winter – we see that homes with batteries are drawing an average of 70-75% less power from the grid at peak times compared to those with rooftop solar alone.
That is reducing the need for additional generation and lowering costs for all consumers.
We’re also seeing other behaviour changes.
For example, at exactly 11am every day, electricity demand jumps up.
Right now, that demand jump is around 360 megawatts across the NEM, and it’s been growing over recent months.
11 am is the start of free power periods under some tariffs, and clearly many households are choosing to automate when they charge their batteries and vehicles and run their appliances.
While the numbers aren’t precise, we estimate that between 15–25% of home batteries may be responding to market signals in various ways.
That could be: directly to wholesale prices, although this is a small proportion; to time-of-use retail tariffs, like those increasing demand at 11am each day; or to other retail offers, which might activate the customer’s battery on an infrequent basis.
That leaves around three-quarters of home battery owners who, today, choose to leave their battery in passive mode – soaking up their own solar during the day for use later in the evening – or doing whatever works best for them.
I want to make three points very clearly here.
The first is that these assets do not belong to the grid – they were paid for by customers and it is each customer’s decision whether and how to use their battery.
The second is that even in passive mode, these home batteries are reducing that home’s demand from the grid during peak times, and that is bringing meaningful benefit to all consumers already.
The third is that if the right proposition can be created to help more home batteries respond to market signals, then all consumers will benefit even further – and I know many retailers are working on developing these propositions.
As I said, numbers aren’t precise and much work is being done to help better integrate consumer energy resources into the grid and unlock as much value as possible.
One of the things that AEMO is doing is to develop a new report called the Demand Side Statement of Opportunities – the DSOO – which we will release in December.
One of the main objectives is to help progress our understanding of the value that households and businesses can contribute through flexible energy use, electrification and energy efficiency.
Not in isolation, but as an integral part of an energy system which increasingly requires all elements to work together.
In addition to the DSOO, we remain focussed on ensuring that Australia’s electricity system is secure throughout upcoming transition points like the closure of major generators.
In the NEM, we provide a report called the Transition Plan for System Security which sets out the essential services needed to keep the power system secure over the next decade.
We’re constantly pushing ourselves and taking on feedback from industry and governments, to make sure that potential solutions incorporate the latest technology while having sufficient confidence to be able to rely on them in operating the nation’s power systems.
To that end, we’ll soon be running a trial to operate part of the grid securely using only solar, wind and batteries, without any synchronous generation online.
So let me wrap up by saying this.
Australia’s energy systems and markets are making progress in energy security, sovereignty and clean power, and are in better shape than they were in 2022.
And batteries, large and small, are fundamentally changing the way energy is produced, consumed and priced.
But to meet future demand growth and replace retiring generation, investment in generation and transmission is critical to ensuring consumers continue to have access to secure and reliable electricity at the lowest cost.
And now more than ever, it’s the “whole system” – large and small, supply and demand – that needs to be considered.
Thank you.