Good morning.
I’d like to begin by acknowledging the Gadigal people of the Eora Nation as the traditional custodians of this land and to pay my respects to their Elders both past and present.
Thank you very much Michelle for your invitation to join today’s forum.
I’d like to start today by taking you inside AEMO and how we manage Australia’s energy systems and markets to ensure secure, reliable and affordable power for homes and businesses around the country.
Every five minutes, AEMO’s central dispatch engine determines how much generation is required to meet demand, given which generators are available, at what price, and making sure the grid is stable and secure.
This is called security constrained economic dispatch, and of course it dispatches the least cost generation first.
Today, the lowest-cost energy is provided by renewables.
On mild, sunny and windy days, wholesale electricity prices are low.
In fact, during the December quarter last year, National Electricity Market (NEM) wholesale prices were zero or negative 23% of the time across that three-month period.
But when it’s cold, dark, and still, backup generation kicks in, and prices rise.
And that’s what happened in June this year.
As the days grew shorter and the wind hit a lull, gas-fired generation kicked in, to meet strong winter demand.
Those conditions – across just three days in June – contributed $32 per megawatt hour (MWh), or 26%, to the quarterly average wholesale electricity price in the NEM.
These are examples of the market working as designed, sending clear price signals to incentivise supply and demand.
AEMO’s reports and publications outline how Australia’s energy systems are changing like this, and underscore the need for planned investments in generation, storage and transmission to be delivered on time and in full.
Now let’s step inside one of AEMO’s control rooms. We’ll take a virtual tour due to our tight security protocols.
The first thing you notice is the sheer volume of information pouring in.
Each operator sits in front of at least six screens, with more on the walls, monitoring the system in real time from thousands of data points across the country.
The next thing you notice is a real sense of calm.
Our control rooms are calm because the system is designed for the market to do most of the work.
The streams of data help our operators maintain situational awareness, to monitor for issues and respond to incidents, if that’s necessary.
But as the energy mix changes, the role of the control room is becoming more dynamic.
Our operators are needing to intervene more often to make sure the grid remains secure.
To illustrate that, let’s jump back a few weeks to the last week of August.
Across the NEM, there were a number of coal-fired units out of service for various reasons.
That is happening more often, because Australia’s coal fleet is getting old, and like an old car, breakdowns are more common and more maintenance is needed which takes them out of service.
Large power stations don’t just generate electricity.
We call them synchronous generators because their spinning generators also help to keep our grid stable and secure in a way that solar panels, wind turbines and batteries currently cannot.
So during that week in August, when yet another unplanned outage was needed for a coal plant in New South Wales, the grid was facing a shortage of those synchronous machines that are needed to keep the grid secure.
In response, our operators needed to direct a hydro-plant to connect to the grid and spin, without generating electricity, to keep our system secure.
So what is system security, and how is it different from reliability?
“Reliability” simply means having enough electricity to meet consumer demand at any point in time.
“System security” on the other hand is quite technical. It’s the catch-all term for the controls and services that are needed to keep the power system safely within its defined operating limits.
It includes maintaining stable voltage, frequency, restoration services, and ensuring protection systems can work to keep the power system safe during storms, equipment failure or sudden changes in supply or demand.
Many in this audience will know that a catastrophic blackout affected 50 million people across Spain and Portugal in April this year.
While there were many factors that caused this significant event, they were all related to shortfalls in system security, not reliability.
Today, the power system gets the bulk of its system security as a by-product of the spinning generators of coal, gas and hydro power stations.
But system security can also be provided by large spinning machines that are connected to the grid but don’t generate electricity at all, called synchronous condensers, or by power stations that have a clutch, like the clutch in a car, which disconnects the generator from the turbine and allows the generator to spin without burning fuel at all.
Batteries can provide some services to keep voltage and frequency stable, but they can’t yet provide sufficient fault current to keep the power system safe.
Pleasingly, AEMO’s reports show that a strong investment pipeline exists for generation and storage projects, strong enough to meet reliability standards by replacing the megawatts and megawatt hours that coal fired power stations provide today.
But what’s missing are the timely investments in system security services, to make sure our grid remains stable and secure when those coal-fired power stations switch off.
Right now, AEMO is working on the biennial update to the Integrated System Plan (ISP), which is the roadmap for transitioning the NEM between now and 2050 to ensure it meets both consumer needs and government energy and emission targets.
It’s remarkable how much change we expect to happen over the next decade.
In fact, over the next 10 years, asset owners have notified AEMO that 11 gigawatts (GW) of generation will retire from the grid.
Last financial year saw a record 4.4 GW of new generation and storage commissioned.
And over the next five years, additional investment of between 5 and 10 GW is expected to come online annually.
If those generation, storage and transmission projects are delivered on time and in full, then for much of the coming decade, there will be sufficient electricity to meet consumer demand, and much more of it will come from renewable energy.
Australia is adopting renewable energy at some of the fastest rates in the world.
Wind and solar capacity in the NEM is set to triple over the decade ahead.
There are now more than 4.2 million rooftop solar systems across Australia – a stunning democratisation of energy generation.
And we may now be standing on the cusp of similar democratization of energy storage, driven by the rapid rollout of consumer batteries.
Across Australia, batteries are playing an increasingly important role in helping to balance supply and demand.
Without batteries, last Saturday would have seen in the sixth lowest level of minimum operational demand in Western Australia.
But it didn’t eventuate, because over the past two years, more than 850 megawatts (MW) of battery storage capacity has been commissioned, which soaks up the excess power from solar during the day and then helps to meet the growing evening peak by releasing that energy later in the day.
Australia’s energy systems are changing, rapidly.
In fact, on Monday, renewable generation supplied over 77% of NEM demand, setting a new record.
In 2021, I set AEMO a goal for AEMO to engineer grids that are capable of running at 100% renewable energy by 2025 and I’m pleased to say that we now know what it takes.
This engineering work, done collaboratively with industry, makes it clear that it is entirely feasible to run our large grids on 100% renewable energy, provided there are sufficient investments in system security.
South Australia has been on this journey for a long time, having progressively retired the synchronous generation in that state.
In November 2022, the effects of a storm left South Australia isolated from the rest of the NEM.
And during that time, South Australia was able to operate at 91% renewable energy, and much of that rooftop solar.
This was possible because of many things, including four synchronous condensers strategically placed within the South Australian network and the ability to manage frequency using batteries and gas generation.
Since that milestone, progress has continued.
In recent years, a minimum number of two synchronous generators was needed to stay connected and burning fuel for the South Australian grid to remain secure, even when there was plenty of low-cost renewable energy.
But from earlier this month, as a result of years of collaborative engineering work between AEMO and industry, in certain conditions, the South Australian grid can operate safely and securely with just one synchronous generator online.
This reduces costs for consumers, and is one of many truly world-leading developments in Australia, as we work towards being able to keep our power systems stable and secure with up to 100% renewable energy.
And again, it underscores the need for investments in system security to be delivered in a timely manner.
The technical work to determine any gaps or shortfalls in system security for each region of the NEM is done collaboratively by AEMO and network companies.
But while the technical requirements are clear, we’re finding that the frameworks to guide investments for system security are not delivering quickly enough.
There is a timing mismatch between the notification of a generator’s retirement and the time it takes to replace the system services that it provides.
Around the world, countries are investing heavily in renewable energy and seeking alternative sources of system security, and this is creating significant supply chain pressures for equipment like synchronous condensers.
Gas turbines with a clutch that allows the generator to spin without burning fuel can also do the job, and could provide multiple services which may further reduce costs to consumers.
These gas turbines that Australia needs may only burn gas 5% of the time, as the ultimate backstop for reliability when it’s cold, dark and still, but they can help keep our system secure 100% of the time, just by spinning.
In December AEMO will update and release our next outlook for system security.
It will outline the services we need to keep the power system stable and run it safely and securely.
The report will make it clear that we have options, but urgent action is needed.
And just as we do to solve other challenges in Australia’s energy transition, AEMO, governments and industry will need to work collaboratively, and at pace, to identify and implement solutions.
From our control rooms, it’s clear that Australia’s energy transition is happening at pace, and there’s no going back.
Australia’s coal-fired power stations are old, and asset owners have told us they are closing down soon.
I was in the control room of the British system operator in August last year, when the last coal-fired power station powered down and disconnected from the grid.
It was a non-event really, because of the careful planning and investment that has taken place over many years.
But Britain’s first coal-free day was in 2017, a full seven years before the last closure.
And it’s that first coal-free day that Australia and AEMO must be ready for, ensuring the system remains both reliable and secure.
It is encouraging that the outlook for reliability is looking more positive, provided those investments in generation, storage and transmission are delivered on time and in full.
While system security can be quite technical, events in Spain and Portugal are a stark reminder of how critical it is for Australia’s power systems to continue to operate securely within their technical parameters.
And while challenges exist today in ensuring investments in system security are delivered in time for when they’re needed, I’m confident that with the collaboration that our industry does so well, and a laser-like focus on the interests of consumers, we’ll be able to navigate each of these challenges in Australia’s rapid energy transition.
Thank you.
[ENDS]