Delayed new energy projects could result in energy blackouts in Victoria and South Australia this summer, warns the Australian Energy Market Operator (AEMO) which has issued an urgent call for immediate investment.
AEMO says Australia faces a decade of unreliable power supply, which only adds to the mounting pressure on the Albanese government to fulfil its commitment to more than double the renewable energy level in system to 82% by 2030. A successful transition, the government claims, could reduce annual household power bills by $275.
For some time AEMO has warned about the slow pace of building new renewable energy to replace fossil fuels pace. Those warnings were escalated in its 2023 Energy Statement of Opportunities (ESOO) report, with the energy market operator saying the national electricity market is now precariously placed and that “imminent and urgent” investment must be delivered to safeguard the system.
AEMO chief executive Daniel Westerman said, "Quite simply, Australia‘s energy transition is happening at pace. Our coal-fired power stations are closing down at the same time as demand for electricity is increasing and without urgent and ongoing investment in new sources of electricity, there are significant risks to reliability."
Further prices rises in store
The absence of new investment may not only risk power supply but also inflate wholesale prices. Australia has already faced two consecutive years of roughly 20% price rises, affecting households and businesses dealing with high inflation and soaring interest rates.
AEMO states that without prompt action, all states, with the exception of Tasmania, face uncertain power supply over the next decade. NSW is expected to experience generation shortfalls by 2025 due to the retirement of Origin Energy’s Eraring coal power station, while Queensland will face uncertain supply periods by around 2030.
Government incentives required
The failure to invest is partly attributed to uncertainty around transmission infrastructure. Nearly 10,000 kilometres of new lines need to be constructed by 2030, but construction has faced funding constraints and community opposition.
Federal Energy Minister Chris Bowen says the government’s A$20 billion Rewiring the Nation program, which offers cheap loans and concessional finance to transmission developers, aims to alleviate these bottlenecks. As will the Capacity Investment Scheme, which supports the development of grid-scale dispatchable renewable generation and storage.
AEMO's warning underscores the urgent need for Australia to bolster its renewable energy infrastructure and transmission lines to ensure a reliable and cost-effective power supply for the coming decade.
AEMO says government incentives to improve transmission, generation and storage capacity would see Australia largely avoid periods when electricity supplies were in question. But it’s not that simple given Australia’s long history of delayed critical energy infrastructure and policies to date failing to deliver much progress.