Will Australian homes really be hit by power outages in the next few years?

Committing to several electricity generation and transmission projects which are currently anticipated to take place this decade would shore up reliability in Australia’s electricity grid and reduce the chances of power outages.

That’s the message from the nation’s electricity market operator AEMO, which has identified “reliability gaps” for several states emerging from the closure of five coal-fired power stations over the next decade. These stations account for the equivalent of 14 percent of the market’s capacity.

While Australia’s expected energy use is expected to remain within the ‘interim reliability measure’ enacted to reduce load shedding risk across the energy market this summer, the outlook beyond this is expected to see a drop in reliability as demand increases amid an increasingly electrified economy. 

Without sufficient investment in new supply and transmission, New South Wales, Victoria, Queensland and South Australia would be affected by reliability gaps in the next three to four years.

However right now there is about  3.4 GW of anticipated generation and storage projects and if they are delivered in-line with currently projected timeframes, that outlook would improve – pushing anticipated gaps back to 2027/28 at the earliest.

These projects include a combined 2,400 megawatts of wind power generation and battery energy storage,  850 MW of solar generation, 100 MW of peaking capacity using gas and diesel and transmission projects in New South Wales and Victoria.

AEMO chief executive Daniel Westerman called for further investment in supply and transmission infrastructure to meet increasing demand within the system.

“In the next decade, Australia will experience our first cluster of coal-generation retirements, at least five power stations totalling 8.3 gigawatts (GW), equal to approximately 14 per cent of the NEM’s total capacity,” Westerman says

“Without further investments, this will reduce generation supply and challenge the transmission network’s capability to meet reliability standards and power system security needs.”

That’s a view shared by Associate Professor Liam Wagner, a senior research fellow in the school of economics and public policy at Adelaide University.

Wagner says measures like a further expansion of Australia’s transmission network beyond current plans, further uptake and incentivisation of renewables and implementation of carbon pricing are measures that would help to bolster market reliability.

“The system’s strength and stability are of significant concern, particularly for a developed economy like Australia,” Wagner says.

“We need to have high reliability in our energy system and the only way we’re going to be able to make up for its current inadequacies is to act now.”

One of the inadequacies Wagner identifies is the reduced availability of gas supplies in the domestic market. The interim gas report released by the ACCC in August projected gas shortages for Australia’s east coast, the result of an imbalance between export and domestic gas retention policies.

“We need to have a significant increase in the amount of gas that’s made solely available for domestic purposes,” Wagner says.

“We are in a gas crisis at the moment simply because of exports, not because we don’t have enough gas.  So really, we are in a situation where we should be guaranteeing the supply of gas, and ensuring that those gas fired generators can ramp up and be online when they’re needed.”

While that’s a short-term imperative, the other factor pointed to by AEMO’s Westerman, is infrastructure investment.

This includes upgrades of existing transmission interconnectors and new transmission pathways between states.

Preventing power outages requires coordination

Investment in transmission is required to help efficiently move renewable power where it’s needed – for example between South Australia and Queensland.

And while Australia has the technological and knowledge resources to execute a ‘green’ overhaul of its national grid, Professor Ariel Liebman who heads up the Monash Energy Institute says the question is whether it can be done fast enough.

“We have all the technology components – wind, solar, and storage – that’s affordable at scale,” Liebman says.

“Transmission we have all these things [components], we know how to build them.

“It’s a matter of building enough of them fast enough.”

The May federal election brought a Labor government to power with a policy to position Australia as a ‘renewable energy superpower’ with a $20 billion investment policy to ‘rebuild and modernise’ the country’s electricity grid.

Achieving that will require better coordination between the commonwealth and the states, the latter of which is responsible for infrastructure.

While bodies like the Australian Energy Market Commission (the market rulemaker), the national energy regulator (compliance) and AEMO (operations) broadly take care of the market, Liebman believes a united approach between two tiers of government will be critical to avoiding the lights going off.

“The challenge here is that the jurisdiction actually rests with the states over their infrastructure,” Liebman says.

“They’ve delegated some of it to the federal government’s bodies, like the AEMC, AER, and the operator AEMO whose job it is to inform and operate in real time – they don’t have any planning or investment powers.

“That framework is a bit cumbersome, and isn’t necessarily fit for the fast transition we need.

“So we need to look at the mix of powers that these bodies have, and how to make it more efficient, and take the politics out of it, between the states and between the states and the federal government.”