Energy analysts have warned Australia's official electricity reliability forecasts are counting on generation and storage projects that may not be built on time, arguing the planning system is hiding significant risks in the country's energy transition.
Australia's electricity reliability planning is built around an exacting standard: consumers should expect their electricity needs to be met 99.998 per cent of the time, meaning no more than 10 minutes of unserved demand across an entire year. That measure does not include power lost to outages on the poles-and-wires network, a much more common occurrence.
For more than two decades, the document central to maintaining that standard has been the electricity statement of opportunities, published by the Australian Energy Market Operator (AEMO), the body that runs the country's biggest electricity system. It is designed to show where supply gaps are likely in the decade ahead, signalling where new projects would be most valuable.
But a number of respected energy market observers canvassed by the ABC say the statement is now counting on projects that may not be built on time, and that many may never be built at all. Dylan McConnell of the University of New South Wales said fundamental changes to the way the reliability assessment is carried out were hiding major problems with the energy transition.
"At the moment, it's probably the case that we're downplaying some pretty significant risks and challenges ahead of us, and that has consequences," he said.
Among those consequences would be higher wholesale energy costs, McConnell said. If less supply arrives than was forecast by the end of the decade, prices would inevitably increase to reflect the shortfall. The cost of building wind projects has ballooned in the past five years, adding to the risk that projects are delayed or abandoned.
Tristan Edis of Green Energy Markets cautioned that the reliability standard itself was "incredibly, incredibly tight", meaning a breach of the standard does not automatically translate into blackouts.
Analysis
Why This Matters
- Australia's reliability planning directs where new energy investment is needed; forecasts that assume projects will be built on time could leave the market unprepared if they are not.
- The reliability standard is so tight that even a small shortfall cannot be absorbed without risk, and the political consequences of blackouts make the stakes especially high.
- If forecast generation and storage does not arrive, consumers are likely to face higher wholesale electricity costs as supply falls short of demand.
Background
The electricity statement of opportunities is the Australian Energy Market Operator's forward-looking assessment of whether enough capacity will exist to meet demand over the coming decade. It has been central to Australia's reliability planning for more than two decades, signalling where new projects would be valuable.
Australia's reliability standard requires electricity needs to be met 99.998 per cent of the time, allowing no more than 10 minutes of unserved demand in a year. That standard excludes outages on the poles-and-wires network, which are a far more common cause of power loss than a shortage of energy itself.
Key Perspectives
Green Energy Markets: Tristan Edis argues the reliability standard is "incredibly, incredibly tight", so a technical breach of the standard should not be equated with blackouts.
University of New South Wales: Dylan McConnell says the statement of opportunities has a genuine purpose, but that it now reads as "everything will be fine if we do these things", while downplaying significant risks and challenges ahead.
Critics and skeptics: The observers canvassed by the ABC warn changes to the assessment methodology are masking problems. If forecast supply does not arrive, higher wholesale prices would follow, they say, and the ballooning cost of wind projects over the past five years makes delivery less certain.
What to Watch
- Whether new generation and storage projects actually begin construction on the timetables AEMO assumes.
- AEMO's next electricity statement of opportunities, and whether it revises its assumptions about project delivery.
- Wholesale electricity prices over the next few years as an early test of whether supply keeps pace with the forecasts.