Eastern Australia requires “imminent and urgent investment” in energy to bolster the reliability of the electricity grid, the Australian Energy Market Operator says, as it warns of the risk of outages in Victoria and South Australia this summer.
The challenges are detailed in an Aemo report, released on Thursday, which says the grid may come under strain even with 3.4 gigawatts of new generation and storage capacity added to the national electricity market compared with last summer.
“We’re expecting an elevated level of risk this summer compared with recent years, mostly due to hotter and drier conditions, and lower levels of reliability from our coal-fired generators,” Aemo’s chief executive, Daniel Westerman, said.
“The entire industry is focused on managing the risks in the summer ahead, particularly during high-demand periods coupled with generation outages and low renewable output, but some risk will remain.”
The past three summers have been dominated by La Niña weather patterns that brought more rainfall and fewer heatwaves.
But with an El Niño set to develop and last through the coming summer, power demand is forecast to reach “the upper end of the forecast range” in most regions. Bushfires may also affect transmission.
Energy users may play a bigger role in reducing grid risks, the report says, with those volunteering to power down projected to rise by more than a third for the coming year.
Aemo’s electricity statement of opportunities (Esoo) projects the power demand and supply over the coming decade for the eastern mainland states and Tasmania.
It says government programs and a pipeline of new projects – as much as 173GW of renewable energy and 74GW of storage – could fill supply gaps as ageing coal plants are closed.
But the report’s “central scenario” – which considers existing, committed and anticipated projects – forecasts that reliability risks will exceed “the relevant reliability standard” in Victoria from this summer. There is a similar forecast for South Australia this summer, while excess risks are predicted in New South Wales from 2025 and in Queensland from 2029.
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A slowdown in clean energy investment approvals has stoked concerns about the transition from fossil fuels to renewables. Delays for projects such as the Marinus link between Tasmania and the mainland and Snowy Hydro’s 2.0 pumped hydro project – reported now to cost as much as $12bn – have added to fears.
The federal energy minister, Chris Bowen, declined to confirm the $12bn figure, saying the government would “take a little bit of time to work through” Snowy’s revised costings.
The Esoo report assumes the project will be online by the end of 2029.
“The latest Esoo confirms our federal government programs, including Rewiring the Nation and the capacity investment scheme, will improve the strength of the grid and reduce reliability risks,” Bowen said.
The report said almost two-thirds of Australia’s coal-fired generation capacity is expected to close before 2033. It also modelled the effects of delaying the closure of half of the Eraring plant for two years beyond its scheduled August 2025 exit, finding reliability risks would be reduced in NSW and other mainland states.
In NSW, the Minns government has delayed the release of a report assessing the state’s energy security until at least September as it considers whether to intervene to support the extension of Eraring. The plant, Australia’s largest, was formerly state-owned before being sold to Origin Energy in 2013.
Esoo noted the spread of rooftop solar was reducing daytime power demand, saying solar systems will contribute to a “marginal” reduction in electricity consumption. Peak demand on the grid is likely to be pushed until after sunset.
Other changes in the grid over the next decade include the increased electrification of homes and businesses as consumers ditch gas.
The growth of hydrogen as an alternative to fossil fuels may increase power demand as much as 10% by 2032-33.