How renewables are transforming electricity grids: an analysis of Australia’s integrated system plan

Abstract

Most countries will require mega programmes of investment to support the transition to higher shares of renewable energy. Large increases in roof-top solar and other grid-scale renewables are changing the way that electricity grids operate and are designed. This paper focuses on the case of Australia, where the Australian Energy Market Operator develops a bi-annual Integrated System Plan (ISP) to provide advice on the development of the electricity grid. The ISP is based on modelling of the future energy system and, accordingly, accounts for a rise in distributed energy generation and other technologies, such as batteries and electric drive vehicles. There are many lessons that can be learned from regions with high shares of renewables, including the importance of grid interconnectivity and storage. This example of rapid change has occurred in a country that did not have a robust national decarbonisation policy, but does have excellent wind and solar resources.

Keywords:

• Electricity grid
• energy
• renewables
• solar PV
• wind
• electric vehicles

1. Introduction

The declining cost of renewables has led to an impressive diffusion of solar photovoltaics (PV) and wind electricity generation over the last few years. Installations of roof-top solar and grid-scale renewables are changing the way that energy systems operate and are designed. High shares of renewables can disrupt existing grid networks and there is a need to redesign infrastructure to cope with this. Battery storage is one way to cope with varying patterns of electricity generation, but there are others. Better interconnectivity of regions with new interconnectors is an important way that electricity grids are being redesigned to adapt to intermittent and distributed electricity generation. The establishment of designated renewable energy zones (REZs) have also been proposed as a way to ensure that grid-scale renewable generation has access to existing (or planned) network capacity.

The countries with the largest increases in solar PV and onshore wind electricity generation between 2010 and 2019 were China, Japan, Australia, the United Kingdom and India (by magnitude of increase). In terms of the highest installed capacity, China, the United States and Germany dominated with more than 100 GW of capacity installed by 2019 (as illustrated in Figure 1). Meanwhile, other countries have broken records, such as Vietnam and Zambia, which are the two countries that had the highest increase in solar PV in 2019 (IRENA 2020, Do et al. 2020).

Figure 1. Installed capacity in solar PV and onshore wind across countries.

In Australia, the Australian Energy Market Operator (AEMO) develops a bi-annual Integrated System Plan (ISP) to provide advice on the development of the transmission grid. It focuses on the National Electricity Market (NEM), which is predominently located in the eastern part of Australia. The ISP is developed based on modelling of the future energy system and, accordingly, accounts for a rise in distributed energy generation due to a transition to renewables. This includes modelling the diffusion of solar PV, batteries and electric drive vehicles.

This paper discusses the 2018 and 2020 ISPs to show how quickly the transition to renewables can change the energy system (AEMO 2018, 2020). Note that the 2022 ISP is available (AEMO 2022). These ISPs focus on projections of energy generation capacity and the proposals being made to manage the change. Australia is an interesting case to focus on as there are expectations that the increase in distributed energy generation will continue due to continued cost declines and high capacity factors for both solar and wind. For example, the 2020 ISP states that the ISP modelling confirms that the least-cost and least-regret transition of the NEM is from a system dominated by centralised coal-fired generation to a highly diverse portfolio that has both behind-the-meter and grid-scale renewable energy resources that are supported by dispatchable firming resources.

2. Projections of Capital costs and energy generation in the ISP

In the two years between developing the 2018 and 2020 ISPs there was a notable decrease in the cost of key technologies, especially batteries and solar PV. Figure 2 compares the capital costs used in the ISPs to comparative data for the period before 2020. The capital costs shown are for the three main technologies that are changing the way that electricity grids operate.

Figure 2. Capital costs of key technologies.

Generally, the modelling inputs are close to or within the range of historical estimates, which were sourced from IRENA (2020) and Lazard (2018, 2019, 2020). However, the lower cost historical data does tend to outpace the cost decreases captured in the ISPs. For example, in the case of solar PV, the current day low capital cost of $1000/kW is assumed to occur in 2024 (Figure 2a). For wind, the current day low capital cost is assumed to occur in 2035 (Figure 2b). For battery storage, the current day cost (using 2019 data) is assumed to occur in 2024 (Figure 2c). The 2020 Lazard battery cost estimates are extremely low compared to the ISP numbers. Note that the capital costs used in developing the ISPs are sourced from the Commonwealth Scientific and Industrial Research Organisation (CSIRO) (Graham et al. 2020).

When comparing the ISP scenarios to the actual data, it is important to note that the modelling assumptions are released for public consultation and feedback. For the 2018 ISP, the modelling assumptions were first released in March 2018, and the last set of changes were made in August 2018. For the 2020 ISP, the relevant dates were February 2019 and September 2020. The date of the final revision of inputs and assumptions are also shown in Figure 2.

One of the relevant projections made in the ISPs is the proportion of underlying demand that will be met by distributed solar PV generation. This is shown in Figure 3. Again, the ISP projections are compared to actual data (AEMO 2016, 2017, 2018a, 2019). In this case, the actual data is sourced from AEMO reports of modelling and forecast accuracy. For the 2020 ISP, the actual data for 2018-19 is equal to the first period of projection (i.e., 2020-21). But the previous ISP had underestimated the rapid rise in solar PV that occurred over the last few years. This is unsurprising, as the increase was not expected by most experts. The modelling team at AEMO did react and revised the numbers for the 2020 ISP.

Figure 3. Distributed solar PV generation relative to underlying demand.

3. Proposed changes to australia’s energy system

The first ISP sets out three groups of actions that need to occur to support the grid. These were: 1) the near-term construction of transmission infrastructure to maximise the use of existing generation; 2) developments in the medium term to enhance trade between regions, provide access to storage, and support extensive development of REZs; and 3) longer-term developments to support REZs, system reliability and energy security.

These actions were matched to specific projects, which were revised and updated in the 2020 ISP.

Figure 4 provides a snapshot of the optimal development of the grid as proposed by AEMO based on the modelling in the 2020 ISP. This includes specific projects and timelines for upgrades to the network, as well as indicative solar, wind and storage projects. These REZs were updated in the 2022 ISP with the inclusion of proposed offshore wind REZs.

Figure 4. Optimal development of the NEM.

3.1. Transmission and interconnectors

In the 2018 ISP, it was found that improved transfer capacity had to occur. It was proposed that transfer capacity needed to increase by between 170-460MW. A range of projects were proposed to achieve this. Notable congestion in parts of western and north-western Victoria meant that AEMO also proposed a range of solutions to assist the existing and committed renewable energy developments in the area. In Figure 4 this is captured by the VNI West project.

Also, improving system strength in South Australia needed to occur. A notable outage event revealed the weakness of the grid for that region. It is also a region with a large amount of renewables with wind generation occasionally exceeding total demand (Csereklyei et al. 2019). A notable change has occurred, including the installation of a 100 MW battery reserve in late 2017, which at the time was the largest lithium-ion battery in the world. The battery has played a notable role in providing Frequency Control Ancillary Services within the NEM (AEMO 2018b) and was expanded (HPR 2020). Figure 4 also shows system strength improvements planned for 2021-22.

3.2. Renewable energy zones

The 2020 ISP states that the establishment of renewable energy zones (REZs) ‘promotes an integrated approach to new generation development, enabled by coordinated network and non-network investments to address system security requirements’. Consequentially, there are three phases of REZ developments based on an optimal development path for grid-scale renewables. The first phase aims to meet regional renewable targets and support renewable projects in areas with good access to existing network capacity and good system strength.

Figure 5 shows the location of the candidate REZs from the 2020 ISP. This can be compared to Figure 4 to understand how the proposed grid developments overlap with the proposed REZs.

Figure 5. Identified candidate Renewable Energy Zones (REZs).

One of the first REZs is the Central-West Orana REZ (N3 in Figure 5), which has been committed to by the New South Wales (NSW) government, and registrations of interest were received in June 2020. Construction was expected to begin in 2022 (NSW Govt 2020). A Central-West Orana REZ Transmission Link, which is a single circuit 500 kV High Voltage Alternating Current transmission loop (as illustrated in Figure 4), is needed to ensure that the expected generation is connected with the existing transmission network.

3.3. Dispatchable resources

The modelling conducted by AEMO indicates that the NEM will need 6-19 GW of new flexible, utility-scale dispatchable resources by 2040. This storage capacity will balance the system and compensate for the intermittency of renewables. AEMO defines dispatchable storage into three classes. These are: shallow storage for capacity, ramping and frequency control (e.g., 2-hour large-scale batteries); medium storage for intra-day shifting (e.g., 4-hour batteries, 6-12-hour pumped hydro); and deep storage for variable renewable energy (VRE) ‘droughts’ and seasonal smoothing (e.g., 24-48-hour hydro).

Figure 6 shows the mix of dispatchable power that will be required to balance the growing share of renewable supply as existing coal thermal capacity exits. Note that the dark blue bands are not a result of modelling, but are an exogenous assumption to capture Snowy 2.0 and other committed projects. Snowy 2.0 is a 2,000 megawatt pumped hydro project with a storage capacity of 175 hours. It has been criticised based on expense, over-stated benefits, and adverse environmental impacts (Mountain and Lintermans, 2020).

Figure 6. Types of dispatchable resources needed to firm variable renewable energy.

3.3.1. The rise of behind the meter technologies

One of the recent developments is the rise of behind the meter distributed energy technologies, which means that consumers are able to invest in technologies that change how they use, store and produce electricity. Increases in these technologies, such as electric drive vehicles, small-scale storage batteries, and roof-top solar PV, impact the grid. As part of the ISP modelling, the diffusion of these technologies is projected.

Previously attention was only given to solar, but now the ISPs include small batteries (Figure 7) and electric drive vehicles (Figure 8).

Figure 7. Projections of the diffusion of small-scale batteries.

Figure 8. Projections of the diffusion of electric drive vehicles.

Up to 10 GW of small-scale batteries and 14 million electric vehicles are projected for 2039-40 by AEMO. The five scenarios presented have different rates of change for technology development, renewable and distributed generation, decarbonisation policies, and the electrification of other sectors, including transport. The central scenario is a current policy scenario, which has 1.8 GW of small-scale batteries and 5.1 million electric drive vehicles in 2039-40.

The widespread use of distributed energy technologies will create challenges for system operations, and there will be a need to coordinate/facilitate battery or electric drive vehicles charging and discharging. Notable use of vehicle-to-home or vehicle-to-grid charging is expected to reduce demand for utility-scale generation and large-scale batteries. It is a change that needs to be accounted for in electricity grid planning.

4. Conclusion

Increased renewable electricity generation and distributed energy technologies (such as small-scale batteries) are changing the way that energy systems are designed and operated. In Australia, increases in renewable electricity generation is changing the infrastructure needed to manage the grid with plans for additional transmission, interconnectors, and dispatchable storage (such as large-scale batteries and pumped hydro). Note that this example of rapid change has occurred in a country that did not have a robust national decarbonisation policy, but does have excellent wind and solar resources.

The National Electricity Market (NEM), which is predominantly located in the eastern part of Australia, has already seen notable change over the last few years. This includes a large increase in generation from solar PV, the integration of the world’s largest lithium-ion battery, and proposals for new deep storage projects (i.e., Snowy 2.0). The 2020 Integrated System Plan (ISP) had to account for rapid change and it will be interesting to see how much change occurs while these ISPs are developed. Note that the 2022 ISP was released in late June 2022 and was not included in this analysis.

The establishment of renewable energy zones (REZs) will hasten the transition to renewables, and the Australian Energy Market Operator (AEMO) has included a range of proposed sites and accompanying transmission links in the 2020 ISP. One state government has committed to building at least one REZ, and expressions of interest from industry for the Central-West Orana REZ have been submitted. The 2022 ISP is the first time that offshore wind REZs were incorporated into the assessment.

As the share of renewables increases, the need for firming and balancing the system with flexible storage increases. Interconnectivity and storage are important in a grid with high renewables shares. Furthermore, the rise of electric drive vehicles and small-scale batteries will impact the operation of the grid and lead to less demand for large utility-scale resources.

Disclosure Statement

No potential conflict of interest was reported by the author(s).