CLIMATE SPECTATOR: An AEMO win for wind

AEMO's newly released 25-year projections have slashed the amount of transmission and power generation investment required. What's left will largely go to wind.

Climate Spectator

The Australian Energy Market Operator on Tuesday released its 2012 National Transmission Network Development Plan, which details its 25-year projections for generation and new transmission requirements.

This year’s plan, the first where AEMO did not rely on transmission companies’ own demand forecasts, has slashed the amount of transmission investment required over the next 20 years from $7.4 billion down to $4.4 billion. Importantly for the growth of wind, this still includes an upgrade of the line linking Adelaide through to Heywood in Victoria. This should help allow further increases in SA wind capacity without further depressing SA pool prices during high wind periods.

In addition, due to subdued demand growth, AEMO has cut in half the amount of new generation investment it projects will be required over 20 years – from $64.6 billion in the 2010 plan down to $25.7 billion in the 2012 plan. This is in spite of the fact that AEMO still relies on Treasury’s optimistic carbon price forecasts, which help drive retirement and mothballing of 4,300MW of coal-fired power capacity.

In terms of that new investment AEMO’s best guess is that it will be dominated by wind and open-cycle gas turbines, as illustrated below.

Total NEM installed capacity by technology

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N.B. The projection above does not incorporate rooftop (small-scale) solar which is modelled by AEMO as a reduction in electricity demand.

In terms of the energy we get out of that capacity however, OCGT continues to play a very minor role, with wind taking up most of the growth in energy consumption. In addition, contrary to what we’re currently seeing in the market, black coal generation grows quite noticeably at the expense of brown coal, probably due to the use of the Treasury’s carbon price assumptions.

Total NEM generated energy by technology

 image

N.B. The projection above does not incorporate rooftop (small-scale) solar which is modelled by AEMO as a reduction in electricity demand.