The Renewable Energy Target has driven the unprecedented deployment of rooftop solar PV and
utility-scale renewables in Australia over the past few years. This growth is expected to continue in 2019.
While the variable renewable energy capacity has increased rapidly since 2016, over the same period more
than 2300 megawatts28 of coal fired synchronous generation capacity
has been retired from the National Electricity Market.
The Renewable Energy Target incentivises generation from renewable energy sources, which diversifies the
energy resources in the electricity grid and reduces greenhouse gas emissions from the electricity sector.
However, the Renewable Energy Target does not incentivise the flexible capacity required to support the
transition to an electricity grid with a high penetration of variable renewable energy.
Australia’s National Electricity Market operates on one of the world’s longest interconnected power
systems, stretching from Port Douglas in Queensland to Port Lincoln in South Australia and across the Bass
Strait to Tasmania—a distance of around 5000 kilometres. The unique size and shape of Australia’s National
Electricity Market means the rapid transformation of the energy supply requires complex management.
The National Electricity Market was designed around large thermal generators located close to major load
centres. Now, large renewable power stations are typically distant from those load centres and cities are
increasingly generating significant amounts of electricity from solar systems on rooftops.
The Australian Energy Market Operator has been using its operational levers to ensure the electricity
grid is operating within technical limits. This includes constraining the dispatch of renewable generators
at times in areas where there is too much wind and solar generation and insufficient synchronous
generation, as well as relying on the Reliability and Emergency Reserve Trader program.
In an electricity grid, supply and demand must be kept in balance to ensure frequency and voltage
remains within tight technical limits. In Australia, the Australian Energy Market Operator manages the
operation of the National Electricity Market and the challenges that come with balancing supply and demand
of a large, changing electricity grid29 with a high penetration of
renewables. To keep the National Electricity Market within technical requirements, both the Australian
Energy Market Operator and network service providers need access to operational levers. These represent the
ability manage dispatch and configure power system services to maintain system security and reliability as
well as the ability to both measure energy demand and generation output in real time and forecast into the
These levers were an inherent part of a grid of mostly uniform energy supply, which comprised
Large-scale fossil fuel-fired synchronous generators. This was relatively easy with predictable demand
allowing large thermal power plants to slowly ramp up and down to meet that demand. Achieving the same
level of stability in the grid transformed with varied energy resources located far from loads requires
greater levels of flexibility, including generation sources that can be ramped up and down much more
rapidly to keep supply and demand in balance.
Electricity supply from weather dependent utility-scale wind and solar generators is currently less
predictable than electricity supply from fossil fuel-fired synchronous generators. More than 8 gigawatts of
distributed Small-scale solar PV is on rooftops, and this presents the Australian Energy Market Operator
with a significant challenge in forecasting how these systems will behave at any given time as it depends
on the level of sunlight available over a sizeable geographic area. The aging thermal generators also face
potential issues in maintaining generation on hot summer days when demand peaks and high temperatures may
increase the likelihood of plant failures. The slower ramp rate of these thermal generators means they are
unable to respond quickly to sudden changes in supply or demand caused by changing weather or as a result
of thermal power station outages.
A flexible electricity grid is one that can respond quickly to sudden changes in electrical supply or
demand. This is increasingly important for a grid with high penetrations of variable renewable energy.
Technologies and standard techniques are available to improve the flexibility of a grid with high
penetration of renewables and an ageing fleet of thermal generators. These include open cycle gas turbine
and diesel generation systems, battery storage, virtual power plants, pumped hydro energy storage and
demand response, as well as increased grid and interconnection capacity (see Table 1). All of these systems
have been, or are in the process of being, deployed in Australia.
Future options include concentrated solar thermal with storage, hydrogen and biomass based systems.
Tasmania has a large wind resource firmed by existing reservoirs across several hydroelectric schemes.
This offers significant potential to deliver dispatchable on-demand generation and power system stability
services to the National Electricity Market. Marinus Link, if it proceeds, will be able to support power
transfers of up to 1200 megawatts between Tasmania and Victoria. This is in addition to the existing 500
megawatts Basslink Interconnector, which already supplies some of the peak load capacity to the eastern
mainland states over summer.
In addition to the Snowy 2.0 pumped hydro project, an increasing number of mid-size pumped hydro power
stations are being planned in New South Wales, Queensland and South Australia.
An increasing number of Large-scale renewable power stations are including additional infrastructure in
their design in anticipation of installing energy storage systems. Large-scale and Small-scale batteries
can be deployed much faster than building pumped hydro energy storage systems. A number of Large-scale
renewable energy projects are co-locating battery storage with wind or solar farms, including Kennedy
Energy Park in Queensland comprising 43.5 megawatts of wind power, 15 megawatts of solar power and a 2
megawatt battery, and the Gannawarra Solar Farm in Victoria with 50 megawatts of solar power and a 25
With the highest per capita uptake of Small-scale rooftop solar PV in the world, Australia’s focus for
virtual power plants is to coordinate rooftop solar PV and battery storage. Battery storage is growing
rapidly in Australia, with Bloomberg New Energy Finance31 estimating
a 37 per cent increase in batteries between 2017 and 2018, and an expectation this will triple by 2019 with
an expected 60,000 batteries installed. The data that is voluntarily disclosed to our agency on batteries
installed concurrently with Small-scale solar PV systems shows a 16 per cent increase in the number of
batteries between 2017 and 2018. This is partially driven by subsidy programs in several states and
The Australian Energy Market Operator values access to data from multiple agencies at both state and
federal levels to assist them to maintain and improve power security and to develop forecasts to improve
the dispatch system’s ability to balance supply and demand. For example, the Australian Energy Market
Operator registers all power stations over 30 megawatts, but has little visibility of smaller capacity
We continue to provide key information gathered through the schemes we administer regarding distributed
energy sources and utility-scale renewable energy power stations that can help manage the transition of the
grid. We assist this transition by providing data and information through:
As the rapid pace of renewable investment continues, planning for the integration of a much higher
penetration of renewables into the national electricity grid is the next key phase in Australia’s
transition to a clean energy future. As the penetration of variable renewable energy passes 40 per cent,
technologies such as storage32 are required to support the grid.
Introducing flexible technologies and mechanisms assists with the challenges facing the National
Electricity Market. The National Electricity Market is currently seeing renewable energy
generation33 of a little over 21 per cent, with Tasmania at 95 per
cent and South Australia at 51 per cent.
If flexible capacity does not keep pace with the addition of variable renewable energy, the Australian
Energy Market Operator may have to keep using its operational levers to ensure the electricity grid is
operating within technical limits.
Looking forward as the Australian Energy Market Operator’s 2019–20 Integrated System Plan is delivered
we will see a more interconnected system with significant levels of storage as well as synthetic and actual
inertia to maintain the operational effectiveness of the National Electricity Market. This, together with a
range of more flexible energy capacity, will provide electricity market operators with the tools to improve
the stability and efficiency of electricity systems while accelerating carbon abatement in Australia.
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