AEMO warns on ‘urgent’ need for new electricity supplies

The Australian Energy Market Operator has warned of an ‘urgent’ need to invest in firming power to avoid energy shortfalls.

AEMO chief executive Daniel Westerman. Picture: Arsineh Houspian

Australia faces an “urgent” need to invest in back-up power to avoid energy shortfalls later this decade, with the market operator warning Snowy Hydro’s delay in delivering the Kurri Kurri gas plant raises reliability risks in the grid.

The Australian Energy Market Operator will release an ­update to its annual electricity statement of opportunities on Tuesday, forced partly by Snowy Hydro’s admission its two key projects – the 750 megawatt gas-fired plant in NSW’s Hunter Valley, and the $5.9bn Snowy Hydro pumped hydro expansion – are at least a year behind schedule.

The report says the late delivery of the Kurri Kurri facility will increase the unreliability risk in the NSW grid in 2024, although it says there is only a limited chance of power shortfalls for the state as a result.

AEMO chief executive Daniel Westerman said the update highlighted the “urgent” need for an acceleration in the rollout of back-up capacity – including batteries, long-life storage and more generation – to avoid the risk of blackouts later this decade.

Mr Westerman said that, without a significant increase in committed energy projects in the near future, the entire east coast energy network would likely fall short of AEMO’s reliability standards by 2027, with significant ­issues likely to emerge in some states within two years.

“Urgent and ongoing investment in renewable energy, long-duration storage and transmission is needed to reliably meet demand from Australian homes and businesses,” he said.

The Albanese government has set a goal of tripling renewables capacity to 82 per cent by 2030 but authorities are worried a lack of power supply is being built to back-up solar and wind, hiking the risks of electricity shortages as coal plants shut their doors after a half century of operations.

AEMO delivered its last electricity opportunities statement in August 2022, and Mr Westerman said its new modelling now incorporated the addition of another 1326MW of wind generation and 461MW of battery projects.

But without additional investment in firming power, the report still shows a potential “reliability gap” of 450MW in NSW in 2025, rising to 560MW in 2026 – when a 510MW gap will apply in the Victorian grid also.

Reliability gaps forecast in South Australia and Victoria have been withdrawn in the latest AEMO report, after Origin ­Energy announced a delay to the closure of its 180MW Osbourne power station in South Australia, and the inclusion of Iberdrola Australia’s 123MW Bolivar gas-fired plant in AEMO’s modelling.

But AGL’s decision to bring forward the expected closure date for its 800MW gas-fired Torrens Island B Power Station in South Australia – from 2035 to 2026 – has sounded additional warning bells for the stability of the NEM later in the decade.

“Reliability gaps begin to emerge against the Interim ­Reliability Measure from 2025 onwards. These gaps widen until all mainland states in the NEM are forecast to breach the reliability standard from 2027 onwards, with at least five coal power stations totalling approximately 13 per cent of the NEM’s total capacity expected to retire.

AGL’s Liddell Power Station in NSW will leave the grid in April, with Origin Energy’s Eraring to exit as soon as August 2025, CS Energy’s Callide B station in Queensland by 2028 – along with EnergyAustralia’s Yallourn facility – and Vales Point B in NSW scheduled to close by 2029.

Delays in bringing on new capacity have stoked expectations that Eraring will now remain open for several more years to protect Australia’s electricity system.

AEMO noted that a substantial set of generation and firming assets remain in the pipeline, ­including a 380MW tender for firming infrastructure in NSW, for delivery from 2025 to 2026, along with 457MW in anticipated battery developments.

Originally published as AEMO warns on ‘urgent’ need for new electricity supplies