Victorian Government Renewable Energy Auction Raises Many Questions That Must Be Answered

Victorian Government Renewable Energy Auction Raises Many Questions That Must Be Answered

Emily Wood | September 2, 2020

In responding to the Victorian Government announcement of a second round of renewable energy auctions, the Energy Users’ Association of Australia (EUAA) is raising concerns about the future risks and costs associated with integrating large volumes of renewable energy into a system already showing signs of stress.

“Renewable energy is already a significant part of the Australian energy landscape and it is set to dominate new investment for many years to come, but this raises new challenges that must be addressed,” said EUAA Chief Executive Officer,  Andrew Richards.

“The warning signs are there that our energy system is under stress.  The EUAA ask that governments and the energy industry heed these warnings and develop a cohesive plan for the energy transition that requires new generation to be more ‘fit-for-purpose’ and that the costs and risks of the energy transition be shared more equitably.”

The recently published published 2020 Australian Energy Market Operator (AEMO) Electricity Statement Of Opportunities (ESOO), provides a very clear picture of the many challenges of integrating large volumes of variable, non-synchronous renewable energy into a system designed around dispatchable, synchronous generation.

It is clear that while a certain volume of renewable energy can be accepted by the system, significant volumes like we are beginning to see can create serious issues.  For example, the ESOO shows that forecast minimum operational demand is declining rapidly and may fall below 1,000MW in Victoria in coming years. This creates serious problems around system stability and may lead to AEMO constraining off renewable generation (including rooftop solar) in certain circumstances or lead to additional costs being incurred by consumers as AEMO seeks to maintain control of the system.  Clearly, this is a bad outcome for all concerned.

“We can’t continue to cram more renewable energy into a system and just assume there won’t be issues.  We need to be conscious of the integration challenges and be transparent about the total costs of the transition to renewable energy.”

Energy users expect that when new generation is deployed, it is capable of providing the market and its customers with a product that does no harm to system strength and that it is aligned with what the market needs.

“It is incumbent on these new generators to provide a product that is fit for purpose so that it does not create issues with system strength and reliability.”

The 2020 AEMO Integrated System Plan (ISP) also highlights the significant investment in networks required to accept and integrate large volumes of renewable energy over the coming decade.  Under existing regulatory frameworks, consumers are set to pay the entire bill and take most of the risks associated with these investments.

“There are many hidden costs to the energy transition that have been ignored with an assumption that consumers will just pay for it.  This essentially shifts all the risk and costs from investors and market participants onto consumers, which is unfair and needs to change.”

The EUAA encourage the Victorian Government to be conscious of these challenges and to use the proposed renewable energy auction as an opportunity to encourage a more innovative approach from applicants that ensures more renewable energy doesn’t lead to an unstable electricity grid, a reduction in reliability and an inequitable allocation of risk.

In addition to placing these requirements on auction participants, the EUAA would be supportive of the Victorian Government providing financial assistance to innovative projects and to help protect consumers from unnecessary risk.

“The Victorian Government collects approximately $170 million per year from energy users in land easement charges associated with the high voltage transmission system.  We encourage them to direct a large portion of this into facilitating the transition of our energy market that could include investments in network upgrades and grid scale batteries.”

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Media Contact: Emily Wood 0421 042 121

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