Renewable Energy
Last year Daniel Westerman, CEO of AEMO, said curtailment of renewable projects has jumped almost 40 per cent in the past year. I'm sure you won't be shocked to hear that he attributes this to insufficient transmission capacity. AEMO is, after all, in the transmission business, along with myriad foreign-owned monopoly transmission companies that can only grow their revenues by growing their regulated asset base.
Curtailment of energy is when an energy-generating site delivers less energy to the grid than the amount the equipment could generate at that time. What AEMO leave out of the curtailment discussion is that curtailment occurs not because of network constraints and local limits but because of economic reasons—that is, large solar farms are not bidding their electricity into the National Electricity Market, the NEM, because the oversupply of energy in the middle of the day means that electricity prices are negative. A negative price means that a generator must pay to send their electricity into the grid. Yes, renewables are cheap energy. The energy is often free, as we can see, or you get paid to take the energy—if it is being bid into the market, which it isn't.
The popular argument about transition to net zero focuses almost solely on the need to increase our supply of green energy generation into the network to meet our renewable energy targets, yet we can see the problem is not the amount of energy being generated but the timing of when it's being generated. As we are discovering, when bringing deep structural change to the energy market in the form of more renewable energy generation projects, ideology must be tempered against the reality of the Australian energy system.
The NEM is a physical system. It is governed by the laws of physics and requires certain inputs to maintain the network's stability. These include not just security and supply but also inertia and frequency control. We cannot just increase supply ad nauseam and expect to stay within the technical envelope of the grid. A case in point is the rhombus of regret, an area in north-west Victoria where large solar farms have been built, the generation from which is being curtailed up to 50 per cent of the time. Fifty per cent caps are being placed on capacity by AEMO due to low system strength in this region. Put simply, the solar farms are too geographically remote. This is a major failing in the history of the Australian energy market. It is a classic example of where ideology has run its course, building large amounts of generation with no actual ability to transmit it. This is uneconomical, impractical and risks investor interest in our market. Most importantly, it risks Australia not reaching its 2030 green energy targets.
The rhombus of regret is not the only area in Australia where curtailment of solar farms occurs. It happens in all states, yet Victoria seems to be the place where AEMO are fast-tracking projects, known in the ISP as actionable projects, to build billions of dollars worth of transmission. Transmission appears to be the $100 billion totemic energy policy that is being championed to fix all energy system problems—an obscene amount that lines the pockets of some, but comes at a cost to all, Australian taxpayers and energy users.
Recently, the Australian Energy Regulator chair, Clare Savage, described this as:
… a "wall of capex" coming at consumers that could more than offset the lower costs of wholesale energy as we make the switch to renewables unless we find ways to be more efficient.
She added:
These network capex costs will be baked in not just for today but for many years to come.
The problem we must solve is not the amount of electricity in the system, though we will need to increase this in coming decades. The problem we must solve is: how do we shift the glut of energy during the middle of the day to other times of the day when electricity is scarce and expensive?
Firstly, we should be incentivising energy-hungry businesses to relocate to near the curtailed generators to make economic use of the curtailed energy. The promise that Australia will be a green hydrogen superpower will not come to pass if we waste all this zero-emissions energy. Secondly, we need to incentivise or force proponents of large renewable energy farms to co-locate battery storage with their farms to manage this increase of supply and the network constraints we are facing. We should be using this excess energy, which can be stored and dispatched into the market, later in the day when prices are much higher. This approach will turn these sites into functioning economical sites as intended. This is not my idea. It is the subject of a study by ARENA in its report titled Unlocking curtailed solar energy on the NEM through storage. This report states that curtailment across the years 2019 to 2022 was approximately 980 gigawatt hours or 16 per cent of the annual energy generation across the 44 solar farms it studied. This is the equivalent of the annual generation of seven average large-scale solar farms—enough generation to power 168,000 Melbourne suburban homes for the year. ARENA suggests that curtailment across those solar farms is approximately 20 to 30 per cent. Therefore, a 50-megawatt solar farm would only need a 10- to 15-megawatt three-hour battery outputting 30 to 45 megawatt hours. These would cost downwards of $2 million to $3 million per megawatt. It later concluded that this loss of energy represents $119 million lost by not arbitraging curtailed electricity by shifting the time it is bid to the NEM.
I agree with Clare Savage on one thing. She said, 'It is vital that, before we build more network, we use more network,' yet I'm sure that we will see AER wave through billions of dollars directed at transmission lines such as the $4 billion being spent on the VNI West project and the $1.5 billion on the South Australia-New South Wales-Victoria EnergyConnect line—two transmission projects set up to manage the excess glut from the 'rhombus of regret'. It makes you wonder why we are sailing with blinkers towards more poles and wires, particularly when the Victoria Energy Policy Centre states that a large network won't alleviate the curtailment problem. Using AEMO's modelling analysis of VNI West, they find AEMO's results only show a slight reduction in renewable curtailment in those renewable energy zones affected by VNI West in the decade after VNI West is commissioned.
So what we can see is that transmission costs more and would not remedy the pressing problem of curtailment. Poles and wires are, after all, a 1920s technology not fit for Australia in 2024. The questionable choices from the transmission mascots are compounded even further when we begin to look at Australia's capacity to have solar panels and battery storage situated at every home across Australia. This would create millions of virtual power plants that can be coordinated via technology to act as coordinated energy resources, providing local economic benefits and cementing consumer energy autonomy, as well as building independence into the fabric of the energy system.
The recent three-year virtual power project Project EDGE shows that only 320 residential customers equipped with a VPP in regional Victoria provided 3.5 megawatts of flexible capacity. To put that into perspective, the final report on Project EDGE highlighted that, if we utilise the roles and market arrangements seen in this project, we could avoid more than 15 terawatt hours of rooftop solar curtailment by 2030 across the NEM. This is enough energy to power 2½ million houses today or almost half of the country's inhabitants for this year. It baffles me that we continue to prioritise the technology that isn't popular among the populous over technologies that make us energy secure and allow us to put Australian citizens back in control as primary decision-makers in this space.
It's time we started having an honest conversation on the real need for more transmission wires—an outdated solution plagued with cost blowouts. Let's be clear, transmission doesn't generate one single watt, not an electron, or store a single kilowatt of electricity. Yet, it costs billions, which we will all end up paying. Utilising batteries, either based at every home across Australia in a coordinated VPP format or co-located with wind and solar generation, must be part of the solution, especially when over the last 15 years you can see that the cost of batteries has declined by 90 per cent. It's one of the fastest cost declines in the clean energy market.
We can meet our 2030 energy targets faster and cheaper while reducing the technical limitations of our energy system at the same time. We're asking for the most rapid change in how energy is generated and transported across our country. It's a worthwhile change, but one that needs intelligent governance.
