The world’s largest microgrid requires gigawatts of new generation and storage capacity

The world's largest microgrid requires gigawatts of new generation and storage capacity

The report of Australian Energy Market Operator (AEMO) in the wholesale electricity market) of 2023 underscores the need for significant and sustained investment in generation, storage and transmission to meet reliability standards in the Southwest Interconnected System (SWIS).

Looking ahead to the next decade, the report forecasts increases in electricity consumption and peak demand, and considers the changing risks to power generation asset availability during this phase of the energy transition. The report also forecasts the retirement of 1,366 megawatts (MW) of coal-fired power generation capacity over the next decade.

Taking into account the existing and committed capacity supply, AEMO anticipates additional capacity needs throughout the forecast period, including a deficit of 945 MW in 2025-26 and around 4,000 MW in 2032-33. This is a significant change from the current situation, where a deficit of 945 MW is expected.

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This is a significant change compared to AEMO’s 2022 outlook, where the need for additional capacity is expected to start in 2025-26 and reach 303 MW in 2031-32.

Director General of Western Australia and AEMO Strategy, Kate Ryan, explained: “The rapid energy transition leads to a very strong forecast growth in electricity demand. At the same time, we are switching to new, lower-emission sources of supply and phasing out coal-fired power generation.”

“This year’s Reliability Outlook underscores the need for significant and sustained investment in additional capacity that will accelerate the pipeline of generation, storage and demand projects, as well as investment in transmission infrastructure to meet reliability standards.”

“There is a need to increase investment in capacity to have a robust and resilient electrical system capable of meeting future demands and facilitating the transition to a cleaner and more sustainable energy future,” he added added.

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In the short term, AEMO has started acquiring additional capacity to address the projected reliability deficits for 2023-24, utilizing the Supplemental Reserve Capacity mechanism. AEMO is also in the process of procuring additional services for 2024-2026 through the Non-Co-Optimized System Essential Services (NCESS) mechanism.

AEMO estimates that 4,598 MW of power generation will be available to meet the required reserve capacity (RCR) of 5,543 MW calculated for the capacity year beginning October 1, 2025.

A total of 1,348 MW of new projects are expected to be “probably” connected to the grid in 2025-26, including NCESS peak demand 2024-26 projects currently being contractually negotiated with AEMO.

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Much of this projected capacity will need to be deployed to fill the capacity investment gap in 2025-26.

“When there is a deficit between supply and demand, we have mechanisms in place to purchase additional capacity at short notice, as we did last year,” Ryan said.

“However, it is critical that the energy project portfolio is developed in a timely manner to mitigate anticipated reliability issues and support the ongoing energy transition,” he added.

Investment needs in capacity were similarly reflected in the Government of Western Australia’s SWIS Demand Assessment, which found that investment in renewable energy is required over the next 20 years, with technologies such as batteries and gas and transmission infrastructure to be affirmed.


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