Submission to the Australian Energy Market Operator's Draft 2024 ISP Consultation
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21 February 2024
To: Australian Energy Market Operator
RE: Draft 2024 ISP Consultation
Thank you for the opportunity for the Institute for Energy Economics and Financial Analysis (IEEFA) to provide input into AEMO’s Draft 2024 ISP Consultation. IEEFA is an independent energy finance think tank that examines issues related to energy markets, trends, and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
IEEFA thanks AEMO for the large amount of work it has put into the 2024 Integrated System Plan (ISP) process so far. The process involves multiple energy industry and consumer stakeholders and is an important process to help align stakeholders on the planning of the National Electricity Market (NEM).
IEEFA has reviewed the Draft 2024 ISP in detail and finds that there are a range of actions AEMO could take to strengthen the ISP to provide more certainty and confidence on the optimal path for the NEM. These changes would help ensure the ISP is better aligned with the government’s target of 82% renewables by 2030 and 43% emissions reduction by 2030. In summary, IEEFA recommends that AEMO:
- More comprehensively discuss the impacts of 1.5°C-aligned climate targets with a focus on the Rapid Decarbonisation sensitivity.
- Provide further discussion to qualify gas power generation (GPG) outcomes in the ‘optimal development path’ (ODP), as the change in balance of GPG and storage capacity compared with previous ISPs is not explained.
- Reassess central gas price assumptions and model a ‘High Gas Price’ sensitivity – as it is not clear that current assumptions reflect the costs of overcoming near-term supply constraints, or that the current ODP would be resilient if future price shocks were to occur.
- Explain changes in the mapping of GenCost scenarios to ISP scenarios, which have led to material increases in storage cost forecasts.
- Revise distributed solar PV forecasts as they appear to be conservative and not up-to-date with the most recent Green Energy Markets projections.
- Makes the assumptions used by CSIRO and Green Energy Markets around the uptake of dynamic operating envelopes transparent.
- Update the electric vehicle (EV) forecasts to use the most recent CSIRO modelling and reconsider EV vehicle to grid forecasts.
- Model and report on the demand side in more detail: consider a broader range of demand side interventions and co-optimise between demand and supply where possible.
- Provide a higher distributed energy resources (DERs) scenario or sensitivity to inform planning and policymaking.
- Include integrated planning with distribution network service providers in the ISP process.
- Provide higher data granularity in generation results, to inform the industry.
- Explore the faster renewables and storage capacity build and coal exit forecast in the Rapid Decarbonisation sensitivity in the final ISP report in more detail.
- Provide more clarity around the drivers of coal exits: emissions, revenue adequacy or both, to inform planning and policymaking.
- Undertake a balanced social licence analysis, not only exploring social license for renewables and transmission but also for new gas and coal developments.
- Revise coal price assumptions, which appear to be materially lower than actual coal prices.
Please see IEEFA’s detailed response exploring each of these areas in the following pages.
Kind regards,
Johanna Bowyer – Lead Analyst, Australian Electricity
Jay Gordon – Energy Finance Analyst, Australian Electricity
Dr Gabrielle Kuiper – Guest Contributor, IEEFA
Submitted via email on 21 February 2024
