Residential and large-scale solar transforming how Australia’s energy market operates, says regulator

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email
A rooftop solar system in Sydney. Image: Photon Energy.

Australia’s electricity markets are undergoing a profound transformation from a centralised system of large fossil fuel plants towards an array of smaller-scale, widely dispersed solar and wind generators, grid-scale batteries and demand response, according to a new report from the Australian Energy Regulator (AER).

Last year, more than 3.7GW of large-scale solar and wind capacity entered the country’s National Electricity Market (NEM) and there was record investment in rooftop PV, with almost 2.5GW of new capacity installed. This drove record levels of solar and wind generation in 2020, accounting for over 19% of total electricity generation.

Despite the renewables additions, fossil fuel-powered plants continue to produce over 70% of electricity in the NEM, but this is declining. Many older generators are nearing the end of their operational life and becoming less reliable, while the growth in clean energy is also contributing to financial stress on fossil fuel generators, risking earlier than scheduled plant exits from the market, the AER said in its State of the Energy Market report.

Over the next 20 years, the regulator forecasts that 16GW of thermal generation (61% of the current coal fleet in the NEM) is expected to retire. Over the same period, 26–50GW of large-scale solar is forecast to come online, along with 13–24GW of rooftop solar capacity.

AER chair Clare Savage said Australian energy consumers are adopting their own behind-the-meter energy solutions, embracing distributed energy resources such as rooftop PV, small batteries, electric vehicles and demand response.

“Almost 24% of all consumers in the NEM now partly meet their electricity needs through rooftop solar and sell excess electricity back into the grid,” she said. These systems combined represent around 17% of the NEM’s total generation capacity, with rooftop solar PV meeting 6.4% of the NEM’s total electricity requirements in 2020.

Where power once moved in one direction, from large generators through transmission and distribution lines to end customers, the report said significant two-way flows of power now occur.  At times electricity demand from the grid is close to zero in some regions.

A variety of factors are driving the transition. Concerns about the impact of fossil fuel generation on carbon emissions are a major catalyst, leading to policy initiatives by governments and behavioural change by energy customers and businesses. Government incentives for lower emissions generation encouraged early investment in solar, wind and small-scale solar PV systems. Meanwhile, a trend of rising energy prices over the past decade gave further impetus to this transition by driving customers to use energy more efficiently and to generate their own power.

While government policies on climate change helped drive the surge in renewable energy, the AER said, the declining costs of renewable plants (both commercial and small scale) have made them the most economic options for new-build generation. This cost advantage over thermal plants is forecast to widen over the next two decades as economies of scale and technology improvements further reduce costs, particularly for solar projects and batteries.

Savage said ensuring reliable energy supply to consumers is a pivotal challenge as the generation mix evolves, with the rise of cheap renewables and more consumers taking ownership of how energy is distributed into homes and businesses.

“We know that with the growth of renewable generation there needs to be investment in dispatchable resources to stabilise the grid, such as demand response, quick starting flexible hydro or gas generation and battery storage technology.”

Proposals announced earlier this year by the Australian Energy Market Commission could result in households with rooftop PV systems being charged for exporting electricity to the grid to address the issue of ‘traffic jams’ on the network. The commission said that with half of energy users in the country expected to be using home energy solutions such as PV within ten years, the plan help could reduce the need for expensive grid infrastructure additions.

Read Next

August 4, 2021
The Australian Energy Market Operator (AEMO) has published a series of planning and forecasting publications under the 2021 Inputs, Assumptions and Scenarios (IASR) report that present five different visions of Australia's future
August 3, 2021
The Australian state of Victoria has unveiled six grid upgrade projects as part of efforts to unlock new renewables investment.
July 30, 2021
Anglo-Australian mining company BHP, in partnership with Canada’s TransAlta Renewables, is to build two solar farms and a battery storage system to help power its Mt Keith and Leinster nickel mines in Western Australia
July 29, 2021
Meyer Burger has revealed plans to launch a solar roof tile product, expanding its rooftop solar product range.
July 26, 2021
Support for distributed energy resources (DERs) like rooftop solar, community solar and battery storage could save Californian ratepayers US$120 billion over the next 30 years, according to a new report
PV Tech Premium
July 23, 2021
A reduction in deployment costs combined with technology gains mean solar-plus-storage is an increasingly attractive option for off-grid mining operations looking to cut emissions. Jules Scully looks at successful case studies and the opportunity ahead.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
August 19, 2021
At 9am (PT) | 6pm (CEST)
Solar Media Events
August 25, 2021
Solar Media Events
October 6, 2021
Solar Media Events
October 19, 2021
BRISTOL, UK