INSIGHT

Technology Investment Roadmap

By Kate Axup, Luisa Colosimo
Energy Technology

The importance of an 'enabling' electricity network 5 min read

With public attention mostly focused on the five priority technologies identified in the first Low Emissions Technology Statement released by the Federal Government (along with the ambitious stretch goals that accompany them), in this Insight we examine the 'emerging and enabling technologies' described in the Statement.

In short, these are the technologies that will play a fundamental role in addressing the current shortcomings of our electricity networks and driving investor confidence in the energy sector.

Key takeaways

The 'Networks' issue
  • Our networks are struggling to keep up with, and adapt to, the rapid changes and opportunities that renewable energy, digitalisation and new technologies bring.
  • Connection delay and curtailment risk are arguably the biggest issues faced by would-be investors in Australia's energy sector today and have the potential to deter the private investment which is critical for Australia's energy transition.
Addressing the issue
  • Proper network planning, meaningful policy reform and substantial and timely investment in grid upgrades, as well as firming technologies, will each play a significant role in addressing the networks issue.
  • The advancement of the second-order 'Emerging and Enabling Technologies' identified in the Statement will play an important role in the successful deployment of many of the priority technologies, and are therefore deserving of immediate focus, too.

Background

Following the announcement of the Federal Government's Technology Investment Roadmap earlier this year which we reported on, the first Low Emissions Technology Statement (the Statement) was released last week. As expected, the focus of the Statement was on public investment in the five identified 'priority' technologies – clean hydrogen, energy storage, low carbon materials, carbon capture storage and soil carbon – each touted as having the highest transformative potential in terms of working towards a more reliable, productive, competitive and low-emissions energy economy in Australia.

While these new technologies are undoubtedly exciting, the question that remains is whether our power system will be able to rise to the challenge and keep up with the pace of this change.

The 'Networks' issue

The Australian electricity market is going through a period of significant transition – one in which clean energy, digitalisation and new technologies will continue to play an increasingly important role. The importance of 'enabling' technology in the energy sector was underscored by Audrey Zibelman's, CEO of AEMO, announcement of moving to Google's parent Alphabet x.company, where she is to lead a team developing new technologies designed at promoting a diversified and decarbonised power system. Electricity networks are the backbone of our power system and will be fundamentally important for the transition to a clean energy future.

It is clear that our current power system and market design has struggled to keep up with and adapt to the significant influx of intermittent renewable energy in our electricity grid in the last 10 years. This has had knock-on effects for all players in the market and, without resolution, could present a real deterrent to the private sector investment which is needed to move Australia to a cleaner energy future.

In our experience, connection delay and curtailment risk are arguably the biggest issues faced by would-be investors in Australia's energy sector today. For generators, uncertainty around these issues impacts construction programming, offtake arrangements, the connection process itself, financing and operational expenditure. Network service providers are grappling with augmentation works, extensions and upgrades required to their networks, and the network operator is increasingly requiring generators to add synchronous condensers or batteries to their projects to help deal with system strength issues.

The effectiveness of the Federal Government's roadmap relies on private sector and state governments investing $3-5 for each dollar of federal funding provided in support of priority technology projects. However, there needs to be a degree of confidence within the industry that the electricity network, and electricity regulation, will be able to keep up with the arrival of the new priority technologies – otherwise, there is a risk that these network issues, if left unaddressed, could deter market participants and hamper new investment.

Addressing the issue

Proper network planning, meaningful policy reform and substantial and timely investment in grid upgrades, expansions and firming technologies will each play a fundamental role in future proofing Australia's electricity network and assisting in our energy transition.

Industry recognises the challenges associated with our current networks, and steps are being taken to address these issues. Key long-term reform projects such as the Coordination of Generation and transmission implementation review being led by the Australian Energy Market Commission and the post-2025 market design project being led by the Energy Security Board, together with shorter-term initiatives such as the proposed development of Renewable Energy Zones, have the potential to transform current power system arrangements in the National Electricity Market.

Most promising is the mention in the Statement of the legislative amendments being tabled in respect of the Clean Energy Finance Corporation Act 2012 to set up the $1bn Grid Reliability Fund

While technology to improve the security and stability of networks is not expressly called out as one of the five priority technologies in the Statement, it is encouraging that grid-scale energy storage is labelled a priority technology. The Statement highlights the important role that energy storage options, such as pumped hydro, batteries and solar thermal energy, have to play in balancing out the intermittency of renewable energy sources and contributing to the reliability of our power system.

Other than energy storage, however, the Statement only briefly addresses technologies required to support the grid to integrate more renewable generation, and 'enablers' such as inverters, demand management systems, electricity market design and infrastructure planning. These fall under the second category of 'Emerging and Enabling Technologies'. The Statement does, however, acknowledge the role these second-order technologies and activities will play in helping to realise the potential of the five priority technologies.

Most promising is the mention in the Statement of the legislative amendments being tabled in respect of the Clean Energy Finance Corporation Act 2012 to set up the $1bn Grid Reliability Fund, which was announced in concept by the Federal Government last year. The intention is that the Clean Energy Finance Corporation will apply these funds towards investment in generation, energy storage, grid stabilising technologies, and transmission and distribution projects necessary to advance the well-overdue overhaul of our electricity networks and assist Australia to move to a cleaner energy system.

What's next?

The 'networks issue' presents both challenges and opportunities for the private sector, governments and energy regulatory bodies. The identification of grid-scale energy storage as one of the five priority technologies in the Statement is a signal to the private sector of the opportunities which exist in terms of accessing funding to assist in the development of these assets. However, we think it is important that industry does not lose sight of the pressing need to address the impediments to private sector investment in clean energy assets and technologies caused by the networks issue, and continue to agitate for change in this area.

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