Submission to: Australian Energy Market Operator’s Draft Inputs, Assumptions and Scenarios Workbook Consultation 2021

26.01.21 By
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Overview

The Climate Council thanks the Australian Energy Market Operator for this opportunity to contribute to the development of the 2021 Inputs, Assumptions and Scenarios Report (IASR), and the development of the 2022 Integrated System Plan (ISP). We would like to congratulate the forecasting team on bringing together the insights gained in the early workshops so thoroughly and look forward to engaging further in future.

Our feedback on the draft report cuts across several disparate areas: some narrow and some broad. Our most pressing concerns relate to the ‘Diversified Technology’ scenario. The Climate Council does see merit in developing a scenario that assumes greater diversity of generation and storage technologies. That said, we feel that this particular scenario and its assumptions are quite implausible and struggle to see how this scenario could be useful for any stakeholder at present.

We believe that its output would likely be quite likely to be misleading as to the possible future of Australia’s largest grid. As a result, we feel that this scenario, as currently written, would have a detrimental effect on sensible efforts to plan electricity network infrastructure and suggest that it needs considerable on those grounds detailed below.

The Climate Council recommends the following:

Diversified Technology scenario recommendations

Recommendation 1. The Diversified Technology scenario featured in the draft IASR does not align with the Diversified Technology scenario in CSIRO’s GenCost. This mislabelling is likely to mislead stakeholders relying on the IASR and the publications that build on it. The Operator should not attempt to obfuscate what this scenario is.

Recommendation 2. There is no realistic prospect of stable, consistently low gas prices across the next 20 years on the Australian east coast. While averages may be lower or higher depending on various assumptions, the next20 years will be defined by price volatility. Any work building on the IASR needs to factor in this inherent volatility, including extreme short term spikes and crashes which will affect the economics of gas in the NEM. The Operator should consider alternative means to model gas prices that factor in the effects of this volatility.

Recommendation 3. It is not sufficient to simply assume two decades of consistently low gas prices without specifying the means by which this will be accomplished. The various mechanisms that might be implemented to distort the price of gas in this way will have different consequences for Australia’s energy networks, including the NEM.For this scenario to have any utility at all, a specific and realistic mechanism to reduce the price of gas must be assumed and transparently disclosed.

Recommendation 4. The Diversified Technology scenario assumptions currently state that the internationally agreed goal of limiting global temperature increases to well below 2°C above preindustrial levels can be met while Australia free-rides on the decarbonisation efforts of other countries. This is quite simply not possible and there is no realistic prospect of meeting an RCP 2.6 pathway without Australia acting in a way that is commensurate with that goal. All references to meeting the global goal should be removed from this scenario, and the consequences of this failure to act on the grid, and on the Australians relying on it, should be appropriately considered.

General recommendations

Recommendation 5. The Operator should be clearer about the role of the Central scenario.

Recommendation 6. The Operator should confirm that the implementation of SSPs in the IASR has been conducted correctly by incorporating external advice from recognised experts in the field.

Recommendation 7. We suggest that the Operator revisit assumed emissions intensities in the NEM to implement recent changes to reporting and the most up-to-date science.

Recommendation 8. It is implausible that sustained low coal and gas prices would occur under pressure to decarbonise. The Operator should revisit the assumed fuel prices in those scenarios with high levels of decarbonisation.

Recommendation 9. We encourage the Operator to give the unique features and prospects of offshore wind more detailed consideration in the IASR and ISP than has occurred so far.

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