The rise of Distributed Energy Resources (DERs) as a primary energy source in the Australian energy market together with the underutilisation of existing DERs creates a significant shift in value within the NEM.
Achieving optimal value for DERs is often the limited by incumbent supplier offerings (e.g. limitations of battery management systems for storage or supply-only offer of genset supplier) and poor DER orchestration strategies. These limitations are often the result of resistance to change or failure to adapt to new market opportunities that may disrupt incumbent models.
Even as DERs get cheaper, more powerful, and more plentiful, they remain chronically underutilised.
Figure 1: Forecast NEM Electricity Market capacity (GW)
On 30 July 2020, the Australian Energy Market Operator (“AEMO”) published the 2020 Integrated System Plan (“ISP”) for the Australian National Electricity Market. AEMO modelling projects DERs could provide 13% to 22% of total underlying annual NEM energy consumption[1] by 2040 with nearly 90% of electricity demand on the Australian electricity network met by renewable generation. According to BNEF, this could be as high as 45% of total capacity being located behind-the-meter by 2040.
The ISP forecasts that 63% of coal-fired generation is set to retire by 2040. In addition, dispatchable capacity primarily from co-ordinated DER storage is expected to grow to more than 70GW of capacity to replace the dispatchable coal-fired generation.
“By connecting millions of customer owned generators and energy storage systems to each other, networks can act as platforms which help match supply and demand and reduce the need for inefficient duplication of energy investments.”[2]
AEMO’s drive towards transitioning the energy market is not only supported by environmental benefits from a transition away from coal-fired generation, but also a significant shift to lowest cost generation from renewables. This shift is expected to bring more than $10bn of gross market benefits by 2040.
[1]Total annual underlying NEM energy consumption, including rooftop PV, and PVNSG (commercial-scale PV, behind-the-meter and <30 MW per installation).
[2]Energy Networks Australia/CSIRO – Electricity Network Transformation Roadmap: Final Report April 2017