Australia’s current energy system is aging, inefficient and polluting. In the transition to a greener National Electricity Market (NEM), the State Governments are playing an increasingly important role by setting stronger renewable energy and emissions reduction policies and targets, while the Federal Government is yet to determine on renewable energy policy beyond 2020. Power prices are rising as a result of the ongoing policy uncertainty, and a lack of new generation investments, etc.
This study, with different state and federal policy setups, calculates the least-cost combination of generation technologies, including high penetration of variable wind and solar, hydro, gas (open and closed cycle) and the existing black and brown coal, etc. that is deployed in each five year period between 2020 and 2050 to meet a demand profile (which growth due to increasing electrification for transport and industrial processes). The model uses the most updated cost projections for various generation technologies from CSIRO – the federal research agency and the Australian Energy Market Operator (AEMO). The model takes into account requirements of inertia in the grid, and the costs of augmenting large-scale transmission to accommodate access to high-quality renewable resources. There are 43 locations across the NEM with hourly data for wind and solar availability, and the model is constrained either by a national emission abatement target (i.e. 80% or 100% reduction) or state-level renewable energy targets.
Results show individually state-based Renewable Energy Target (RET) would lead to a sub-optimal generation mix (i.e. inefficient deployment of capital leading to higher electricity cost) for the National Electricity Market as the quality of intermittent renewable resources and access to geographic diversity would be limited. In comparison, “good” federal-level policy (e.g. National Emission Reduction Target) would facilitate system-wide generation and transmission planning by harnessing larger geographic distribution of renewable resources, which allows for a smoothing of the aggregate output of power for the collective benefit (i.e. increased system reliability and reduced electricity cost).
 Graham, P.W., Hayward, J, Foster, J., Story, O. and Havas, L. 2018, GenCost 2018. CSIRO, Australia.