Australia flags caps to renewable energy connections in overhaul of power grid

Australia is seeking to overhaul its power grid to improve its stability as the fast uptake of renewable energy generation risks overburdening a transmission system originally built for more reliable but dirtier coal-generated energy. In a report published on Tuesday, regulators flagged plans for new caps to renewable connections to its power grid in a bid to reduce risks associated with network congestion amid the rapid growth of weather-dependent renewable power.

Connection caps on “renewable energy zones” with tender processes would help the orderly introduction of new generators, the report said, and the improved stability would reduce uncertainty for investors and benefit customers in the long-run. Nearly two-thirds of coal-fired capacity in the National Electricity Market (NEM), one of the world’s largest interconnected electricity systems, is due to close by 2040. The NEM serves most of Australia.

Australia, the world’s top coal and gas exporter, faces the complex challenge of managing the rise of weather-dependent renewables and flexible power sources on its power grid as coal plants shut, while households increasingly turn to roof-top solar energy, batteries and electric vehicles.

“The record levels of intermittent generation along with major thermal generator closures demands a clear focus on reliability and investment in reliable generation,” said Angus Taylor, Australia’s Minister for Energy and Emissions Reduction in a separate statement.

“The NEM needs to adapt to address risks to reliability, security and affordability … we need long-term signals for private sector investment in reliable generation and storage, to replace existing generators with like for like capacity.”

The Australian government is already backing some new grid links and power projects and building the Snowy 2.0 pumped hydro project, but warned against too much new transmission capacity.

The government previously said that gas, not solar or wind projects, would be key to the country’s transition towards cleaner energy generation.

Other proposals in the report include changing the way power reserves are managed, improving the accuracy of net demand forecasts, and publishing more market data.