National Electricity Market: dispatchable energy storage for firming capacity
The National Electricity Market (NEM) will require significant investments in dispatchable energy storage to support growing renewable energy generation and the future retirement of coal-fired generators.
The 2019 Australian Infrastructure Audit identified that new forms of large-scale energy storage are increasingly available, including pumped hydroelectric and battery assets.
Introduction of new firming capacity will complement variable renewable energy sources and support the transition to the new electricity mix. However, without sufficient dispatchable capacity, there is a risk of power outages and load shedding in the NEM.
Dispatchable storage can absorb surplus energy in off-peak periods and release it when it is most needed to ensure reliability in the NEM.
In June 2022, the Australian Energy Market Operator (AEMO) released the 2022 Integrated System Plan (ISP), which forecasts that approximately 63 gigawatts (GW) of firm dispatchable capacity and additional power system security services will be needed by 2050. This is to firm up distributed energy PV and utility-scale variable renewable energy, such as solar farms and wind farms. .
Storage options range from large-scale investments (such as utility-scale pumped hydro) to smaller battery storage facilities.
The Infrastructure Priority List separately includes an Early-Stage Proposal for the expansion of Renewable Energy Zones in the NEM.
Potential options to address the proposal include:
- distributed batteries
- large-scale battery energy storage systems
- utility-scale pumped hydro
- gas-fired generation
- wholesale demand response.
It is likely that a diverse mix of technologies will be required to support the NEM.
The 2021 Australian Infrastructure Plan identifies that the energy sector is fundamentally changing — from how, where and when energy is generated and how it is transported and stored, to who participates in the market and how users pay for it. That the Plan also identifies that the Energy Security Board (ESB) has been tasked by Energy ministers with developing reforms through the Post-2025 market design project to ensure a fit-for-purpose market design for the NEM.
The NEM is a wholesale market that connects generators and retailers across the six eastern and southern states and territories in Australia. Western Australia and the Northern Territory are not connected to the NEM.
The Australian Energy Market Commission (AEMC) develops the rules by which the market must operate.
The Australian Energy Regulator (AER) enforces the rules and makes judgements on the regulatory proposals of monopoly network operators.
As AEMO handles the day-to-day operations of the electricity and gas markets, we encourage them to continue to work with AEMC, AER, ESB, government and private sector asset owners and operators to identify options for firming capacity and energy storage to support legislated renewable energy targets and to support the Post-2025 market design.
Refer to Infrastructure Glossary for terms and definitions.