APGAFeb 11, 2022 11:02:00 AM34 min read

2022 Draft Integrated System Plan Consultation

The Australian Pipelines and Gas Association (APGA) represents the owners, operators, designers, constructors and service providers of Australia’s pipeline infrastructure with a focus on high-pressure gas transmission. APGA’s members build, own and operate the gas transmission and processing infrastructure connecting natural and renewable gas production around the country to demand centres in cities and elsewhere. Offering a wide range of services to gas users, retailers and producers, APGA members ensure the safe and reliable delivery of 28 per cent of the end-use energy consumed in Australia and are at the forefront of Australia’s renewable gas industry, helping achieve net-zero as quickly and affordably as possible.

APGA welcomes the opportunity to contribute to the Australian Energy Market Operator (AEMO) 2022 Draft Integrated System Plan (ISP) Consultation (the Consultation).

APGA supports a net zero emission future for Australia by 2050[1]. As set out in Gas Vision 2050[2], APGA sees renewable gases such as hydrogen and biomethane playing a critical role in decarbonising gas use for both wholesale and retail customers. APGA is the largest industry contributor to the Future Fuels CRC[3], which has over 80 research projects dedicated to leveraging the value of Australia’s gas infrastructure to deliver decarbonised energy.

APGA is pleased to see three key changes in AEMO’s approach within the 2022 Draft ISP.

Recognition of the rapidly advancing pace of change in the Australian energy market through utilisation of the Step Change Scenario as the central scenario;
Recognition that Gas Power Generation (GPG) will continue to be critical within the generation mix through to 2050; and
Recognition that a future in which Australia maximises its renewable gas potential is the future in which net zero emissions energy could be achieved fastest and with the greatest opportunity for the Australia economy.

APGA provides the following feedback to assist in the development of the best possible ISP.

The importance of hydrogen infrastructure

The Hydrogen Superpower scenario currently only considers transportation of energy as electrons, with all hydrogen produced at demand sites. Section 3.12 of the 2021 Inputs, Assumptions and Scenarios Report (IASR) indicates AEMO is aware of the options for hydrogen and will consider modelling transportation of hydrogen as gas in future ISPs. APGA considers this an issue of paramount importance.

Hydrogen pipelines are a significantly more cost-effective energy transport and storage solution compared to electricity powerlines, utility scale batteries and pumped hydro energy storage. This has been shown in a recent report commissioned by APGA which directly compares these options across various distances and throughputs[4]. Hydrogen customers may be able to access lower hydrogen costs when hydrogen is produced at the electricity source and piped to the customer in comparison to when electricity is transmitted to electrolysis closer to the customer.

This report aligns with the 2020 Frontier Economics report which indicates that using 100% green hydrogen to decarbonising gas use would come at around half the additional cost of electrifying gas demand. The lower cost of hydrogen infrastructure means that it is economically impractical to assume that all electricity used for hydrogen production would be supplied via the NEM. Access to lower cost energy transport and storage via hydrogen pipelines would have the following implications:

Where electricity for the purposes of significant (greater than 100MW) hydrogen production is currently considered to be supplied via the NEM, it will be much more cost effective for electrolysis to be supplied electricity from behind the meter variable renewable electricity (VRE) and for hydrogen to be piped to the customer; and
Where the electrification of customer energy demand could technically be supplied by hydrogen, the lower cost of hydrogen infrastructure compared to electricity infrastructure could result in a lower net zero energy cost for customers through hydrogen rather than electrification, leading to lower and less challenging rates of electrification required for Australia to achieve its net zero emission goal.

These implications warrant further investigation in order to deliver the lowest costs to consumers. The high levels of electrification currently modelled under the Step Change scenario may change if interconnected with a viable hydrogen market. APGA recommends that Hydrogen Pathway 3 from Figure 54 of the IASR should be investigated as a matter of priority for both domestic and export applications.

APGA is not advocating for a future in which all energy transport and storage occurs via energy pipelines. Rather, APGA anticipates a future in which the relative merits of both pipeline and powerline infrastructure result in a blended, highly integrated system. This is not only theory but the practical experience of today’s energy market in which gas and electricity networks operate side by side to deliver near equivalent volumes of energy to Australian households and businesses today.

Existing technologies offer predictable NEM reliability

Heavy reliance on depletable utility scale energy storage and opt-in Distributed Energy Resources (DER) means the 2022 Draft ISP reliability strategy relies upon technologies less reliable than the current NEM. The latter of these is of most concern. Energy customers will have the ability to remove their DER devices as they choose, disrupting the ability for the NEM to rely upon these resources. APGA recognises that economic models struggle with redundancy while physical models thrive on it, however balance is needed between the two modelling approaches on the topic of reliability.

In 2021, the Grattan Institute proposed that 90% variable renewable generation combined with 10% firm, dispatchable generation could deliver the lowest cost net-zero NEM by 2050[5]. Grattan identify mature technologies such as GPG (with offsets) as central to this opportunity. APGA notes that firm dispatchable generation currently drops below 10% by 2038-39 in the 2022 Draft ISP Step Change scenario, and below 6% by 2050.

Key to the forms of dispatchable generation identified as being critical by Grattan is the ability for today’s highly reliable dispatchable generation market to draw its fuel supply from much larger adjacent markets. By drawing from these much larger markets, dispatchable generation like gas power generation rarely finds itself without access to fuel supply. This is a significant difference between the dispatchable generation of today and the dispatchable energy storge technologies proposed as the basis for grid reliability under the Step Change scenario.

Development of a ‘Plan A’ and ‘Plan B’ for energy security under the central Step Change scenario could help AEMO ensure deeply reliable technologies are considered alongside part of the plan in case options relying on more discrete energy stores or public energy market engagement prove unreliable.

Existing technologies offer predictable NEM security

The 2022 Draft ISP security strategy relies upon advanced inverters with grid-forming capabilities. AEMO notes in its Application of Advanced Grid-scale Inverters in the NEM white paper that the potential [of advanced inverters] is not demonstrated at the necessary scale, and focused engineering development is urgently needed to address the remaining issues and realise the promise of this technology[6]. This reliance on advanced inverters is despite there being technologically mature energy security options available upon which AEMO could have founded the 2022 Draft ISP central Step Change scenario.

In recognition of both the importance and complexity of energy security in the NEM, APGA proposes that the reliance on ‘potential’ technologies within the ISP be carefully considered by AEMO, especially where proven technologies exist and could have been included within its modelling[7]. Development of a ‘Plan A’ and ‘Plan B’ for energy security under this scenario could ensure appropriately mature technologies are considered alongside ‘potential’ technologies.

Recognising that it may not be practical to undertake significant remodelling and amendment of the 2022 Draft ISP prior to its delivery, APGA provides recommendations ahead of the 2022 ISP delivery alongside recommendations ahead of 2024 ISP delivery:

2022 ISP recommendations

Recognise that energy transport and storage by pipeline could result in lower cost, lower complexity scenarios, including where hydrogen is considered, in particular under the Hydrogen Superpower scenario
Consider the uptake of an adjacent lower cost hydrogen supply chain may significantly reduce anticipated volumes of electrification, reducing the expense of addressing complexities arising from modelled levels of electrification, including under the Step Change scenario.
Flag that maintaining sufficient GPG capacity to ensure grid reliability is expected to require new GPG development across the coming decades as GPG reliability supports much greater uptake of VRE generation.
Better investigate the role of existing technologies can ensure security of energy supply in a Net Zero NEM and could be used if ‘potential’ advanced inverters with grid-forming capabilities do not eventuate.

2024 ISP (and associated activities) Recommendations

All scenarios to consider hydrogen and other renewable gases within the ISP gas model as energy solutions which have the potential to provide a lower cost alternative to electrification of gas and transport energy demand. This would include implications for how much bolstering of the NEM will be required to facilitate lower anticipated levels of electrification following higher uptake of hydrogen and other renewable gases, as well as reductions in the levels of grid storage required following broad access to lower cost hydrogen pipeline energy storage.
All scenarios considering hydrogen and other renewable gases to consider hydrogen energy transport and storage via pipeline, investigating Hydrogen Pathway 3 from Figure 54 of the IASR for both domestic and export applications as a matter of priority.

APGA considers there is sufficient evidence to be confident that effective consideration of hydrogen infrastructure options will show that improved outcomes are achieved when gas infrastructure is widely deployed in a large-scale hydrogen industry.

Include a ‘Plan A’ and ‘Plan B’ for ensuring NEM reliability in scenarios with high reliance on DER and shallow battery storage for grid reliability purposes in order to mitigate the risk of these aspects undermining the broader generation basis of the scenario. Plan A should include proven, mature energy reliability solutions which exist today to ensure NEM reliability.
Include a ‘Plan A’ and ‘Plan B’ for ensuring NEM security in scenarios with high reliance on ‘potential’ technologies in order to mitigate the risk of these technologies not coming to fruition. Plan A should include proven, mature energy security solutions which exist today to ensure NEM security.

We welcome further engagement with AEMO on the finalisation of the 2022 ISP and look forward to working more closely with AEMO towards a further step changes in electricity – gas system interaction ahead of the 2024 ISP.

To discuss any of the above feedback further, please contact APGA National Policy Manager Jordan McCollum on +61 422 057 856 or jmccollum@apga.org.au.

Yours Sincerely,

STEVE DAVIES

Chief Executive Officer

Australian Pipelines and Gas Association

Detailed Feedback

APGA appreciates the opportunity to engage with AEMO on the 2022 Draft ISP and seek to provide feedback across three topics:

Changes since the 2020 ISP
Potential for improvement within the Draft 2022 ISP
Proposed actions ahead of the 2022 ISP and 2024 ISP

APGA hopes to engage further with AEMO on these topics and more in the leadup to the 2022 ISP delivery, and in the leadup to Draft 2024 ISP development.

1. Changes since the 2020 ISP

APGA has observed a range of improvements in AEMO’s approach to ISP development since the 2020 ISP. Three key areas observed by APGA include how AEMO has approached:

The pace of change in the Australian energy market
The role of Gas Power Generation in the NEM
The value of renewable gases in a net zero emission future

1.1. The pace of change in the Australian energy market

The rapid pace of change in the Australian energy market is clear. Acknowledging this pace of change is necessary for AEMO to ensure change can be best anticipated and managed.

By considering progressive scenarios within the ISP, AEMO stimulates further conversation, ambition, and activity. In doing so, AEMO contributes to energy industry development. APGA values the enhanced activity driven by AEMO’s Hydrogen Superpower scenario and hopes that industry developments can lead to hydrogen and renewable gas increasingly feature in central scenarios of ISPs to come.

1.2. The role of Gas Power Generation in the NEM

GPG forms an important part of AEMO’s reliability and security strategy in the Step Change scenario, with no reduction in GPG capacity before 2030 and an increase to over 9GW GPG Capacity by 2050. This need means that as old GPG retires, new GPG will need to be constructed to provide reliability and security to a high VRE NEM.

By supporting the reliability and security of the NEM, GPG ensures the lowest cost net zero NEM is achievable[8]^,[9],[10]. APGA supports the view put forward by AEMO’s Nicola Falcon in RenewEconomy’s Energy Insiders podcast, saying that it’s not economically efficient for [AEMO] to build that much more storage capacity just to better cover… …one or two periods in the year that it might be very, very high demand[11]. Nicola goes on to identify that peaking generation of some sort, whether it’s fuelled by natural gas in the future, whether it’s fuelled by green hydrogen, or some other sort of zero carbon fuel, [AEMO] see it still playing a really crucial role in helping to balance the system.

GPG today is a mature, high reliability form of dispatchable generation, ensuring that those regions which can reach high levels of VRE penetration are able maintain system reliability and security. It does so by combining GPGs fast start capabilities with the low-cost energy transport and storage via gas pipeline.

1.3. The value of renewable gases in a net zero emission future

AEMO’s Hydrogen Superpower scenario provides insight into what is possible if renewable gases are developed alongside renewable electricity. Having the shortest time to achieve net zero and the greatest economic growth opportunity for the nation, the Hydrogen Superpower scenario indicates the potential of the growing renewable gas industry.

The Hydrogen Superpower scenario is an excellent start in considering a renewable gas future in Australia. Increased consideration of hydrogen in transport, hydrogen for heating and the role of gas infrastructure in a hydrogen industry are all likely to deliver further improved outcomes. APGA looks forward to working with AEMO to increase consideration of hydrogen and renewables gases in future ISPs.

The CSIRO places hydrogen technologies, including hydrogen electrolysers, fuel cells, internal combustion engines, and pipelines, all firmly at the highest Technology Readiness Level TRL 9. The technologies themselves are mature from a technical standpoint and are poised to deliver major cost reductions as the scale of deployment increases in the coming years.

2. Potential for improvement within the Draft 2022 ISP

APGA has identified a range of potential improvements which AEMO could apply to its current approach to 2022 Draft ISP development. Three key opportunities for improvement include:

Analysis of hydrogen infrastructure
Existing technologies offer predictable NEM reliability
Existing technologies offer predictable NEM security

2.1. Analysis of hydrogen infrastructure

The Hydrogen Superpower scenario includes the earliest pathway to a net zero NEM and represents the greatest economic opportunity for the nation. This scenario currently only considers the use of electricity infrastructure to transport and store energy in a future hydrogen industry. This is highlighted in Section 3.12 of the IASR alongside a series of potential hydrogen pathways seen in Figure 54.

Figure 1: Figure 54 of the AEMO 2021 Inputs, Assumptions and Scenarios Report

Within this section of the IASR, AEMO goes on to note that Pathway 3 may be explored in future ISPs. Pathway 3 contemplates the production of hydrogen adjacent to the resources, and transporting hydrogen by truck, rail tanker or dedicated pipeline. APGA emphasises the importance of exploring the pipeline aspect of Pathway 3 through development of the 2024 ISP, both in the export context and the domestic context.

Today, pipelines transport more energy around Australia than electricity infrastructure does. In a study commissioned by APGA, GPA Engineering performed technoeconomic analysis comparing the cost of pipelines and powerlines across a series of like for like scenarios. APGA and GPA Engineering are releasing this report and an associated summary report in the week following the due date of the 2022 Draft ISP consultation process. APGA has attached pre-release copies of both documents to its submission in support of AEMO continuing to develop its understanding of hydrogen and gas infrastructure.

This analysis identifies that energy transport costs less via pipelines than via powerlines in every modelled scenario. Importantly, this included analysis of hydrogen pipelines too, which also transport energy at significantly lower cost than powerlines in all scenarios. Analysis spanned distances measuring from 25km to 500km and considered energy throughput capacities from 10 terajoules per day (116MW, 70t H2 per day) to 500 terajoules per day (5,800MW, 3,520t H2 per day) to ensure no factor was misinterpreted.

Figure 2: Levelised Cost of Energy Transport data from Pipelines vs Powerlines report (attached)

The study also included analysis of the levelized cost of energy storage in pipelines, utility scale batteries and pumped hydro, showing once again that pipelines represent the lowest cost alternative. Storage volumes were assessed on an hours of design throughput basis, with 4hr, 12hr and 24hr energy storage intervals considered. Storing hydrogen in hydrogen pipelines was seen to cost 10’s to 100’s of times less than energy storage in batteries or pumped hydro across some scenarios.

Figure 3: Levelised Cost of Energy Storage data from Pipelines vs Powerlines report (attached)

While the lower prices are valuable, the energy supply chain implications of these costs combined with hydrogen production efficiencies are the real game changer for customer prices. As seen in the indicative comparable hydrogen value chains below, substantial reductions in hydrogen cost to customer can be achieved by transporting and storing energy via hydrogen pipelines. The opportunity to avoid transporting the energy lost through the electrification process gives hydrogen pipelines an even greater edge than their lower upfront cost alone.

Figure 4: High level estimation of hydrogen cost for customer via example hydrogen supply chains

APGA recognises that there is a myriad of different hydrogen supply chain configurations. For some supply chains, energy cost for customers will be lower using pipelines, and for others, energy cost for customers will be lower using powerlines. APGA does not attempt to state that all energy transport should occur via pipelines. Rather, APGA anticipates that a balance of pipelines and powerlines will achieve the least cost energy system throughout Australia.

APGA looks forward to working with AEMO to ensure consideration of this information for future scenarios in the 2024 ISP.

2.2. Existing technologies offer predictable NEM reliability

When looking to the future of the NEM, the central scenario of the 2022 Draft ISP relies heavily on utility scale energy storage, distributed storage and DER. These options will be reliant on VRE generation via the very same market which they provide reliability for. APGA is concerned that these technologies may not always have the depth and certainty of energy availability provided by todays’ market backed dispatchable generation options.

Mature technologies including GPG address grid reliability without the inherent risks of shallow energy storage options. They can do so in the future with a net zero outcome10. Whether fuelled by natural gas today (potentially decarbonised via offsets tomorrow) or supplied by renewable gas market in the future, GPG represents a deep, long-term solution to the challenge of reliability in a net zero NEM.

APGA has already noted above that AEMO sees a long-term role for GPG in the NEM. AEMO should consider maintaining deep dispatchable generation fuelled by secondary markets at or above the limit recommended within the Grattan Institute’s Go for Net Zero report. The Grattan report proposes 10% dispatchable generation such as GPG (with offsets) alongside 90% variable renewable generation as the least cost approach to delivering a reliable net zero NEM. For reference, the 2022 Draft ISP central scenario sees firm dispatchable generation dropping below 10% by 2038-39 and below 6% by 2050.

Towards the top of the list of AEMO’s priorities is the avoidance of blackouts across the NEM. AEMO know that mature technologies exist to secure grid reliability. APGA hopes that this knowledge combined with more progressive views around renewable gases and emissions offsets can lead to more reliable solutions to the NEM reliability challenge which lays in Australia’s high VRE future.

2.3. Existing technologies offer predictable NEM security

Grid security within the NEM is one of the most crucial topics to get right in relation to Australia’s net zero energy future. It is also one of the most complex topics, making it one of the hardest topics on which to have robust, public facing debate and discussion. There are three macro-level facts which can be stated about this challenge:

If sufficiently advanced grid forming inverters were to be developed and demonstrated to have sufficient fidelity to no longer require synchronous inertia within the NEM, this would be a boon for decarbonisation efforts globally and a huge leap forward in the global ability to achieve maximum possible VRE penetration in electricity markets;
Sufficiently advanced grid forming inverters are yet to be developed and demonstrated to have sufficient fidelity to no longer require synchronous inertia within the NEM;
Without sufficiently advanced grid forming inverters having been developed and demonstrated to have sufficient fidelity to no longer require synchronous inertia within the NEM, synchronous inertia is unequivocally required to ensure energy security within the NEM.

APGA know that system security is an AEMO priority, with significant work being undertaken throughout the Future Power System Security Program[12]. Improvements can be seen in overall NEM security, with recent improvements evident from the application of Primary Frequency Response measures[13]. Even after these improvements however, AEMO still regularly intervenes in the high Inverter Connected Generation (ICG) South Australia NEM Region[14]. Measures available to AEMO to date have been insufficient to fully secure the NEM without dispatching synchronous generation to physically provide synchronous inertia.

Despite this, and the availability of mature synchronous generation technologies, the central scenario of the 2022 Draft ISP identifies ‘potential’ advanced inverters with grid forming capabilities forming a key role in their future energy security strategy. Synchronous generation technologies such as GPG, whether fuelled by abated natural gas, hydrogen, or other forms of renewable gas, represent a here and now net zero solution to NEM security.

APGA considers that to great an emphasis has been placed on ‘potential’ advanced inverters and recommends that more emphasis be placed on existing options.

APGA provide additional commentary on two key subjects relevant to this section:

Energy security case study: South Australia NEM region
Relative technology maturity: Hydrogen and grid forming inverters

2.3.1. Energy security case study: South Australia NEM region

The South Australian NEM region has been Australia’s case study for an increasingly high VRE grid. The South Australian NEM region has had many renewable energy successes, including Australia’s first experience of VRE contributing 100% of South Australia’s net NEM region energy demand. That said, it is important to note that this has only been achieved on a net basis, and that behind every South Australian Net 100% VRE day lies support by a foundation of synchronous generation.

Since the system black event in 2016, AEMO have paid particular attention to energy security in this region, resulting in market intervention to ensure enough synchronous generation is maintained in the NEM region to ensure secure grid operation. While this has reduced over time, as a proportion of total generation, this has never reached zero. Analysis of total South Australian NEM generation across the past year displays that on no day did synchronous generation ever account for less than 17% of total NEM generation during this period. On each of the 21 days in which the South Australian NEM region could claim to have covered 100% of the state’s net electricity demand with renewable electricity, the quantity of electricity exports were either greater than or equal to the quantity of synchronous generation on the day.

Figure 5: Ratio of Synchronous and Inverter Connected Generation in the South Australian NEM Region (1 Feb 2021 - 21 Jan 2022)[15]

This ratio is improving over time, and APGA congratulate all involved for reducing this ratio as much as possible. That said, it is clear that some level of synchronous inertia is required within the South Australian NEM region at all times. There are two mature technology approaches to the net zero emission provision this inertia, and one ‘potential’ approach:

Mature technology approach 1: Generating electricity through synchronous generation using carbon free or abated fuels
Mature technology approach 2: Using synchronous condensers as demand side inertia
‘Potential’ technology approach: Using advanced inverters with grid forming capabilities

The challenge of energy security is demonstrated here through the South Australian example – a scenario which cannot cover 100% of net state energy demand without generating and exporting significant quantities of synchronously generated electricity. When planning for a secure, least cost net zero NEM, all pathways to providing energy security must be considered. A secure, net zero NEM could be achieved within the macro parameters of the central Step Change scenario through mature technologies, providing a greater chance of success for a 100% net zero NEM on a gross generation basis.

2.3.2. Relative technology maturity: Hydrogen and grid forming inverters

Throughout this submission, APGA attributes the term ‘potential’ to advanced inverters with grid forming capabilities as the term ‘potential’ is used by AEMO in describing this technology[16]. In this white paper, AEMO notes:

With sufficient attention, focus, and investment, advanced inverter technology may be able to address many of the challenges facing the NEM today for the integration of renewable (inverter-based) resources. However, at present this potential is not demonstrated at the necessary scale, and focused engineering development is urgently needed to address the remaining issues and realise the promise of this technology.

APGA anticipates that hydrogen sceptics may attempt to draw parallels between the technological maturity of advanced inverters with grid forming capabilities and hydrogen technologies. APGA notes that such parallels, if drawn, would be inaccurate.

The 2019 CSIRO Hydrogen Research, Development and Demonstration report considers hydrogen technologies against the internationally recognised Technology Readiness Level (TRL) framework[17]. CSIRO puts hydrogen electrolysers, fuel cells, internal combustion engines, and pipelines all firmly at the highest ranking of TRL 9. Whilst cost reductions are still required to achieve more cost competitive hydrogen production and fuel cell utilisation, the technologies themselves are mature from a technical standpoint and can be deployed today.

Additionally, utility scale hydrogen production is occurring across the globe, with the current round of Australian hydrogen projects being developed on par with the worlds’ largest hydrogen production facility in Japan[18],[19]. South Korea recently opened the world’s largest hydrogen fuel cell power plant with a capacity of 78.96MW of dispatchable renewable generation capacity, while GE have been producing 100% hydrogen capable turbines for years[20],[21]. The technology required for 100% Hydrogen energy value chains are mature today, unlike that of a 100% synthetic inertia NEM.

More importantly however, such comparison is unfair on those striving to develop advanced inverters with grid forming capabilities. The challenges faced by a 100% ICG capable NEM and a 100% hydrogen energy value chain are very different. The technological development of grid forming inverters is simply more difficult than producing, transporting, storing, and using hydrogen.

3. Proposed actions ahead of the 2022 ISP and 2024 ISP

In light of changes identified since the 2020 ISP and potential for improvement within the Draft 2022 ISP, APGA proposes a range of actions through which AEMO could greatly improve ISP development. In recognition of the limited time ahead of 2022 ISP delivery, APGA recommends AEMO undertake more achievable actions ahead of the 2022 ISP, alongside more involved actions which AEMO could take ahead of the 2024 ISP.

3.1. Pre 2022 ISP

APGA proposes that AEMO prioritise ensuring that the Australian energy industry and general public are adequately and accurately informed of certain truths within the 2022 ISP.

Recognise that energy transport and storage by pipeline could result in lower cost, lower complexity scenarios, including where hydrogen is considered

As discussed in Section 2.1 of its submission, APGA identifies that by only considering electricity transmission and electricity storage technologies, the current version of the Hydrogen Superpower scenario misses out on the opportunity of lower cost hydrogen pipeline transport and storage. By utilising hydrogen infrastructure in place of electricity infrastructure, AEMO could achieve a lower cost, lower complexity solution for both the NEM and the broader Australian energy system under this scenario.

APGA propose that AEMO note within the 2022 ISP that the cost and complexity found within the Hydrogen Superpower scenario may be able to be reduced through the utilisation of hydrogen pipeline infrastructure as contemplated in hydrogen pathway 3 seen in Figure 54 of the IASR.

Consider the uptake of an adjacent lower cost hydrogen supply chain may significantly reduce anticipated volumes of electrification

Large-scale electrification within AEMO scenarios leads to an increase in NEM complexity in order to address larger variations in NEM supply and demand. This is seen to require significant infrastructure investment, at significant cost, including in the Step Change scenario. Much of the complexity caused by mass electrification could be avoided through the uptake of an adjacent, potentially lower cost hydrogen supply chain. This is not yet considered in AEMO’s scenarios beyond the Hydrogen Superpower scenario. The Inclusion of large-scale hydrogen uptake may significantly reduce the currently anticipated volume of electrification, and as such, the expense of addressing the complexities which arise from the anticipated volume of electrification.

APGA propose that AEMO note within the 2022 ISP that the complexities caused by assumed levels of electrification seen in the Step Change and other scenarios may be reduced if a parallel hydrogen energy supply chain develops. Such an outcome would avoid much of the costly investment required to upgraded then NEM to meet all energy demand in a full electrification future.

The need for new GPG development to ensure the reliability of a high VRE NEM

After past ISPs proposed reductions in GPG capacity, new GPG development required to maintain sufficient GPG capacity under the Step Change scenario may be controversial. Investors and financiers alike will need certainty to combat incorrect views that no further GPG investment is required in the NEM.

APGA proposes that AEMO note within the 2022 ISP that the levels of GPG required to maintain grid reliability under the Step Change scenario will require further investment in new and repurposed GPG across the coming decades.

Existing synchronous generation technologies will be needed ensure grid stability if ‘potential’ advanced inverters with grid-forming capabilities do not eventuate

The Step Change scenario relies upon ‘potential’ advanced inverters with grid-forming capabilities, not contemplating how AEMO would ensure NEM security if such technologies do not eventuate. In this event, APGA anticipates that AEMO would need to propose investments in traditional, mature technologies to maintain energy security. Without prior advice of this necessity, such investments to secure grid security may receive opposition, impeding timely and cost-effective deployment, ultimately risking the energy security of the NEM.

To mitigate this risk, APGA proposes that AEMO note within the 2022 ISP that traditional, mature technologies would need to be deployed to ensure energy security within the NEM in the event that ‘potential’ technologies advanced inverters with grid-forming capabilities do not eventuate.

3.2. Pre 2024 ISP

In the leadup to the 2024 ISP, APGA proposes the following changes in AEMO development of the ISP:

All scenarios to consider hydrogen and other renewable gases within the ISP gas model as energy solutions
All scenarios considering hydrogen and other renewable gases to consider hydrogen energy transport and storage via pipeline
A ‘Plan A’ and ‘Plan B’ for ensuring NEM reliability
A ‘Plan A’ and ‘Plan B’ for ensuring NEM security

All scenarios to consider hydrogen and other renewable gases within the ISP gas model

The opportunity for renewable gases such as hydrogen and biomethane to compete with electrification will impact the economic validity of all scenarios, not just the Hydrogen Superpower scenario. APGA recognises that the Hydrogen Superpower scenario was AEMO’s important first foray into considering renewable gases acting alongside renewable electricity in a net zero future, but not contemplating their broader impact in future ISP scenarios risks inefficient over investment in the NEM. Australian energy customers will opt for the least cost net zero energy option regardless of whether there is inefficient over investment to enable all energy to pass through the NEM.

Inefficient over investment in electricity infrastructure in the NEM has been seen in the past to result in unnecessarily higher energy costs for Australian homes and businesses[22]. AEMO has an obligation to consider the impacts of a future in which renewable gases compete with renewable electricity to ensure inefficient over investment can be avoided.

APGA proposes that all scenarios considered under the 2024 ISP include consideration of potential renewable gas uplift through to 2050 in order to demonstrate the levels of electrification and associated NEM complexity which could be avoided through renewable gas uptake. While this is preferred to occur through all scenarios, APGA could understand a reluctance to significantly modify 2022 scenarios ahead of 2024. In this case, as a minimum APGA proposes that a “Diverse Step Change” scenario be considered in which renewable gases grow along a similar trajectory experienced by renewable electricity across the past decades.

AEMO has at least 18 months to prepare for the 2024 ISP. APGA expects that this would be sufficient lead time for AEMO to develop the necessary capability to apply greater consideration to renewable gases ahead of the 2024 ISP. APGA notes that the Future Fuels CRC is researching and developing integrated electricity and gas system models that could be of use to future ISPs.

All scenarios considering hydrogen and other renewable gases to consider hydrogen energy transport and storage via pipeline

Alongside the opportunity for renewable gases to compete with electrification, the opportunity for lower cost pipeline infrastructure to compete with electricity infrastructure will impact the economic validity of all scenarios in which renewable gases are considered. Preparing for all energy destined for electrolysis to pass through the NEM under the Hydrogen Superpower scenario (or any future scenario) risks inefficient over investment in the NEM. Hydrogen producers will seek the least cost pathway to market regardless of whether inefficient over investment in the NEM occurs, and Australian renewable gas customers will opt for the least cost net zero energy option regardless of whether inefficient over investment occurs as well.

Inefficient over investment of electricity infrastructure in the NEM has been seen to result in unnecessarily higher energy costs for Australian homes and businesses in the past22. AEMO has an obligation to consider the impacts of a future in which renewable gases compete with renewable electricity to ensure inefficient over investment can be avoided.

APGA proposes that the 2024 ISP consider the utilisation of lower cost pipeline infrastructure where renewable gases are considered within the energy system, in particular with relation to hydrogen pipelines. APGA anticipates that the integration of lower cost pipeline infrastructure into the broader Australian energy system will lead to an overall lower cost energy system, much like gas pipelines allow for today.

A ‘Plan A’ and ‘Plan B’ for ensuring NEM reliability

Ensuring energy reliability in the NEM is a key deliverable of the ISP. APGA recognises that a future in which low reliability forms of dispatchable generation dominate reliability in the NEM is a possible future which needs to be prepared for. AEMO also needs to be prepared for a future in which distributed storage, DER and shallow utility scale storage are insufficient to ensure reliability in the NEM. AEMO are highly experienced in the application of mature technologies which are able to ensure energy reliability in the NEM and have the opportunity to provide a ‘Plan A’ and ‘Plan B’ for NEM reliability.

APGA proposes that AEMO develop a ‘Plan A’ and ‘Plan B’ for at least its central scenario to ensure the necessary actions required to ensure NEM reliability are taken in the event that current proposed options do not eventuate. Through such an approach, ‘Plan A’ would represent the no-risk approach to ensuring NEM reliability, using mature net zero emission technologies made deeply dispatchable via the support of large reliable energy markets. ‘Plan B’ could then focus on ensuring NEM reliability through shallow battery storage, distributed storage, and DER solutions in preparation for the event that this outcome unfolds.

A ‘Plan A’ and ‘Plan B’ for ensuring NEM security

Ensuring energy security in the NEM is a key deliverable of the ISP. APGA recognises that a future in which ‘potential’ advanced inverters with grid-forming capabilities ensure security in the NEM is a possible future which needs to be prepared for. AEMO also needs to be prepared for a future in which these technologies do not eventuate. AEMO are highly experienced in the application of mature technologies which are able to ensure energy security in the NEM and have the opportunity to provide a ‘Plan A’ and ‘Plan B’ for NEM security.

APGA proposes that AEMO develop a ‘Plan A’ and ‘Plan B’ for at least its central scenario to ensure the necessary actions required to ensure NEM security are taken in the event that ‘potential’ advanced inverters with grid-forming capabilities do not eventuate. Through such an approach, ‘Plan A’ would represent the no-risk approach to ensuring NEM security, using mature net zero emission technologies which are able to provide physical synchronous inertia. ‘Plan B’ could then be founded upon ensuring NEM security via ‘potential’ advanced inverters with grid-forming capabilities.

Attachment 1: Pipelines vs Powerlines: a summary

Attachment 2: Pipelines vs Powerlines – A Technoeconomic Analysis in the Australian Context

[1] APGA Climate Statement
https://www.apga.org.au/apga-climate-statement

[2] Gas Vision 2050, APGA

https://www.apga.org.au/sites/default/files/uploaded-content/website-content/gasinnovation_04.pdf

[3] Future Fuels CRC Website
https://www.futurefuelscrc.com/

[4] Please see attached to this submission:
Pipelines vs Powerlines: a summary; and
Pipelines vs Powerlines: A Technoeconomic Analysis in the Australian Context

[5] Go for Net-Zero, The Grattan Institute 2021
https://grattan.edu.au/wp-content/uploads/2021/04/Go-for-net-zero-Grattan-Report.pdf

[6] Application of Advanced Grid-scale Inverters in the NEM, AEMO 2021
https://aemo.com.au/-/media/files/initiatives/engineering-framework/2021/application-of-advanced-grid-scale-inverters-in-the-nem.pdf

[7] In anticipation of rebuttal, Hydrogen Electrolyzer technologies have been identified as technologically mature by the CSIRO in their 2019 Hydrogen Research, Development and Demonstration report
https://www.csiro.au/en/work-with-us/services/consultancy-strategic-advice-services/csiro-futures/futures-reports/hydrogen-research

[8] Potential for Gas-Powered Generation to support renewables, Frontier Economics 2021
https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/210219_potential_for_gpg_to_support_renewables_-_final_report_0.pdf

[9] The role of gas in the transition to net-zero power generation, Frontier Economics 2021
https://www.apga.org.au/sites/default/files/uploaded-content/field_f_content_file/frontier-economics-report-stc.pdf

[10] Go for Net Zero, The Grattan Institute 2021
https://grattan.edu.au/wp-content/uploads/2021/04/Go-for-net-zero-Grattan-Report.pdf

[11] Transcript: Energy Insiders Podcast interview with Alex Wonhas, Energy Insiders Podcast, RenewEconomy 2021
https://reneweconomy.com.au/transcript-energy-insiders-podcast-interview-with-alex-wonhas/

[12] Future Power System Security Program, Australian Energy Market Operator 2022
https://aemo.com.au/initiatives/major-programs/past-major-programs/future-power-system-security-program

[13] Implementation of the National Electricity Amendment (Mandatory Primary Frequency Response) Rule 2020, Australian Energy Market Operator 2022
https://aemo.com.au/-/media/files/initiatives/primary-frequency-response/2022/pfr-implementation-report-v21-20-jan-22.pdf?la=en

[14] Directions to SA generator during billing weeks 37 to 40 2021 (and reports from previous periods), Australian Energy Market Operator 2022
https://aemo.com.au/energy-systems/electricity/national-electricity-market-nem/nem-events-and-reports/market-event-reports/directions-to-a-sa-generator-during-billing-weeks-37-to-40-2021

[15] OpenNEM Website
https://opennem.org.au/energy/nem/

[16] Application of Advanced Grid-scale Inverters in the NEM, AEMO 2021