Good morning.
I’d like to begin by acknowledging the Traditional Owners of the land, the Wurundjeri and Bunurong peoples, and pay my respect to their Elders past and present.
I’d also like to acknowledge that today marks the start of National Reconciliation Week, which is an opportunity for all of us to move forward together.
Thank you Andrew for inviting me to join you today for the EUAA National Conference, and for your engagement over a very long time with AEMO.
The candid input that you consistently provide, on the needs of large energy users, is critical to the work we do.
I also wanted to acknowledge the very significant role that large energy users play in the Australian economy as employers, investors, and engines of economic growth.
And of course, the role you play in the energy systems and markets that AEMO operates on both sides of the continent.
The demand from your operations shapes energy systems and energy markets, including reliability outcomes, system security and other operational settings, particularly at critical moments.
From AEMO’s perspective, we value the role you play in supporting a secure energy system for Australian consumers, both today and going forward.
So it’s a real pleasure to join you all today for this National Conference.
You’ve got a comprehensive agenda ahead of you today and tomorrow, so I thought it would be helpful to start with a snapshot of the energy system today.
I think you’d have to go back to the 1970s to find a time when geopolitics had a greater impact on Australia’s energy systems.
The impact of the conflict in the Middle East is being felt everywhere, from hip-pocket pain at the petrol pump, to the operations and budgets of every energy user in this room, right through to Australia’s national accounts.
As you’d expect, AEMO is working collaboratively to help manage these risks by supporting industry and providing advice to governments where necessary.
When this most recent conflict began, our first thought – probably like yours – was whether our energy systems would face a re-run of that very challenging winter in 2022, after Russia’s invasion of Ukraine.
The good news is that so far, the answer is no.
Thanks to investments in recent years, Australia has more generation and storage available than in 2022, market reforms have been implemented and regulatory settings are more flexible.
Gas supply is healthy, storages are full and prices remain stable.
So while we at AEMO remain alert but not alarmed, Australia’s energy systems and markets are more resilient today than they were in 2022.
That investment in new capacity has spanned both large and small-scale projects, and it means that our generation mix is less exposed to international commodity price shocks than it was in 2022.
In the NEM, the generation fleet has been bolstered by more than 12 gigawatts of new utility-scale wind and solar, around 9 gigawatts of rooftop solar, and a new 660 megawatt gas-fired power station.
In addition, more than 6 gigawatts of new grid-scale storage is soaking up sunshine during the day, and discharging in the evening, helping to meet peak demands and steadily replacing gas in setting prices.
This is even more evident in Western Australia’s grid, where 1.5GW of storage is reshaping how that grid operates.
And of course, 400,000 home batteries have been added across the country.
The conflict in the Middle East is a stress-test of an energy system that is more reliant on renewable generation and storage, and so far, that system is proving itself to be resilient.
AEMO’s most recent quarterly snapshot showed that more than 46% of demand was met by renewable generation in both east coast and west coast grids, the highest share ever recorded for a first quarter.
Batteries are now a major force in the market.
They make up almost half of the total capacity of projects seeking connection in the NEM – around 33 GW.
And in the past 12 months, new battery projects accounted for 96 per cent of application approvals in our connection program.
But it’s not just what’s been built that explains this resilience.
It’s how the market behaves under stress.
Initiatives like the connections reform initiative, integrated energy storage systems and new fast frequency response markets have also helped the market to meet this moment.
Both AEMO and industry have worked hard to apply the lessons learned from the winter of 2022 to manage a complex and fluid situation.
But while Australia’s energy systems and markets are weathering this disruption well, there will – without doubt – be others.
All of this underscores AEMO’s consistent message that those planned projects in generation, storage and transmission need to be delivered on time and in full, to both meet growing demand and replace the fleet of ageing coal-fired power stations.
In addition to having enough energy, our Transition Plan for System Security also lays out what needs to be in place to ensure the system remains secure after the upcoming closure of major generators like Yallourn and Eraring.
Delivering these investments is critical.
Vivek did a great job this morning talking through the Commonwealth Bank’s view of the economic challenges ahead, so I’m not going to cover the same ground.
I do want to take this opportunity to underscore that, at a time of real economic pressure, AEMO is focused on minimising the costs borne by energy users.
This comes in two parts.
The first is AEMO’s own costs, and like many in this room, our costs are under pressure from a tight labour market for our specialist workforce, growing digital costs and the increasing complexity of running the energy system.
Our priority, always, is our core functions of operating energy systems and markets.
We know the potential consequences of system disruption or disorderly operating conditions are so destructive for consumers and industry alike.
We operate prudently, and we invest where it matters: in capability, readiness and replacing legacy technology with tools that are fit for purpose.
Despite these pressures, we have managed the cost base to run our core, stable responsibilities – that’s roughly half of our total costs to just 5.6% year-on-year growth since FY23 in nominal terms.
We’ve been asked to take on new and expanded responsibilities too, though, and while this has been the primary source of cost growth, we’re making sure that those new functions are delivered efficiently and transparently.
Wherever we can, the costs for any new responsibilities are recovered directly from those receiving the benefit – various governments in many instances, but also the cost of a growing volume of connections.
This makes sure that those new costs are not spread onto others.
While AEMO is a not-for-profit entity, we’re very conscious that the costs of our core functions and several market reforms, are borne by you and your customers.
So we’re committed to being clear and transparent on where our costs come from and what they deliver, over the short and longer-term.
The second, and more substantive part, is what we are doing to minimise costs across the entire energy system.
At a system level, AEMO remains focused on planning and enabling the least cost pathway for the energy transition.
That’s what the Integrated System Plan is designed to do, and I want to thank the EUAA and its members for the constructive and thoughtful input you always provide.
The draft ISP confirms that renewable energy, firmed with storage, backed up by gas and supported by upgraded networks, remains the least cost way forward for Australia.
And it highlights the growing role of consumers and large users as active participants – not just users – of the energy system.
Back when the EUAA was formed 20 years ago, the energy users were just that, users of energy, and generally price-takers to the market.
Today, large users increasingly contribute to the dynamics of the market, both on the demand and supply side, with behind-the-meter generation, storage, controllable load and sophisticated energy management.
Many of you are making significant, long‑lived investment decisions in electrification, on‑site generation, storage and digital controls, based on expectations about how the energy system will evolve.
Those investments are shaping demand profiles and system outcomes, and they rely on a planning and market framework that is stable, transparent and predictable.
In that context, flexible energy use is no longer just something the system reacts to, it’s a genuine system asset with increasing market benefit.
Large energy users with the ability to respond to market signals are already helping manage peaks and reduce overall system costs.
That same opportunity also exists for virtual power plants – the aggregation of many smaller energy users – but more work is needed to develop the right value propositions for those homes and smaller businesses with batteries, electric vehicles and other devices that can respond to market signals.
We’re doing what we can at AEMO, through our work on the energy demand reform agenda, the development of the Demand Side Statement of Opportunities, and in the evolution of existing market mechanisms.
Flexible energy use can be as valuable as new supply because it can reduce or defer investment and smooth extreme price outcomes – lowering your costs as well as the costs of the whole energy system for all users.
There’s no question that data centres are becoming the backbone of our digital economy.
Data centres, and the AI and processes that they enable, have enormous potential to boost Australia’s productivity and economic growth.
From my conversations, I know that new data centres want to be responsible participants in the NEM.
It is important that their connection and participation in the system is done in a balanced way that meets the needs of all consumers.
Data centres consume roughly 2% of grid-supplied electricity today, but that’s forecast to triple by 2030 and to keep expanding over the longer term.
In the first quarter of this year, there were 11 data centres totalling 5.4 gigawatts of ultimate capacity load working through a transmission network connection.
Considering the strong development activity we’re seeing, it is likely that our current forecasts will materially increase.
There are a few things to bear in mind when looking at the pipeline.
First, the ultimate connection capacity is not required on day 1. Projects are built in stages and that ultimate capacity may be a decade away.
Second, projects often pursue multiple connection options, which makes the overall pipeline look larger than it actually is – still sizeable, but manageable.
I want to be clear that we are working to enable the growth of data centres in Australia while maintaining reliability and security for all consumers.
My view is that this is entirely feasible, and I know this is a top priority for governments and industry alike.
And through our international networks, AEMO is learning from the experience of our peers in places like Texas, Virginia and Ireland, to benefit Australia.
Many of you will have seen the proposed grid access standards for data centre connections which the AEMC published in March.
They’re designed to make the system stronger for everyone by making sure that data centres are able to perform appropriately, provide the right levels of visibility and participate in the market.
And at AEMO we’re focused on delivering fast and efficient connections, so that major new energy users can connect without shifting costs or risks onto existing users.
Finally, a brief word on the outlook for winter.
It’s looking like Australia will experience a warmer-than-average winter, and the good news is that we enter winter in the NEM with 3,000 more megawatts of large-scale generation and battery storage than we had at the end of winter last year.
Gas storage facilities in southern Australia are near full, and the outage schedule for coal and gas plants looks manageable.
It’s a similarly reassuring story in Western Australia.
The outlook is cautiously positive, but Australia’s coal-fired power stations continue to get older, and like any old machine there is an ever-present risk of disruptive failures and outages.
And of course the conflict in the Middle East is ongoing, and AEMO will continue to work closely with industry and governments to manage risks as they arise.
So as you’ll hear over the two days ahead of this conference, today’s energy system is being tested by a whole range of challenges, ranging from geopolitics to extreme weather events, to rapid increases in demand and technological changes.
What gives me confidence is that Australia’s energy systems are meeting these tests, being more diverse, more flexible and more resilient.
But AEMO’s consistent message remains as true as ever, that those planned investments in generation, storage and networks must be delivered on time and in full.
Large energy users are an essential part of this evolution, not just as customers of the market, but as active participants in how both market and systems evolve.
And we look forward to continuing to work closely with the EUAA and its members as we navigate the next phase of the energy transition together.
Andrew / Bridgette, I’m very happy to take your questions.
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