As the transition towards net zero emissions in Australia accelerates, there is an increasing need for rigorous modelling to understand how different parts of the economy can work together to achieve ambitious emissions targets.
This is particularly true in the case of the rapid, but coordinated change needed to stay within a 1.5C-aligned future.
Over the past five years, Climateworks Centre has partnered with CSIRO to lead groundbreaking energy systems modelling projects using the AusTIMES model.
A detailed whole-of-economy model of Australia, AusTIMES was developed by Climateworks and CSIRO based on globally recognised frameworks from the International Energy Agency.
AusTIMES allows us to explore future energy and emissions scenarios. It offers insights into the economy-wide interactions that can achieve emissions reduction goals at the least cost to society.
Climateworks has used it in collaboration with CSIRO to develop multiple pathways to net zero emissions – including the 1.5°C-aligned Australian whole-of-economy scenario in our landmark Decarbonisation Futures report – and has applied it for others’ needs such as for the Australian Energy Market Operator (AEMO).
Planning Australia’s grid for a low carbon future
AEMO manages energy systems and markets across Australia. Every two years, AEMO releases an updated version of their Integrated System Plan (ISP).
The ISP lays out a pathway to guide investment across the National Electricity Market (NEM). One of the world’s longest interconnected electricity systems, the NEM serves Australia’s eastern states and South Australia.
With governments now formally committed to net zero emissions, this planning process is becoming increasingly important to ensure Australia’s main energy grid is ready for a low- or zero-carbon future.
In 2021, AEMO commissioned CSIRO and Climateworks Centre to deploy AusTIMES to help understand how different climate targets and major differences in new technologies could affect the electricity system, ahead of the 2022 ISP.
This was the first time the ISP process took account of the emissions reductions pathways of other sectors (such as buildings, transport and industry). The modelling showed how the electricity system might change when those sectors reach net zero emissions.
Using four possible scenarios for achieving net zero emissions, it illustrated how much more electricity supply is needed when those sectors stop using fossil fuels in homes, cars and commercial and industrial sites. This is because many of the solutions involve switching to electrification using zero-emission renewable electricity.
This helps AEMO plan for the electricity sector’s role in Australia’s decarbonisation effort.
For example, the Hydrogen Superpower scenario tackled the question: If Australia were to align its climate ambition to 1.5C of global warming in the least-cost way possible and have a strong green export industry, what would the role of the electricity sector be? The answer was that this scenario leads to strong decarbonisation actions being taken across all sectors of the economy and breakthroughs in the cost of hydrogen production, resulting in substantial growth of both domestic and export industries.
Updating modelling in an evolving national context
In 2022, AEMO commissioned CSIRO and Climateworks Centre to conduct an update to this work.
This update reflected some significant changes that have occurred since 2021.
Firstly, it highlighted just how much the context of climate action has evolved in Australia over the past year – presenting more granular questions about the future of the electricity system.
One factor that has shifted significantly since the first modelling exercise is Australia’s legislated climate targets. In October 2021, the Australian Government committed to a 2050 net zero emissions target. This was legislated just over a year later.
In June 2022, Australia’s 2030 emissions target under the Paris Agreement was strengthened from a 26-28 per cent reduction on 2005 levels to a 43 per cent reduction. The new target is now legislated.
In all our updated scenarios, the model was set to achieve or exceed the legislated 2030 and 2050 targets.
Before these targets were introduced and strengthened, a scenario where emissions continued to grow to 2050 and beyond was possible under current government policy – which was reflected in AEMO’s Slow Change scenario.
However, the latest commitments increase the climate ambition of this policy-aligned ‘base case’ significantly – sitting closer to, although not equal to, AEMO’s 2021 Step Change scenario. This scenario forecasts a doubling of annual electricity consumption from the grid, a more than 60 per cent reduction in coal generation by 2030, a ninefold increase in grid-scale wind and solar capacity, triple the firming capacity and a near fivefold increase in rooftop solar. This scenario is aligned with a global temperature increase of 1.8C.
New themes and modelling developments
The evolution in national climate policy is not the only change sitting behind the scenarios in 2022, with a range of new themes explored.
The 2021 scenarios explored two different pathways to 1.5C, through Hydrogen Superpower and Strong Electrification. By contrast, the 2022 1.5C Green Energy Exports scenario is a more balanced 1.5 degree scenario.
Key inputs impacting the role of hydrogen in different sectors have been refined. This showed that there are still technical barriers to be overcome in certain sectors, particularly buildings. However, those sectors have mature technologies including electrification and energy efficiency that are available today.
Compared to 2021, our modelling has a much greater representation of decarbonisation technologies in heavy industry, which has been informed by early research under the Australian Industry Energy Transitions Initiative. This sees more rapid decarbonisation occur in heavy industry, driven by a combination of electrification and hydrogen.
While other sectors face significant infrastructure challenges to blending high levels of hydrogen into their gas supply, large industrial users may have more options to source their own direct supply.
Biomethane was a new fuel considered in 2022. Exploring its role required new capabilities to be built into AusTIMES. The modelling found that while biomethane is easier to introduce to existing gas networks compared to hydrogen, its supply constraints make it a costly solution to deliver at scale.
Expanding the scope to consider Western Australia
The scope of this round of modelling was also extended to consider Australia’s other large interconnected electricity systems, in Western Australia.
The energy transition in WA may look different to the rest of the country, based on its unique economy and concentration of heavy industry.
When combined with our improvements in heavy industry modelling, we were able to provide key insights into WA’s transition.
Hydrogen, for instance, may be able to play a much larger role in WA compared to other states, given its applications in heavy industry.
The 1.5C Green Energy Exports scenario, particularly, highlights the significant opportunities that WA could capture in establishing green hydrogen, and zero-emissions steel exports.
Electrification as a cost-effective solution a constant finding
Although the scope and themes of the work evolved in 2022, one common finding across both pieces of work was that electrification is one of the most cost-effective solutions to decarbonise the economy.
The full benefits of electrification is enabled by a zero or near-zero carbon grid.
Rapid decarbonisation of the electricity grid can bring both emissions benefits and greater cost savings to consumers.
This underscores the fact that the electricity system has a pivotal role to play in reaching net zero emissions.
The multi-sector modelling produced by CSIRO and Climateworks Centre feeds in as a key input to AEMO’s draft Inputs, Assumptions and Scenarios Report (IASR).
The IASR lays out all the inputs, assumptions and scenarios that AEMO proposes to include in the 2024 ISP.
Following a rigorous consultation period, AEMO will release a final version of the document in the middle of this year. Eventually, energy system stakeholders will decide how each scenario is ‘weighted’ to contribute to a final ISP, leading to further rounds of modelling and analysis by AEMO.
The draft ISP is due to be released in December, with the final version to be published in June 2024.
The ISP underpins decision-making across a range of investment and infrastructure areas, and supports an orderly transition for the east coast energy system.
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