Role of electricity networks in the energy market transformation

Analysis

Role of electricity networks in the energy market transformation

Targeted network investment is needed to unlock the potential of renewables

We are in the midst of an energy market transformation. A strong electricity network is critical to achieving this transformation at least-cost, by facilitating the efficient production, transportation and use of electricity.

Electricity generation is transforming. Generation is becoming increasingly dispersed and remote from demand centres, putting pressure on transmission networks. Despite flattening demand, significant investments are required in generation and network infrastructure to replace ageing generation assets with more geographically dispersed renewables.

Distributed energy resources (DER) are increasing. We are experiencing a rapid increase in uptake of rooftop solar, with batteries and electric vehicles likely to follow. Efficient take-up and use of DER is reliant on advanced distribution network operations.

Deloitte was engaged by Endeavour Energy to analyse the role of electricity networks in supporting the energy sector transformation.

Two alternative network investment scenarios were defined for the analysis

  • Base case – Energy market transformation progresses with efficient network investment supporting new utility-scale generation and the take-up and utilisation of DER
  • Network Underinvestment Scenario – Defined as a future scenario where discretionary expenditure on networks required to unlock the potential of renewables is not undertaken.

Our analysis found that in the Network Underinvestment scenario, despite some initial cost reductions, electricity prices are higher and economic welfare is reduced over the long-term.

Published: December 2018

Role of electricity networks in the energy market transformation

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