energy transition to net zero

How the power system supports Australia’s transition to Net Zero emissions

15 November 2021

As the IPCC declares “code red for humanity”, Australia adopts a net zero commitment and COP26 comes to a close, Australian and global focus turns to what practical steps are required to decarbonise our economy.

In Transgrid’s recently announced Energy Vision for Australia’s electricity system, much of our modelling focused on the role the grid will play in the decarbonisation process.

Working with independent experts, CSIRO, ClimateWorks Australia and The Brattle Group, we developed and modelled six future energy scenarios out to 2050. In our ‘Deep decarbonisation’ scenario, market forces, international and domestic politics, and consumer expectations drive a huge reduction in carbon emissions across all sectors of our economy. Australia commits to limit global warming to 1.5⁰C, in line with the aspirations of the Paris Agreement – achieving net zero emissions by 2035 (not 2050) and then net-negative emissions beyond.

Whether or not this is how the future will play out, the modelling offers some important insights into the critical role of a decarbonised power sector in enabling a sustainable energy future for Australia.

The route to decarbonisation

According to ClimateWorks Australia, we have four levers to pull as we move towards a decarbonised economy:

  1. Reducing energy waste
  2. 100% renewable energy
  3. Electrification and a shift away from fossil fuels
  4. Non-energy emissions reductions and offsets

The electricity system will therefore play a central role in supporting Australia’s decarbonisation, underpinned by a rapid transition to renewable energy and the electrification of road transport, industry and buildings.

Electricity generation currently accounts for 34% of Australia’s greenhouse gas emissions. With the costs of solar, wind power and storage falling, decarbonisation of the electricity sector is a low-cost option for emission reduction in Australia. BloombergNEF calculates that, globally, the cost of solar PV has fallen 87% and wind 63% since 2009, and battery storage has fallen 80% since 2013. Solar PV is projected to drop a further 70% by 2050.

Under our business as usual ‘Current trends’ trajectory, the NEM’s electricity system is projected to reduce its emissions 93% by 2050, while the remainder of the economy only sees a 7% reduction in emissions. However, in our ‘Deep carbonisation’ scenario, the electricity system is powered by 100% renewable energy from 2035 and helps to reduce 87% of emissions from the rest of the economy by 2050.

This latter role is critical. By rapidly switching to renewable energy and increasing supply, we can also support the decarbonisation of other sectors of the economy through electrification.

According to the International Energy Agency (IEA), spreading the use of electricity into more parts of the economy may be the single largest contributor to reaching net-zero emissions. The IEA calculates that electrification offers the cheapest route to decarbonise sectors such as light-duty transport (replacing liquid fuels), cooking, space and water heating (replacing gas), and many industrial and manufacturing processes (replacing gas, oil and coal).

As we decarbonise the electricity system, electrification can enable the decarbonisation of up to 35% of Australia’s domestic emissions from transport, buildings and industry. When combining the potential for emissions reductions from electricity generation with electrification, the electricity sector can support the decarbonisation of up to 73% of Australia’s total domestic emissions.

What will this mean for Australia?

Across all scenarios, electric vehicle uptake is projected to surge. In our Deep carbonisation scenario, internal combustion engine vehicles are completely phased out by 2050, replaced primarily by electric vehicles. Even following our ‘Current trends’ scenario, 8 million electric vehicles will be on the road by 2050.

Under Deep decarbonisation, Australia will have more than 3 million electric vehicles by 2030 and 14 million by 2040. By 2050, all road transport will be electrified, with the exception of 50% of articulated trucks.

Australia currently lags other major economies in the growth of electric vehicles, with electric vehicle sales accounting for only 1.1% of all new car sales, behind the global average of 5%. However, in the first half of 2021, Australia’s electric vehicle sales were twice that of the entire 2020.

Global trends suggest electric vehicles will achieve local mass-market penetration in the coming decade. While global passenger vehicle sales dropped 16% during the COVID-19 pandemic, sales of electric vehicles jumped 47%. This trajectory is expected to accelerate, with falling electric vehicle costs driven by falling battery prices, dedicated electric vehicle manufacturing platforms and government support and incentives. In Europe, battery electric vehicles are expected to reach price parity with internal combustion engine vehicles between 2025 and 2027. Australia is unlikely to be far behind.

What will this mean for the grid?

Electrification means electricity demand will surge in the coming decades, almost doubling by 2050 in a Deep decarbonisation scenario and growing sixfold if Australia becomes a ‘Clean energy superpower’ and exports green hydrogen and steel to the world. If the vast majority of Australia’s vehicle fleet is electrified, almost 100TWh/year of energy demand could be added to the NEM by 2050, equivalent to half of the NEM’s current annual demand. In the same period, the electrification of industry and buildings is projected to add another 40TWh/year.

In our current trends scenario, we project 108GW of large-scale wind, solar PV and rooftop solar capacity is required in the NEM by 2050. This increases to 159GW in Deep decarbonisation and 417GW in Clean energy superpower.

The modelling makes it clear that transmission will be central to Australia’s successful transition to a clean energy future. Decarbonisation and electrification will require a significant expansion of renewable generation, storage and associated transmission infrastructure.

At Transgrid, we are preparing to support the biggest energy transformation of our lifetime through our portfolio of major projects. A significant expansion of the electricity system is required to achieve Net Zero – and our modelling shows that this is achievable. But to realise this potential, we must accelerate the power system’s central role in achieving economy-wide decentralisation.