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Future energy scenarios for an industry in transition

Future energy scenarios for an industry in transition  

With the push to achieve net-zero emissions, the energy industry is in a state of significant transition. What the future looks like and how it will impact organisations within it is open to debate. Recently the Australian Energy Market Operator (AEMO) conducted collaborative research through workshops, public forums and webinars to get feedback from stakeholders to help them identify five possible future energy scenarios. This information was published in AEMO’s 2021 Inputs, Assumptions and Scenarios Report that will be used to develop their 2022 Integrated System Plan.

Given the level of uncertainty in the industry, scenario planning provides an effective means to identify and plan for investment and business risks by testing sensitivity to certain factors. The scenarios take key uncertainties into account while focusing on material drivers of change. The future energy scenarios take into account not only decarbonisation but also economic and technological factors that are expected to change in the future. This includes the level of consumer investment in distributed energy, increased electrification and growth in the transport industry. 

Five scenarios were identified:

1. Slow Change

The global pandemic has brought unprecedented challenges to the industry. This scenario takes a conservative approach to managing change in coming years with the continued risk of industrial load closures and slowed action on decarbonisation. At the same time consumers seek to manage their energy costs through distributed energy resources like photovoltaics. 

2. Steady Progress

In this scenario, existing government policy is coupled with corporate abatement goals, reduction in the cost of technology and the growth of consumer investments in photovoltaic energy. With cost still a significant factor, renewable generation complemented by firming capacity is the primary means to replace coal.  

3. Net Zero 2050 

Technology leads the way in this scenario with a focus on emission abatement based on research and development. Commercially viable low-emission technologies deployed in the 2030s and 2040s, supported by government policy and tighter emission targets that focus on the entire economy drive the shift. Consumers switch primarily to electricity to power their lives, from vehicles to home heating. 

4. Step Change

Global commitments change significantly driving consumer-led transformation across the economy. This change is supported by the falling cost of energy production for consumers and increased digitisation to help people and businesses manage their energy use and enable greater grid flexibility.   

5. Hydrogen Superpower

This scenario looks at what is required for Australia to become a true hydrogen superpower in the export economy. Developments in manufacturing and transport are leveraged to drive hydrogen production, coupled with global action to reduce emissions. While electricity continues to power homes, gas is progressively replaced with hydrogen as appliances are upgraded. 

The report provides insights to assist both policymakers and investors to make efficient decisions about the generation, transmission and storage of energy. The final 2022 Integrated System Plan will be delivered in June next year, with a draft expected to be released in December 2021. 

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