These are the key findings of the Australian Energy Market Operator's August Electricity Statement of Opportunities issued this morning, providing grist for the mill ahead of the Council of Australian Governments Energy Council meeting in Canberra at the end of next week.

This year the AEMO's 2016 NEM ESOO, which projects supply adequacy out to 2025-26, has modelled further generation withdrawals in response to Australia's emission abatement target of reducing carbon emissions by 26% to 28% below 2005 levels by 2030.

The ESOO highlighted that as intermittent generation like wind and rooftop photovoltaic generation keeps rising and thermal synchronous generation such as coal- and gas-fired generators are withdrawn, total installed generation capacity alone becomes a less reliable indicator of supply adequacy.

The report modelled the impact of additional generation withdrawals, beyond those already announced by participants, which may contribute to Australia meeting its COP21 target.

The ESOO projects that under a neutral economic and consumer outlook, and in the absence of new generation network or non-network development, coal-fired generation withdrawals at the levels assumed to achieve Australia's COP21 target may lead to reliability standard breaches.

The reliability standard specifies that the level of expected unserved energy should not exceed 0.02% of operational consumption per region in any financial year.

The breaches will occur in NSW once 2000 megawatts of generation from AGL Macquarie's Liddell coal-fired thermal power station, which produces about 12% of the electricity needed by consumers on the east coast, is withdrawn in March 2022, the ESOO predicts.

Victoria will also cop it by 2025-26, assuming up to 800MW of coal-fired generation is withdrawn in the region in the outlook period.

This will have a knock-on effect for SA, which will also experience reliability issues from 2019-20 due to assumed coal-fired generation withdrawals in Victoria, which the ESOO says will tighten supply in both Victoria and SA.

"The withdrawal of Northern Power Station [546MW] in May 2016 has increased South Australia's reliance on imports of energy and support services from Victoria during high demand periods," the AEMO's report stated.

"Additional intermittent generation alone may not materially improve the reliability of the system.

"The future risk of load shedding is projected to be greatest between 2pm and 8pm, if high demand coincides with low wind and rooftop PV [photovoltaic] generation, unplanned generation outages, and/or low levels of imports from neighbouring regions.

"Network or non-network developments, potentially including generation, storage, and demand side management services, may reduce the risk of load shedding if they can increase available supply or decrease demand at these times."

Gas backers

As the AEMO's report indicated that new electricity generation would be required if Australia is to meet greenhouse gas targets, Australian Pipelines & Gas Association CEO Cheryl Cartwright urged the COAG leaders meeting on August 19 to "seize the opportunity to encourage investment in gas and gas markets".

"Using a combination of renewable energy sources and natural gas to generate electricity would enable Australia to reduce carbon emissions to meet its commitment," Cartwright said.

As electricity generated by natural gas has less than half the emissions of electricity generated by coal, Cartwright said renewables plus natural gas was the "logical way forward" for an economy that wants to reduce emissions efficiently and economically.

"Energy ministers would also do well to avoid unnecessary regulation of the gas industry as this hampers the effective operation of the market," Cartwright said.

"Increased gas supply would see an increase in liquidity and competition in the gas market bringing lower prices for consumers and helping to avoid any risk to power supply because of the unreliability of renewable energy and lack of energy storage.

"APGA calls on energy ministers to introduce sensible policies for gas and gas markets - policies that encourage competition and transparency rather than increase regulation and stifle investment in this critical sector of the economy."

And of course, the upstream industry relished the AEMO's not entirely unexpected revelation too.

Australian Petroleum Production and Exploration Association CEO Dr Malcolm Roberts said that while reducing emissions was "essential", ensuring reliable energy supply was "just as important".

Yet both are at risk from ongoing moratoriums and what he sees as unnecessary restrictions on natural gas development, he noted.