Assessing Long-term Security of Electricity Supply and the Role of Renewable Energy: A Probabilistic Generation Portfolio Analysis Approach

A modelling tool is applied to assess long-term energy security in the Australian National Electricity Market (NEM). The potential role of renewable energy in increasing the security of electricity supply is examined, with a focus on two aspects: price risk and physical supply risk. Optimised portfolios with no renewable energy (RE) are found to have a diversity index suggestive of a highly concentrated system which could potentially threaten supply security. Increasing the RE penetration from 0% to 50% makes generation portfolios more diversified as well as reducing expected costs, cost risks, and CO2 emissions. The expected cost is minimised at around 50%-70% RE penetration level, which is approximately the level that results in the most diversified generation portfolio. This analysis suggests that cost risk and fuel diversity are good indicators for determining generation portfolios that can contribute in addressing energy security concerns in both cost and physical supply aspects. The modelling indicates that renewables such as solar photovoltaics (PV) and wind can play an important role in addressing longterm energy security concerns by reducing electricity price uncertainty and physical supply risk through fuel diversification.