GILES PARKINSON. AEMO says fossil fuel failures, renewable delays biggest threat to grid

Sep 6, 2017

The Australian Energy Market Operator has cited climate change, and the potential for large fossil fuel generators to fail in the summer heat-wave as the biggest threat to Australia’s electricity supplies in the coming years. 

It also makes clear that there are plenty of alternatives to new baseload coal generators, and underlines that any delays to new wind and solar plants could also jeopardise security of supply, particularly in Victoria and South Australia.

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The greatest risk is in South Australia this coming year, hence the need for emergency back up generators, although AEMO hopes not to use this if demand response and battery storage can fill the void. But the big risk is fossil fuel failures and high demand.

In NSW the risk increases in 2022 once Liddell closes, but AEMO says the risks can be mitigated in both states if “additional renewable generation was to be developed to deliver a national renewable generation outcome.”

That message, however, appears to have fallen on deaf ears. At the same time as AEMO published its annual Electricity Statement of Opportunities on its website, prime minister Malcolm Turnbull rose in parliament to announce that the Coalition was asking AGL Energy to keep Liddell open an extra five years until 2027.

This is despite the fact that AEMO says there is no risk to security standards from the closure of Liddell, and any risk would be further reduced if more renewable energy was constructed.

It’s the very first sentence of the ESOO report that strikes the most however:

“The overall responsiveness and resilience of the system is at risk from increased vulnerability to climatic events, such as extended periods of high temperatures, and the risk of loss of, or reduction in output of, major generation units.”

Last summer, the electricity system was hit by a range of failure in fossil fuel generation, including the loss of 1,000MW of Liddell at the very height of summer, and the simultaneous trip of major gas fired generators in NSW and South Australia. Numerous other coal and gas plants lost capacity at various times due to the heat.

But the report is also notable for its emphasis on renewable energy technologies and “demand-side” measures such as demand management and battery storage, particularly in South Australia.

The big concern is this coming summer, because not enough is in place, and much of the existing gas capacity is old and frail and, frankly, unreliable.

“From 2018–19 to 2021–22, progressively decreasing levels of potential USE conditions are observed over the next four summers, due to increasing renewable generation,” AEMO says.

“New strategic reserves to deliver firming capability during this period are recommended, given AEMO will not be able to engage long notice RERT as it is doing for summer 2017–18.

AEMO boss Audrey Zibelman said in an accompanying statement that Australia was undergoing an “unprecedented” transformation and needed “new approaches” to ensure AEMO has a reliable portfolio of dispatchable energy resources capable of responding quickly and effectively.

“The power system does not have the reserves it once had, and therefore to balance peak summer demand in real time, targeted actions to provide additional firming capability are necessary to reduce heightened risks to supply,” she said in the statement.

She said up to 1,000MW of “strategic reserves” would be needed across South Australia and Victoria over the medium term, but that AEMO was indifferent to what fuels or technology resources are utilised.

But she said firming capability could include generation on the grid, storage, demand resources behind the meter, flexible demand, or flexible network capability, such as the demand response and battery storage being implemented now.

AEMO also released a more detailed report on the need for new baseload and dispatchable generation that was requested by the federal government. The Coalition has yet to release it, although Turnbull announced the initiative on the Liddell coal generator, seemingly ignoring AEMO’s comments on renewables.

AEMO makes no mention of the need to keep Liddell open in its report, which is not surprising given its age and failures in last year’s heatwave, and its lack of flexibility to respond to quick changes in supply and demand.

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In fact, AEMO says that even with Liddell retiring as expected in 2022, there is no breach of the system’s reliability standards. And security can actually be enhanced if there is a big push for more distributed renewable energy. The only threat to reliability is if another coal generator was to close at the same time.

The Coalition government also appears to have released some elements of the report to its favourite media outlet, The Australian, which duly ran a front page lead “Bill shock looms amid power crisis” that claimed a “dangerous shortfall in baseload power that could drive up household eletriity bills.”

Of course, the Coalition made no mention how renewable energy and demand side response and battery storage could address the issue, along with a coherent climate change strategy.

And then Turnbull rose in parliament to announce his request to keep Liddell open, which appears to follow on from a Minerals Council report urging the same thing. It suggests that the Coalition is paying more attention to the fossil fuel lobby than the market operator.

“The challenges and transformation we are seeing are similar to those faced by other countries around the world,” Zibelman says in her statement.

“In the European, Asian and United States markets, it is increasingly recognised that changes in market design to retain and incentivise appropriate levels of investment in system security and reliability are required.

“Affordable, secure energy for all Australians remains our goal, and AEMO is committed to continually reviewing global practices working with the Commonwealth and States, and through appropriate consultative processes to produce considered recommendations that can be adopted by the Energy Security Board and the COAG Energy Council.”

AEMO sees no issues in Queensland or Tasmania. (Western Australia and other isolate grids, such as those in the Northern Territory and around Mt Isa are not included in the report.

In South Australia and Victoria, the absence of some plant, and the risk that some big units may fail, creates a real risk of load shedding for a few hours  this summer.

AEMO puts the risk at between 39 and 43 per cent for Victoria and 26 per cent and 33 per cent for South Australia, but they should be at least partly addressed by the actions currently planned by the South Australia government and AEMO (emergency back-up, storage, and demand management).

The forecasts contained in the report do not include the demand management initiatives put together with AEMO and various state governments, nor do they include part of the Tesla battery, the 30MW Electranet battery and the  emergency back-up commissioned by the state government.

But from 2018–19, the risk of unserved energy in these regions drops noticeably because of a number of committed generation projects are due to be commissioned (almost all of them wind and solar), and due to ongoing energy efficiency and installation of PV systems by consumers.

In the meantime, AGL rejected the idea of extending the life of Liddell, saying it would not increase reliability or lower prices and went against its commitment to begin its exit from coal.

And the Australian Energy Market Commission also said it would recommend changes to settlement rules, shifting from 30-minute to 5-minute settlements, in a move that will encourage battery storage and other fast response technologies, and help reduce gaming of the markets by big generators.

But the AEMC’s decision to delay this shift until mid 2021 at the earliest has incurred the wrath of the likes of Professors Ross Garnaut, and the Australia Institute, who say it will slow the energy transition and The Australia Institute, who described the delay as a deliberate attempt to hobble new industries.

This article first appeared on RenewEconomy on 5 September 2017

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