It’s a transition with some pain attached

By AEMC Chief Executive Anne Pearson

Australia’s power system transition to renewables is accelerating with all the promise of lower cost and lower emission options for consumers – but there are problems to fix along the way. 

The annual market performance review for 2017/18 was released today bringing together current knowledge about how the energy market is performing in terms of security, reliability and safety. It makes sombre reading.

This report is prepared for the Australian Energy Market Commission by its independent Reliability Panel of industry experts and consumer advocates. It confirms the power system is experiencing more stress as it transitions to more renewables.

Key trends continue to include the entry of significant new generation capacity, mainly intermittent, large scale, wind and solar; an ageing thermal coal generation fleet that will see power stations retire at the end of their operational lives and massive growth in solar PV that could see rooftop installations reach 25GW by 2035/36 or 45% penetration in a market the same size as today’s.

Unprecedented in their breadth and scope, these trends put extraordinary pressure on the security and reliability of our power grid.

As the generation mix changes we need different ways to manage the power system when new technologies connect to the grid in large numbers. Systems with lots of non-synchronous generation like wind and solar are weaker and harder to control – raising the risk of cascading blackouts.

The good news is, the system met its reliability standard in 2017/18. But the reliability reserve energy trader had to be used to supply demand for the first time ever during that period. The bulk of the $51 million cost was paid by Victoria and South Australian businesses. It’s been used twice more since then. Concerning.

The story is the same when it comes to keeping the technical parameters of the system in line. The grid is holding up but only because the system operator is intervening on a daily basis to keep the lights on. It’s a power system under increasing pressure.

  • In 2017/18 AEMO responded to system weakness with 101 directions for synchronous generators (like gas) to turn on to keep the system stable compared with just eight the year before. All but one of those directions were issued to keep the system stable in South Australia.
  • South Australia’s electricity supply is now operating under direct intervention of the market operator around 30% of the time. 
  • In Victoria, there were occasions when AEMO had to manually switch off transmission lines to maintain voltages at stable levels across the network to deliver secure supply.
  • System strength deterioration is also evident in north Queensland, south-west NSW, north-west Victoria as well as South Australia.

Ever since 2016, even before South Australia’s system black event, the AEMC has been examining the facts of system transformation and making new rules so the grid can remain strong as new forms of generation and capacity come in.

We have increased the pace of this work so it’s possible to move away from expensive emergency ‘stop-gap’ solutions to more efficient and cheaper ways of integrating new technology.

Our work program has put new obligations on networks and generators to maintain system strength. The power system is strong when voltage levels are steady even in the face of sudden changes in electricity flows when the weather changes. Networks now have to maintain system strength above minimum levels at key locations when shortfalls are identified by the system operator. The South Australian network, for example, is installing synchronous condensors which are due to be commissioned in 2020. When that happens the need for frequent directions to maintain South Australia’s system strength will hopefully come to an end.

New generators must now pay for any extra equipment or services they need to maintain the strength of the network before they are able to connect to the grid.

These are big changes – and they will make a big difference to the management of the power system.

Right now it’s most important for industry, regulators, governments and consumer representatives to work together to fully understand the implications of the generation transformation as it unfolds ,so precise solutions can be targeted to actual problems.

All the market bodies working together have a comprehensive program underway to manage the impact on system stability and reliability but it will come at a cost. That’s why it’s more important than ever to focus on targeted least cost solutions.

Getting more firming capacity into the system will help. This is why the AEMC believes it’s important that the retailer reliability obligation be implemented by the Council of Australian Governments Energy Council so retailers and large users get incentives to invest in dispatchable electricity generation and demand response to fill any gaps between generation and forecast peak demand.

These issues are not insurmountable.  It’s why government needs to encourage the right energy investments through stable integrated energy and climate change policy. We all need to come together at the COAG Energy Council to manage these matters on behalf of consumers.