Summer Reliability Looking Good

 

On Thursday 27 August 2020, AEMO published its latest Electricity Statement of Opportunities (ESOO), this is a projection of electricity supply reliability in the National Electricity Market (NEM) for the next 10 years.

The ESOO is key in identifying gaps in reliability which could lead to the calling of the Retailer Reliability Obligation (RRO) in the coming 5 years. As the ESOO covers the next 10 years, the second 5 years following the RRO looks closer at forecasts for the major transmission upgrades and the continued development of renewable generation.

This years ESOO has looked at the impact of COVID-19 and how this could impact the outlooks uncertainty. As a result of COVID-19 and the change in generation mix, demand changes and the gas market, it has resulted in AEMO not forecasting any unserved energy (USE) for the coming summer.

This years’ ESOO will require an update if the impact of COVID-19 is rapidly reversed due to a faster return to normal than expected. There are a few points of concern in AEMO’s statement including the delays or deferment of planned outages that could affect reliability over summer. ElectraNet have also reduced the summer rating on the Victoria to South Australia Interconnector in both directions following damage incurred during the bushfires of 2020.

A further downside of the reduced flow across the interconnectors is the further delays of the commissioning of renewable projects across the regions resulting in AEMO needing to deploy Reliability and Emergency Reserve Trader (RERT) to manage the expected unserved energy. The focus following this summer will be the outlook for reliability in New South Wales when Liddell Power Station retires.

The outlook has improved since the 2019 ESOO with the augmentation of the Queensland to New South Wales Interconnector (QNI) in 2022 to 2023 and increase renewable generation development in the region.

Another interesting observation is that by 2025, the minimum operational demand will occur during the middle of the day not the historic period overnight. As previously discussed, this will lead to the challenges of managing voltage, system strength and inertia.

AEMO is working with aggregators of Distributed Energy Resources (DER) to offer services such as increased PV controllability, load flexibility, storage, and load shifting.

Another urgent action for new projects is the requirement to ensure all new distributed PV installations have suitable disturbance ride-through capabilities and emergency PV shedding capabilities.

AEMO is also working with various stakeholder and industry experts to ensure energy supply is protected from the effects of increasing frequency, extremity and scale of climate induced weather events observed in recent years.

The NEM continues to see the connection of a large quantity of renewable generation with 4,300MW of new capacity forecast to be operational this summer, 1,900MW of this is expected in Victoria.

Due to impacts of COVID-19 and increased renewable generation penetration the reliability of thermal generators could remain at the historic lows observed during 2019-2020 or deteriorate further resulting in volatility.

AEMO’s governance in question

AEMO's governance in question

Energy Networks Australia (ENA) represents Australia’s electricity transmission, distribution networks, and gas distribution networks. The Australian Energy Council (AEC) represents generation companies. Recently, ENA and the AEC have engaged Cambridge Economic Policy Associates (CEPA) to investigate the governance arrangements of Australian Energy Market Operator (AEMO) within the National Electricity Market (NEM).

The AEC and ENA raised concerns over AEMO’s expenditure on transition studies and planning. Specifically, the pace of change proposed by AEMO and their approach to new technologies such as virtual power plants and new market mechanisms.

CEPA reviewed similar government models from international market operators and has now proposed alternate models. Among the suggested new models were options to make AEMO answerable to the Australian Energy Regulator (AER). CEPA suggested that a budget and planning committee with members from AEMO and member representatives could be created.

It appears that these actions have come off the back of AEMO’s recently published Integrated System Plan (ISP). The ISP mapped out AEMO’s pathway to a shift to renewable energy within 20 years. AEMO commented that thanks to Australia’s fleet of ageing and increasingly unreliable coal generators, there is a need to transition to a renewable energy future. The only thing that could deliberately slow down this transition would be due to industry or government policy changing. AEC members want to hear this as they are heavily invested in coal fire generation assets and, in recent times, gas powered generation.

Renewable advocates have viewed this review as a way for thermal generators to slow down the regulatory process. By including the AER in decision making, they are reducing competition from renewable generators. The renewables industry sees the AEC as a pro-thermal generation body. Their Chief Executive Officer (CEO), Sarah McNamara previously worked as Senior Energy Policy Advisor for Tony Abbott. Prior to this, she worked for AGL’s Corporate Affairs team as well as anti-renewable lobbies, Ian MacFarlane.

ENA members have been more positive towards AEMO’s ISP as they see the benefits of more transmission infrastructure. However, some members in the distribution business see a threat on the lower voltage networks by rooftop solar, battery storage and Electric Vehicles.

AEMO have also been offside with the renewable industry in its role responsible for Victorian grid connections. Last minute changes to connection requirements and agreements has caused delays and reductions in projects. Market participants, including end users, are also unhappy with AEMO following recent budget increases.

AEMO has been spending more money on projects such as the ISP, research and the development of new market mechanisms that will favour new technologies such as batteries and virtual power plants. The budget was set at $241 million this year which was an increase of 12% on previous budgets. Prior to this, fees generally remained static or increased by Consumer Price Index (CPI). AEMO have defended these increases by saying that the volume of rule changes in the NEM has tripled in the last three years. They stated that virtually all the rule changes have directly impacted them.

Queensland Energy Users Network (QEUN), a prominent consumer advocate in Queensland, have also come out against AEMO. They noted that AEMO’s total costs amounted to eight cents a week to the average consumer. They believe that development of the market should not be at the expense of the Australian economy, jobs, or reasonable living standards. QEUN suggested that AEMO sticks making sure the lights are kept on. They essentially told AEMO to stay quiet about any big plans for the future.

 

Written by: Alex Driscoll

 

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The 2020 Integrated System Plan (ISP)

What is the Inegrated System Plan?

The Australian Electricity Market Operator (AEMO) recently published the 2020 Integrated System Plan (ISP) which is intended to maximise the value to end users by developing the market through an optimal development pathway. The ISP was endorsed by the Council of Australian Governments (COAG) Energy Council in 2018, and has since guided governments, the industry and consumers on investments needed for an affordable, secure, and reliable energy future.

The ISP is a 20-year roadmap for the National Electricity Market (NEM) and is updated by AEMO every two years with their response to the latest technology, economic, policy and system developments. The report identifies investment choices and recommends essential actions to optimise consumer benefits. Although the report is published by AEMO, they are not the only party to have an input in the ISP. In preparation of the 2020 ISP, an 18-month consultation program took place where over 200 stakeholders were consulted, 8 workshops were held, 3 webinars were hosted, and 85 written submissions were provided.

The 2020 Integrated System Plan

The 2020 ISP is expected to deliver approximately $11 billion in net market benefits to the NEM the next 20 years. These benefits come together with the market reform which is currently aiming to attract investments and optimise markets outcomes. The market reform is being coordinated by the Energy Security Board (ESB) with market bodies such as the Australian Energy Regulator (AER), Australian Energy Market Commission (AEMC) and AEMO.

It has been highlighted in the 2020 ISP, that as the generation mix changes with the retirement of coal generation, the least-cost transition should be through Distributed Energy Resources (DER), Variable Renewable Energy (VRE) and investment in transmission infrastructure. DER is expected to double, if not triple, providing around 13-22% of the total underlying annual energy consumption. Although, more than 26 GW of new VRE is needed to replace 63% of coal-fired generation that is set to retire.

Dispatchable resources between 6-19 GW are also needed to back up the renewable energy generators. These dispatchable resources will be in the form of utility-scale pumped hydro, fast responding gas-fired generation, battery storage, demand response and aggregated DER participating as virtual power plants. It was also highlighted that there is a growing need to actively manage power system services such as voltage control, system strength, frequency control, inertia, ramping and dispatchability.

AEMO’s Forecasted Projects

To achieve the desired results, there are several projects outlined in the 2020 ISP that were broken down into committed projects, actionable projects, actionable projects with decision rules and future projects. The committed projects are aiming to address cost, security and reliability issues and have already received regulatory approval. The South Australia system strength remediation is one of these projects, which will see the installation of four high-inertia synchronous condensers and is on track to be completed in 2021.

The Western Victoria Transmission Network Project is a two-part project due to be completed in 2021 and 2025 to support generation from the Western Victoria REZ, including new 220 kV and 500 kV double-circuit lines. The last of the committed projects is the QNI Minor which is set to be commissioned in 2021-22 and will involve a minor upgrade of the existing interconnector, adding over 150 MW thermal capacity in both directions.

Actionable Projects

The actionable projects include a minor upgrade to the existing Victoria ‒ New South Wales Interconnector (VNI), which is expected to be complete by 2022-23. There will be a new 330 kV double-circuit interconnector created between South Australia and New South Wales which is due to be complete by 2024-25. In the same year, the Central-West Orana REZ Transmission Link is set to spark network augmentations to support its development. In 2025-26, there will be a 500 kV transmission upgrade to reinforce the New South Wales southern shared network and increase transfer capacity between the Snowy Mountains hydroelectric scheme and the region’s demand centres.

Two projects that are actionable with decision rules are the VNI West project and the Marinus Link. VNI West is a new High-Voltage, Alternating Current (HVAC) interconnector between Victoria and New South Wales and the Marinus Link involves two new High-Voltage, Direct Current (HVDC) cables connecting Victoria to Tasmania, each with 750 MW of transfer capacity and associated alternating current transmission.

Future Projects

Some of the future projects include Queensland to New South Wales Interconnector (QNI) Medium and Large interconnector upgrades, three additional Queensland augmentations, three New South Wales augmentations, and two South Australian augmentations.

AEMO has forecasted a great deal of change to the NEM and Edge is looking forward to seeing the progress of the upcoming projects.

 

Written by: Alex Driscoll (Senior Manager, Markets and Trading)

 

To learn more about the National Electricity Market (NEM), read our educational article: https://edgeutilities.com.au/an-introduction-to-the-nem/

Back to the Future Part Two: Still a long way off

Back to the Future Part Two: still a long way off

In the 1989 film back to the future part 2, we were promised we would have hover boards and flying cars by 2015. Now I know we shouldn’t believe everything we see on TV, but I think a few people feel robbed of the future they were promised! The Tesla self-driving car and a Segway is about as close as we have got by 2020.

CSIRO’s Report

When CSIRO, Australia’s main scientific research body, stated the whole of Australia’s car fleet will be electric by 2050, there were doubts. Let’s dive deeper to see if there is merit in the claim.

CSIRO released 5 scenarios incorporating electric vehicles, rooftop solar and batteries which fed into the Australian Energy Market Operator’s (AEMO) Integrated System Plan (ISP). The ISP was released at the end of 2019, but the step change latest scenario has been the one to attract the most controversy. This is due to it showing what it believes can be possible from these technologies with the right grid integration and the rate of reductions in costs which could be possible for these technology with large scale uptake. It is also being overly ambitions not just limiting Australia’s contribution to warming at the agreed Paris agreements 2oc but exceeding this with an ambition to be closer to 1.5oc.

They do acknowledge with this there is significant increase in electricity demand but they do not address the cost of this, nor do they address the likely advertising campaign which would ensue if a mandatory “carbon tax on wheels” was introduced. Merely they expect a price parity of electric to petrol cars by 2025 and that charging would not be an issue.

I fear therefore that this scenario is another which is based on a chess board which is not in place. With no federal government really wanting to raise their head above this parapet, it therefore limited incentives to move to electric vehicle and investment in the electrification capabilities, i.e. charging. As such the likelihood of it coming to pass in this timescale is unlikely.

Arena (Australian Renewable Energy Agency)

However in contrast, Arena, the Australian Renewable Energy Agency, has agreed to fund a two year, $2.4m trial to create a vehicle-to-grid power source where electric vehicles can provide system security and be paid to plug their EVs into the grid. With this Australia join the ranks of around 50 other vehicles to grid projects (~50% of which are in Europe). This trial is using around 50 cars from the ACT governments new Nissan Leaf fleet and could provide grid stability without the huge outlay required for a Tesla battery or a Snowy 2.0 hydro project.

Initially, these discharges will only be used for Frequency Control Ancillary Services (FACS) to the National Electricity Market (NEM). This will allow AEMO to maintain the frequency of the system. But with discharge ability within tenth of a second Dr Sturmberg (Australia’s National Universities research leader in Battery Storage and Grid integration) anticipates that if this was available across Australia’s 19 million vehicle fleet “it would store more energy than five Snowy 2.0’s or over 10,000 Tesla Big Batteries.”

These vehicles will work on bi-directional chargers and it is anticipated with more people working at home these could later become an in-home battery also. If proven feasible, this vehicle-to-grid technology could be the biggest disruptor on the Distribution System since small scale solar PV was introduced. The ability for consumers to have the control and ability to support the grid in a controllable way and with returns expected to yield around $1,000/Year this extra revenue could this create a significant incentive to start the drive towards the electrification of Australia’s car fleet with or without government legislation.

 

Written by: Kate Turner (Senior Manager, Markets & Advisory)

 

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