NEW TOOLS FOR AEMO

We all agree having a safe, reliable, and secure National Electricity Market (NEM) is the key deliverable for AEMO. AEMO have flagged that there is a shortfall in the participants able to provide key services to keep the grid stable as the generation mix changes and they are running out of tools to keep the grid stable.

The biggest issue for AEMO and market participants is as synchronous generators such as thermal power stations reduce availability and eventually retire the much-needed system security services such as inertia and voltage control that they provide, drops.

As a result of AEMOs concerns, the Australian Energy Market Commission (AEMC) has developed ways of valuing the much-needed services.

The AEMC has just released a directions paper outlining mechanisms that could provide the system security services to the NEM. The AEMC has also highlighted support for innovative technologies to provide these services.

At this moment in time, AEMO has limited tools to improve system security at times of scarcity apart from using its intervention powers to direct generators online to provide the services. The problem with using its direction powers is that additional costs associated with the directions are passed onto end users and as a result this does not meet the requirement of the National Electricity Objective (NEO) of providing the lowest cost solution and it also distorts the market.

AEMC’s directions paper covers two rule changes proposed by Delta Electricity and Hydro Tasmania. The Delta proposal is to introduce a capacity commitment mechanism to provide system security and reliability services. In Hydro Tasmania’s request they propose to create a market for inertia, voltage control and system strength products.

Both these rule changes will form part of the Energy Security Boards (ESB) ‘post 2025’ market design. AEMO is also working with participants to develop the engineering to meet these challenges. These challenges include a changing market due to an increased reliance on weather dependent generation such as solar and wind and new technologies such as batteries.

The options in the directions paper are about providing a transitional approach as we move to a different generation mix while keeping the cost of the solutions to a minimum over the long-term. Solutions may include a similar process to direction but increasing the transparency of what assets should be online to maintain system security while keeping the costs down. Some of the options available to AEMO could be scheduling assets to provide specific services like voltage control while other would be scheduled for inertia. These arrangements would likely transform into stand-alone services similar to the current FCAS services.

The market is changing at a rapid pace and these extra tools in AEMO’s toolbox should allow the NEM to operate safely and securely for many years into the future.

NEW RENEWABLES ON THE HORIZON

The next phase in the development of the renewable industry may just be about to occur. The Australian Energy Market Operator (AEMO) have been studying locations for new renewable developments. The majority of the market has been focusing on Renewable Energy Zones (REZ) on land but the solution maybe further off ashore. AEMO have located four offshore wind zones off the coast of NSW, Victoria, and Tasmania. The potential opportunities could add up to 40GW into the grid. To keep transmission costs down, AEMO have found locations close to land where significant ports are established that will allow the renewable output for the wind farms to be used at renewable hydrogen export hubs.

This year, AEMO updated its inputs into the Integrated System Plan and one of the significant changes from previous years is the volume of offshore wind availability. The 40GW identified is likely to be constructed over the next 20 years. At this stage the only offshore wind farm is the Star of the South wind farm located off the coast of Victoria and is likely to be 2,200MW. The Start of the South project is likely to connect into the grid via the Latrobe Valley and will feed in electricity as the coal fired generation in that region retires.

As the Hydrogen market also grows, offshore wind developers will focus on sites adjacent to the proposed hydrogen export facilities around Newcastle.

Offshore wind developers are concerned the legislation hurdles may stall the industry, so they are looking for support from governments to allow the industry to grow.

Oceanex Energy is looking to develop and construct up to 4 offshore windfarms off the coast of NSW with output likely to be over 7,000MW.

Oceanex Energy CEO Andy Evans says the clarity over the legislation is important given that project developers would likely need to spend up to $200 million to get a project to financial close.

He said it was an industry that would be likely dominated by major energy players – such as RWE, Iberdrola, Macquarie, and Equinox, along with big oil companies such as Shell and BP that are also expanding into offshore wind.

5 MINUTE SETTLEMENT DELAYS

AEMO have submitted a contingency plan to the Australian Energy Market Commission (AEMC) for consideration. Although AEMO is on track to meet the planned 1 October start date, it has submitted a rule change request as a precautionary measure.

The 5-minute settlement is a major market reform that brings 5-minute settlement in line with 5-minute dispatch. From 1 October 2021, the electricity spot market will settle every 5 minutes rather than in 30-minute intervals where it currently occurs. The changes to the market have impacted many parts of the electricity sector including generators, retailers, and network providers. This has resulted in new systems being implemented to accommodate the changes.

The AEMC has been asked to rule on a proposed contingency plan to account for an event where there is a delay to the implementation of 5-minute settlement resulting from late issues occurring with major IT change projects.

AEMC has prioritised this request because going live with 5-minute settlement before AEMO or industry can meet essential capability requirements would be a threat to the market.

AEMO will advise the market by the 1st of September if there is any cause for delays. If delays are not flagged, a new rule will not be made, and the 5-minute market will go live on 1 October. AEMO will consult with industry on the impact of AEMO’s three proposed alternate start dates. The final ruling will be live by 30 September if a change is required.

AEMO has identified two scenarios under the contingency plan. The first option is a short delay until 1st December 2021, and the second and third options are longer delays until either 1st February or 1st April 2022.

As the implementation of the 5-minute market required changes to the national electricity rules (NER), any changes to these rules, because of different start dates due to delays needs to be approved through the AEMCs rule change process.

The impact of these delays has a knock-on effect for different parts of the industry, the Commission noted that any new start date could change the timetable for other, linked reforms and affect existing market contracts for 5-minute settlement. The commission will make a decision on proposed alternative start dates with that in mind.

The AEMC have asked for submissions to the rule change request and will be open until 2 September.  A public forum on the issue will be held on 9 August.

AEMO TO FASTTRACK TO NET ZERO EMMISSIONS

 

On Friday, the Australian Energy Market Operator (AEMO) published its 2021 Inputs, Assumption and Scenarios Report (IASR) which includes five scenario’s which may take the industry into the future. The five scenarios range from the slow change where not much happens in relation to technology changes and the existing generation mix right through to the Hydrogen superpower where changes in technology make huge advancements. The scenarios outlined in the IASR will form part of the 2022 Integrated System Plan (ISP).

AEMO have spent the last 10 months working with industry, governments, and consumers to build the scenarios. During consultation, most stakeholders supported the rapid decarbonisation scenarios leading to achieving net-zero emissions.

Compared to the input to the 2020 ISP, the 2022 ISP will include economy wide decarbonisation not just across the electricity sector and increased investment in distributed energy resources. To model decarbonisation across the economy, the 2022 ISP will include scenarios of electrification across industry and the transport sector.

To understand how the market moves to a lower carbon world, AEMO have modelled a ‘steady progress’ scenario and a ‘net zero’ scenario. The steady progress scenario employs existing government policy including emission abatement targets and a steady growth in the uptake of PV. In the Net-zero scenario the change in the electricity industry is driven by technology led emission abatement and progressive tightening of emissions targets leading to net zero emission by 2050.

AEMO have also modelled a ‘Hydrogen superpower’ scenario where the market is structured to support the development of a renewable hydrogen export economy.

A draft ISP will be published in December with the final ISP released in June 2022.

AEMO Leads Global Push to Slash Emissions

As seen in recent reports published by Australian Energy Market Operator (AEMO), which include the Electricity Statement of Opportunities (ESOO) and the Integrated System Plan (ISP), the outstanding trend is the rapid growth of renewables and the need to connect the generation and load in a more robust manner.

As coal is retired the replacement technologies are now Solar and Wind.  This is resulting in issues such as, inertia and system strength. The network needs to be redesigned to cope with limitations, due to the lack of inertia provided by non-synchronous generation such as Solar and Wind.

AEMO, in conjunction with various Transmission Network Service Providers (TNSP) is leading the world in solving the issues associated with greater intermittent renewable generation on the network.

AEMO have launched the Global Power System Consortium (G-PST), a consortium of the six largest system operators grappling with high volumes of renewable generation and growth. The group includes:

  • Australian Energy Market Operator (AEMO)
  • The National Grid Electricity System Operator UK
  • California Independent System Operator (CAISO)
  • The Electric Reliability Council of Texas (ERCOT)
  • Ireland’s System Operator (EirGrid)
  • Denmark’s System Operator (Energinet)

The charter for the group is to achieve a 50 per cent cut in emissions by unlocking $10 trillion worth of investment in wind, solar and enabling technologies over the next 10 years.

Along with the lead members, 25 other system operators from around the world will participate in the G-PST. Several large research institutions will take part in the technical work, including:

  • Commonwealth Scientific Industrial Research Organisation (CSIRO)
  • The Fraunhofer Cluster of Excellence for Integrated Energy Systems
  • National Renewable Energy Laboratory (NREL)
  • Latin American Energy Organization (OLADE)
  • Institute of Electrical and Electronics Engineers (IEEE)
  • Electric Power Research Institute (EPRI)
  • The Danish Technical University (DTU)
  • ASEAN Center for Energy (ACE)

During the announcement at London’s Bloomberg New Energy Finance Summit, AEMO Chief Executive Officer, Ms Audrey Zibelman announced that, “Countries around the world are looking to pursue a path to modern low-emissions energy systems, but face significant challenges in acquiring and applying the technical knowledge needed to operate and plan rapidly transforming power systems”.

She went on to say that “The goal of G-PST is bold: to contribute to more than 50% emissions reductions of all pollutants around the world, over the next ten years, by acting as an enabler of new clean energy integration.”

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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Read our latest article: https://edgeutilities.com.au/changes-to-the-generation-mix/

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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