The Australian Federal Government, led by Chris Bowen, has announced a bold move to support renewable energy, the energy transition plan will add an extra 550 megawatts (MW) of firming generation in New South Wales (NSW). This strategy aims to ensure grid reliability and security and attract nearly AUD 10 billion in investment, thereby contributing to an estimated 6 gigawatts (GW) of additional power. The energy transition plan is designed to offset the projected power shortages following the anticipated shutdown of various fossil fuel generators across the National Electricity Market (NEM).
Despite the optimism, there are challenges. It remains uncertain whether the proposed measures, largely based on large-scale battery and pumped hydro storage, can compensate for the power shortage following the phasing out of fossil fuel generators. Further concerns have been raised following the delays to the Snowy 2.0 project, with doubts about the NEM’s ability to maintain a stable electricity supply and prevent a spike in power prices. The reliability of renewable energy during periods of calm weather and low sunshine is also under scrutiny.
These uncertainties lead to an important question: will this ambitious plan become a successful blueprint for the future, or a cautionary tale of overambitious planning and under-delivery? The outcomes will have significant implications for the future of renewable energy, not just in Australia, but globally. As Australia embarks on this renewable energy journey, the world watches closely.
The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au or call us on 1800 334 336 to discuss.
The Australian Energy Market Operator (AEMO) recently confirmed a scheduling error involving the Liddell Power Station, which led to considerable disruptions in the National Electricity Market (NEM) and the futures market on May 1, 2023. The closures of the last three units of the Liddell Power Station towards the end of April should have been integrated into the AEO dispatch system. However, a data mismatch within the system kept these units active, leading to market inconsistencies.
This oversight originated from a disparity within the NEM Dispatch Engine (NEMDE) utilized by AEMO. While a portion of the system correctly acknowledged the shutdown of the Liddell units, another part, responsible for handling constraints, continued to count them at their initial 500MW capacity rather than the actual zero. The resultant 1500MW drop in capacity from the system’s balancing equation led to adjustments in the power distribution across states.
To rectify this situation, AEMO reduced power flow from Victoria to New South Wales and moderated power generation by approximately 173MW. The resulting market response was a surge in electricity prices, pushing the daily average price up by around 30%.
In the aftermath of the Liddell shutdown, the market has been on high alert, responding to the smallest of disturbances. This sensitivity was evident as the futures market reacted positively, experiencing a rise in the Q3 2023 close price across QLD, VIC, and NSW, and a notable increase in SA.
In the following weeks, the power market continued to be volatile due to various outages and unexpected factors such as a tube leak at Bayswater 2, outages at Kogan Creek, Eraring 2, and Tarong, the delay of Callide’s return, and unexpected interest rate hikes. This scenario led traders to act on the price differences between states, resulting in a rise in NEM prices. It is suggested that this sensitivity and rapid reaction of the market is likely to continue for some time. Despite the quick adjustments in the spot market, the futures market appears to be retaining its value.
The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au or call us on 1800 334 336 to discuss.
Despite leading in solar power generation and reducing emissions, Australia requires a significant increase in storage capacity to maintain affordable and reliable energy.
Storage is vital to integrating renewables into the grid and reducing coal and gas-fired generation dependency. A combination of various storage technologies, such as electrochemical, mechanical, chemical, and thermal storage, is needed to meet the evolving demands of the National Electricity Market (NEM).
Increasingly, dispatchable generation must come online as coal-fired generation retires between 2023 and 2035. The CSIRO report calls for accelerated development timelines for projects by 2030. Faster development or alternative storage technologies are needed, as pumped hydro typically takes ten years to develop.
CSIRO’s chief executive emphasises the need for a “massive increase” in storage capacity, estimating an additional 11 to 14 gigawatts by 2030. As a result, the focus should shift to storage as the deadline approaches, exploring repurposing old mine pits and retiring thermal power stations.
The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au or call us on 1800 334 336 to discuss.
The Clean Energy Council (CEC) recently released to its members the quarterly renewable projects report, which showed only one renewable project, Stubbo solar farm, reached financial close in Q3 – 2022. Investment in renewables is at an all-time low where quarterly investment has dropped almost 60% to $418M. As well as project growth which has slowed by almost 30%, compared to Q2 -2022 and over 60% lower than Q3- 2021.
While politicians are talking up the prospects of a renewable energy driven industry to reduce the impact of climate change, the reality is, reaching the 44GW target outlined by the federal government may be hard to achieve at the current rate of growth.
A significant number of new wind, solar and storage projects need to come online. If these projects do not come online the retiring coal generators cannot be replaced and may be forced to remain in action.
While only one renewable project in Australia reached financial close last quarter, two projects completed commissioning and three new projects started construction during Q3- 2022. Currently there are 247 financially committed renewable projects in Australia, with 221 under construction and 169 undergoing commissioning.
The CEC notes that the desire to build new solar, wind, pumped hydro and transmission lines is meeting opposition from by local communities. Some examples being, Chalumbin wind farm in North Queensland is now reducing the number of planned wind turbines it is installing by half,due to the concerns from the local community. There are also concerns for the largest pump storage hydro project that the Queensland Government is planning to construct near Mackay, after locals have discovered the mega project has the potential to flood a local town.
With ambitious renewable targets being spruced by politicians and businesses actively seeking renewable energy to aid in the decarbonisation of their operations, the question of where and when these projects will be delivered need to be asked. The majority of people support the transition to renewables but obviously not in their own backyard.
During 2016 a series of storms caused a widespread power outage in South Australia. As a result, a significant amount of work has been undertaken by AEMO to build a more secure grid. In 2017 AEMO released a review of the events which blacked out the state, a significant cause was the extreme weather that resulted in transmission lines being knocked over as well as some windfarms not meeting protection standards.
On November 12th a similar event occurred with a series of storms passing through South Australia causing the tripping of multiple transmission lines. Some transmission towers were damaged and fell over resulting in the South Australian grid being disconnected from the NEM. During this period, South Australia was powered by wind and solar for up to two thirds of its electricity demand with gas providing the difference.
The South Australian network has now been re-synchronised to the NEM and electricity is flowing between South Australia and the other states of the NEM as before.
During events like this AEMO invokes its power to manage system security, however this time it went a step further and restricted roof top solar PV to maintain a secure level of Distributed PV (DPV) generation. AEMO switched off as much rooftop PV installations as possible during the middle of the day, by curtailing the rooftop PV they were able to manage scheduled and semi scheduled generation assets to maintain system security.
System stability is a fine balance of the supply of electricity, the types of generators providing the electricity and the demand of electricity from end users. Part of the solution this time was to encourage end users to consume more electricity enabling a higher level of generation. Prior to the curtailment, South Australia was being supplied by over two thirds of it demand via renewable generation.
While high levels of renewable generation is good to keep electricity costs down, the savings can be eroded by high frequency control costs and the need for more expensive gas fired generation to fill the gap when the sun is not shining and the wind is not blowing.
The NEM has experienced an unprecedented year of high electricity spot prices, recently Q322 averaged $216/MWh across the (NEM) which was more than three times higher than the same quarter in the previous year and close to matching the all-time high during Q222 of $264/MWh.
Many factors influenced the volatility and elevated spot prices including:
A tight supply / demand balance resulting from gas flow restrictions in Europe associated with the war in Ukraine
Australian weather events
An increase in demand
Generator bidding behaviours
A reliance on thermal generation (coal and gas fired)
Coal and gas prices are at all-time highs due to international demand leading to a high cost of generation. In turn increasing the underlying fuel cost for generators, contributing to the increase in spot prices. As little energy storage is currently installed in Australia, large swings in the output from wind also contributed to the volatility in the market.
Generators who want to sell electricity to the NEM must submit a bid detailing how much energy they would like to offer in ten different price bands. Recently a lower volume of generation has been available from coal due to bidding behaviour with participants withdrawing thermal capacity and intermittent generation like solar and wind taking a larger market share.
A lower capacity factor for coal generation has resulted in coal fired availability to move higher up the bid stack, resulting in coal fired generation needing to dispatch at higher spot prices to meet their long run average costs.
Weather influences such as La Niña and a negative Indian Ocean Dipole (IOD) event increased the likelihood of rainfall across the east coast of Australia this year. With September’s rainfall being the fifth highest on record across Australia. The cloudy and wet conditions impacted solar generation and the supply of coal to power stations resulting in higher fuel prices.
Demand from the grid has increased for the first time in Q322 since 2015 as households and businesses require more electricity from the grid due to rooftop solar not generating as much as previous years due to cloudy conditions.
If you feel you need more control of your company’s energy spend, please reach out to discuss joining our Edge Utilities Power Portfolio (EUPP) where we use the power of bulk purchasing to help Australian businesses of all sizes save on their energy bills. Read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.
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.
With the release of the latest Electricity Statement of Opportunities (ESOO) some of the assumptions used in it have raised concerns of the viability of Snowy 2.0 and the impact it will have on security of supply for the market. Snowy 2.0 had been given the green light under AEMO assumptions even though the project would not have hit the hurdle rate AEMO uses for all other projects. The second concerning point is when you build one of the largest generation assets in the country it is crucial that it is linked to the market via appropriate transmission lines. Information from transmission line providers suggests the full capacity of the powerlines will not be in place when Snowy 2.0 comes online. Our third concern is the cost of the new transmission line projects are rapidly rising. These costs will go directly to the end user.
Transmission provider TransGrid outlines information on HumeLink, the transmission line earmarked to connect Snowy 2.0 to the NEM. TransGrid estimates HumeLink costs have increased from $1.3B in the draft assessment to $3.3B. The more worrying statement is TransGrid saying the final cost could be up 50% or more.
Apart from HumeLink, to be full unconstrained, Snowy 2.0 will need the Victoria to NSW interconnector West (VNI West) transmission to be built. HumeLink is labelled the largest transmission project in history, VNI will be a similar size and most likely a similar price however costing have not been released.
The cost of these two transmission lines will eventually be passed down to end users via increases in transmission tariffs. Modelling has indicated that the $3.3B for HumeLink will add 40% to NSW costs. While these costs are met by all end users, large users will be impacted the most as these fees are paid for on a proportional basis.
Latest costing suggests HumeLink, VNI West and Snowy 2.0 has the potential to cost $12 billion. This will make Snowy 2.0 the most expensive generation and transmission project in history.
The question is, with far cheaper renewable projects that do not require 2 huge transmission lines to make them effective for system security, are there better options the federal government and the consumers of NSW could be spending their money on.
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)
