The insecurities exposed by the piecemeal invitation of renewable generation to a necessarily traditional electricity network are exposed with data-filled simplicity in the Australian Energy Market Operator’s latest quarterly assessment of the state of our energy markets.
And, as ever, it is South Australia that emerges as the fulcrum of an energy dilemma born of the continuing absence of a federal policy that aligns and co-ordinates the states that maintain our National Energy Market.
The latest AEMO Quarterly Energy Dynamics report stands as a timely cautionary tale for the NSW government now committed to a $2.5 billion network roll-out that aims to connect an ever more disparate estate of renewable generation.
But, in attempting to please both the Greens and energy market traditionalists, the NSW Energy Minister Don Harwin has amplified the systemic risk that renewable energy poses to both the NSW system and the National Energy Market.
Now, these risks are manageable, but only if you recognise them. And there is little or no evidence in the NSW policy that says Harwin has.
The NSW plan relies on the ability to firm its system with intermittent power from the state with the most expensive power in the world. Yep, we are talking South Australia.
It relies on a new interconnect from Snowy that may never be built and that has no business case. It relies on coal firming supply from Victoria and Queensland, which both now have a 50 per cent renewable target that patently aims to drive coal out of the system more quickly than previously imagined.
The NSW plan ignores the need for mid-merit supply in the wake of the closure of the Liddell plant in 2022 and it ignores the potential that the cost of fanning out the network to meet renewable generation will be socialised through power bills.
I could go on. Indeed, I will.
The Harwin plan includes the construction of a new interconnector between NSW and South Australia. The logic of a project that has never previously been able to make it through investment gateways is that NSW will be able to suck up South Australia’s excess renewable power while South Australia will have access to more baseload.
But that thesis looks vulnerable when you consider that Liddell is three years from closing and there are question marks over the future state of baseload in both Victoria and Queensland. As it stands, NSW relies on Victoria and Queensland to fill its generation gaps. That structural interdependence serves everyone very well until the moment it doesn’t.
The September quarter saw NSW sit in the brink of going black when lightning took out the Queensland interconnector. The disruption in flows triggered separation of South Australia from the NEM and 1110 MW of load shedding in NSW, Victoria and Tasmania. And it forced a $10 million investment in network sustaining frequency ancillary services.
What we have here is, once again, a state interfering in the NEM in an uncoordinated fashion without any obvious advice from the market operator. Instead of firming the energy market, the states continue to force the pace of its dysfunction.
Where is the business case that says a South Australian interconnector is the appropriate answer? It has consistently failed the net benefits test before and the uncertainties over baseload generation up and down the east coast can only have made that case more fragile.
And what plans to invest in ancillary or market firming generation may be shelved because NSW has pushed the button on an interconnector that has no business case and finds itself relying on the big battery that is Snowy 2.0, which also has no obvious investment case and may not ever happen?
The states own the obligation to provide energy security for their citizens. It is far from clear how Harwin intends to fulfil that obligation. Should he really want to understand the challenges ahead, Harwin could do worse than read AEMO’s latest quarterly market review.
It reveals that at 2.30pm on September 30, South Australia’s quarterly minimum electricity demand record was broken when system demand reached 661MW. That was 132 MW under the previous record low and 1638 MW below the quarter’s peak demand, which was 2299 MW.
AEMO assessed that this new low was the product of forces passing and permanent. The short-term issue was that the state’s single biggest commercial customer, BHP’s Olympic Dam copper smelter was (and remains) out of action. And, needless to say, the embedded issue is the roll-out of small-scale solar power systems across the state.
The net effect of these two forces was that South Australia’s “operational demand” in the September quarter fell by 40 MW or nearly 3 per cent, on the June quarter.
The other really notable aspect of that low point in demand was its timing. It occurred in the peak of the day. Historically, daily demand troughs happen after midnight as the retail power world literally goes to sleep. Again, that underscores the structural changes being driven by the PV roll-out which continues apace across the country, but nowhere faster than in South Australia and Victoria.
“While the overall movement in average demand varied geographically, one element was consistent across all NEM regions – the impact of small-scale PV in reducing operational demand in the middle of the day,” AEMO reported.
“Increased small-scale generation has the effect of offsetting consumption, thereby lowering the overall grid demand for electricity. This is a trend that has been increasing over time as the level of installed small-scale PV capacity continues to rise.”
Solar capacity across the NEM increased by 25 per cent in the year to September 30 with increases of over 30 per cent in South Australia and Victoria, 25 per cent in NSW, 18 per cent in Tasmania and 15 per cent in Queensland. The Clean Energy According to AEMO, the average daily peak generation of small-scale solar increased by 21 per cent from 2,714 MW to 3,285 MW in just 12 months,
As a result of all of that, renewable generation in the NEM reached record levels over the September quarter, making up more than 20 per cent of the supply mix for for the first time.
Not so good news
Now that is all good, right?
Well, in part yes, I suppose.
According to AEMO, this record renewable output left quarterly emissions within the NEM at “their lowest level on record, both in terms of emissions and emissions intensity”.
But the corollary of this blast-off in intermittent power is that AEMO is being forced to manage network security with ever greater and more costly vigilance. Again, AEMO offered South Australia as an example of its ballooning functional challenge.
Put simply, the security of the state’s network is being exposed to risk ever more often because it is carrying ever more volumes of solar- and wind-generated power. And that insecurity is reflected in the electricity futures market where prices in all states are currently between 9 per cent and 14 per cent higher for 2019 deliveries and between 1 per cent and 14 per cent higher for 2020.
“Over the quarter, AEMO intervened on multiple occasions to direct synchronous generation to remain online to ensure adequate system strength in South Australia and thereby maintain the grid in a secure operating state,” the market operator reported.
The interruptions of supply from large scale wind are occurring more often and in greater volumes. In the September quarter total curtailments increased to about 10 per cent of total solar and wind capacity and those drop-outs occurred for 26 per cent of operating time during the quarter.
“This was the highest amount on record and 34 GWh higher than the next highest quarter (Q3 2017),” AEMO said. The market operator noted that the key drivers to this system vulnerability were record high wind generation and “insufficient synchronous generators being available to meet system strength requirements”.
Synchronous generation is what I guess the Prime Minister and the Minister for Lower Electricity Prices might be referring to when they talk about “fair dinkum power”.
We need it. But even more we need a plan, a holistic energy policy that aligns our renewable future, our emissions targets and obligations and our collective need for a secure network and affordable energy.
What we don’t need is need any more dumb-arse slogans, buck passing or blame shaming.