SA power plan: intervention, not going alone

Malcolm Turnbull and Josh Frydenberg have now added a second myth to the earlier one that South Australia had rushed madly and blindly into renewables without thought for the consequences. They say that South Australia is now “going it alone”. Unfortunately this meme was picked up in the media, so that Philip Clark on ABC Nightlife recently had SA “going it alone” as his topic of the day (most of the comment supported SA, but no-one, not a single one, had their facts right).

The fact is that the Australian Energy Market Operator (AEMO) runs the market, calls bids for supply on a 30-minute basis, and balances supply and consumption. That is what it has done every day for years, since 1 July 2009, and will continue to do so into the future. Except that 30-minute time-slots are bound to be reviewed in the Finkel report and may end up at five. The Australian Energy Market Commission is currently considering a request for such a change.

AEMO also operates the Wholesale Electricity Market (WEM) and power system in Western Australia, and the important gas markets in Australia.

Weatherill has been quite explicit about his commitment to the National Energy Market (NEM). From The Guardian:

    Remember the federal government spent the summer responding to the blackouts giving the SA government a bollocking on their high renewable energy target of 50%? Weatherill recommitted to that target today and said his plan would fit with the objectives of the chief scientist, Alan Finkel, who originally favoured an emissions intensity scheme (carbon price). The premier also favours an EIS.

    Weatherill said: “If Malcolm Turnbull tomorrow recovered his memory and decided to go for an emissions intensity scheme, we would be ready to cooperate with him and our scheme would fit perfectly into those arrangements.”

Much has been made of in Hugh Saddler’s words the plan to:

    introduce legislation that would allow the state government to override the NEM’s market dispatch process for generation in the event of an emergency such as the demand peaks that triggered last month’s blackouts.

This arises from the failure of AEMO to instruct Engie to turn on the second Pelican Point gas turbine during the heatwave in early February, instead precipitating rolling blackoputs causing 90,000 homes to lose power for about 40 minutes.

The state government already has the power to instruct electricity generators to fire up in an emergency, it’s just that, as I understand it, the minister would need to refer to cabinet before acting. This is unrealistic in any scenario that is likely to involve a power outage. The proposed legislation would simply allow the minister to take action at the appropriate time.

However, the minister cannot and will not take control of the grid, so such an order would need to be taken in communication with AEMO well in advance, that is, some hours before the power was required. Since AEMO already has the same emergency power, and since AEMO is responsible for balancing supply and demand on the grid, if any such thing happened it would have to happen cooperatively.

The only realistic alternative would be for SA to exit the NEM and control its own power directly. That is clearly not the intention, and would be difficult if not impossible while the state typically relies on importing power from the NEM.

In the remainder of the post I provide some links relevant to SA’s plan.

Here is SA’s quick introduction to Our energy plan, whence you can download the detailed plan.

Other relevant articles include:

5 thoughts on “SA power plan: intervention, not going alone”

  1. Brian: This bit of your article cuts to the core of the problem:

    The fact is that the Australian Energy Market Operator (AEMO) runs the market, calls bids for supply on a 30-minute basis, and balances supply and consumption. That is what it has done every day for years, since 1 July 2009, and will continue to do so into the future. Except that 30-minute time-slots are bound to be reviewed in the Finkel report and may end up at five.

    What this market does is provide successful bidders with a payment per kWh for a lousy 30 mins with the threat of reducing this to 5 mins.
    The press has gone on and on about how one of the SA blackouts would have been avoided if the Pelican Point combined cycle gas powered power stations. However, the underlying problem was that the Pelican point owners made a not unreasonable decision that it was not worth them going to the effort to crank up their generator on the off chance that they would win the bidding and be able to sell enough power at a premium price to make the cranking up worthwhile.
    The other problem is that renewables have much lower operating costs than fossil power. What this means is that renewables win the bidding wars under the spot price system and this failure to win enough can drive fossil power out of business even when the system as a whole will need the fossil power from time to time.
    This crazy market needs to be replaced with a system that pays for capacity as well as kWh. For example, assuming that Pelican point or similar is needed we might get something that looks like:
    1. A payment for having a generator that can be ready to operate on X weeks notice for times of the year when this capacity may be needed. (The generator may be available for major maintenance for the rest of the time.)
    2. An extra payment for time when the generator is ready to start up.
    3. A payment per hour the generator is spinning.
    4. A payment per kWh produced.
    Someone from the power industry might come up with something better.
    I suggest that competitive tendering is a logical way of keeping the necessary capacity available at the necessary level of availability and minimum cost.
    Different forms of contract may be appropriate for different forms of generation and storage. Where necessary tender documents may specify the characteristics of the power required, location etc.
    What is turned on and off when and levels of readiness required should be specified by whoever is running the system, not a complicated and expensive spot market sytem.

  2. What is turned on and off when and levels of readiness required should be specified by whoever is running the system, not a complicated and expensive spot market sytem.

    Completely agree John. The current system puts the cart before the horse. Electricity supply should be first and foremost an essential service, not a commodity.

  3. John, there you go being rational again!

    I hope your ideas or similar are being fed into the Finkel review and other reviews. However, politics and ideology seem to rule the day.

    I went looking for Ian McAuley’s article about the National Electricity Market, and found one even more powerful: South Australia’s Electricity Problems: Jay Weatherill Should Follow The Coalition’s Example.

    The example he’s referring to is 1946 when Tom Playford nationalised the British-owned Adelaide Electricity Supply Company. There were some issues, but in general the Electricity Trust of South Australia (ETSA) did a far better job than a private company driven by profit-maximising incentives and accountable to foreign owners.

    But it was all sold off and split into four bits – generation, transmission, distribution and retail – in the late 1990s by the Liberal Olsen government. The other states were moving in the same direction, guided by the same gods. ultimately the National Electricity Market was set up where competition and markets were supposed to deliver cheapest prices.

    Time to admit failure and run the system rationally in the interests of the people.

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