You will recall that after the closing of Hazelwood Power Station at the end of March 2017 fears were held that the 2017-18 summer would see extensive blackouts. AEMO, the Australian Energy Market Operator, was tasked to assemble a strategic reserve to keep the lights on.
AEMO assembled a reserve of 1150 megawatts mainly “demand response” capacity with capital cost approaching zero, but the mechanism the agency had used called the Reliability and Reserve Trader or RERT, can’t be automatically rolled over for the summer of 2018-19. And perhaps it can’t be done at all, because the rule-maker, the Australian Energy Market Commission, has changed the rules governing the RERT so that the mechanism can only be used on 10 weeks notice in an emergency as a last resort, which is simply impractical.
So what is going on?
Here are some links:
- May 23 RenewEconomy – For $6 extra, AEMO keeps lights on and defies renewable skeptics
The short story is that Audrey Zibelman who heads up AEMO wants to keep the lights at cheapest cost, and sees paying consumers to reduce demand (‘demand response’) as a legitimate way of meeting peak demand.
John Pierce who chairs AEMC (Australian Energy Market Commission) believes that the market should not be interfered with unless there is an actual emergency, and then only as a last resort on a short-term basis. They are worried about the long-term use of demand response distorting the market, reducing incentives for investments in capacity.
You can tell by the photos I’ve chosen who I think is on the right track.
Pierce believes that to build a ‘strategic reserve’ of electricity capacity to be used only in emergency will be very expensive, raising electricity bills. Zibelman believes that if you exploit ‘demand response’ to its fullest, and have regular and repeatable protocols in place, you won’t need a strategic reserve. Price spikes will be avoided and electricity will be cheaper.
Problem is, if Zibelman wants to do what she has in mind she can’t go past the rule-maker. She has asked for a nine-month window for RERT and as linked above, the AEMC will soon make a ruling so that action could take place from June.
To back up a bit, the responsibility for finding electricity for consumers rests with the retailers, who conclude longer term contracts with generators to meet most supply. However, this is supplemented with the spot market, run by AEMO, who are responsible for balancing supply and demand, essentially in five-minute blocks.
When demand peaks, the price rockets towards or up to the regulated cap of $14,700 KWh. Notoriously in recent years some generators, mostly gas, made a large proportion of their profits through these peaks. Apparently during the 2017-18 summer the market was quieter, and performed quite well on price:
In part, this was due to a better performance from coal, with generators working hard on maintenance, and better prediction of demand, thus limiting the role of gas. This graph shows that the NEM coal fleet delivered the fourth highest summer availability in the last 10 years, with around 250 MW more capacity than average:
This shot of NEM Watch is I think instructive:
Although it was near midday, there was a lot of cloud around. So solar was way down. The wind was blowing well in SA and Victoria, not so in NSW. Qld does not have any wind yet. NSW was a bit of a sink hole as usual, and was effectively being topped up by gas in SA and QLD, plus increased coal in the three larger states. There is gas also in Victoria and NSW, which can come into play as demand increases.
A full account of the past summer is available in the May AEMO report.
Hazelwood had a name plate capacity of 1600 MW. This graph shows the new capacity available for the 2017-18 summer:
Details are given in this table:
Gas generators were re-opened in SA, Qld and Tasmania, giving 833 MW of extra generation. Diesel generators in SA and Victoria provided an extra 274 MW of temporary generation. To that was added 867 MW of RERT demand response.
AEMO contracted with 14 companies – including Alcoa Portland Aluminium, Agrekko Diesel Generators, SA and Victorian distributors SA Power Networks and CitiPower/Powercor, and Australian Steel Company’s Laverton mill – to deliver demand response capacity under the RERT during the summer:
Clearly there was a learning curve in setting this up, which could be capitalised upon if the same companies were used again.
During the summer, demand response was called into play twice, I understand, with the AEMO strategic reserve only costing $6 per household.
It should be noted that Energex in SEQ has been using demand response since 2006. Capacity was increased to about 800 MW in 2017, with PeakSmart (cashback for turning down home aircon) being extended through Ergon to the regions. This would have increased Queensland’s reserve capacity quite apart from the AEMO strategic reserve.
Queensland’s actions do not require NEM rules. I would be surprised if any rule or law changes were necessary.
It seems to me that similarly demand response should form part of AEMO’s standing brief, to be implemented as a delegated function from COAG. Zibelman tried to develop a channel directly to COAG, bypassing the AEMC, but failed. AEMC is chaired by a lawyer, and when Chief Scientist Alan Finkel visited in the course of his review, asked “why are we here?” when he found no engineers present. We will soon see whether they are a speed bump on the road or an actual road block to progress.
Queensland’s experience with demand response has apparently not had a negative effect on the $20 billion development stream of new renewable generation. However, some southern policy makers appear not be able to see anything north of the Tweed.
AERMO’s review report shows it as a very active organisation, forward-looking and embracing new technologies. For example, Zibelman said:
a method used by CitiPower/Powercor to lower demand by 60 MW-100 MW for the RERT just by slightly lowering the voltage in substations could be used by every distributor in the National Electricity Market, which would sharply increase the amount of demand response capacity available.
AEMO’s active concerns run from ensuring gas and coal supplies for generators, scheduling generator maintenance away from peak demand times, to network performance, grid stability, batteries, behind the metre developments and using machine learning to predict demand. Engagement and communication appears to have gone to another level since Zibelman was appointed.
The role of big batteries was newsworthy, with the fossils in government completely missing the point. On Monday this week (28 May) an article appeared in the AFR on page 3 – Mike Cannon-Brookes blasts Tesla battery critics.
Cannon-Brookes was the software billionaire who “accidentally” brokered the building of a big Tesla battery in South Australia after a Twitter bet with Elon Musk.
Reports are that the big battery had driven down the price of a grid necessity called “frequency control ancillary services” by 57 per cent or $32.7 million. Cannon-Brookes said:
“Let me be clear: the SA government invested $50 million, consumers/taxpayers saved $35 million in the first four months. At that rate, $105 million in year one of a 20 years-plus infrastructure asset. Wave a lump of coal at that!”
It charges when the price of power is low, then discharges into the afternoon peak. While it makes $90.56 per megawatt hour on the differential it helps to keep spot prices down.
- Mr Cannon-Brookes said the battery had “far surpassed everybody’s expectations”, and that those who had dismissed its relevance had been proven wrong.
Given its 100 megawatt output in a South Australian energy market whose peak demand is about 3000 megawatts, Treasurer Scott Morrison had compared the battery’s usefulness to Coffs Harbour’s Big Banana, while Resources Minister Matt Canavan had dismissed it as “the Kim Kardashian of energy”.
Morrison is Treasurer of our fair land and Canavan Resources Minister. These are the people running our country.
Next summer there will be three big batteries, with two more in Victoria.
Meanwhile our prospects of making the National Electricity Market fit for purpose would be enhanced if COAG got behind Audrey Zibelman and John Pierce was put out to pasture.