Addressing a growing problem

Look at the media today and you will find a raft of stories about the Australian Energy Market Commission’s new analysis taking stock of the east coast power system’s ability to deliver on demand.

Inevitably the media coverage is flavored by the “sinner or saint” view of intermittent renewable energy which is a constant current focus of political argument and side-taking commentary – and by an interpretation of the commission’s work to the effect that the NEM is growing more unstable.

The commission is actually quite clear on its perspective: right now, it says, there is enough power capacity to sustain reliable supply “but we have a growing problem (in) management of the system and more action needs to be taken to integrate weather-driven generation with the grid.” Keeping things like frequency and voltage within technical limits is becoming “more challenging.”

This is rather more moderate language than the Energy Security Board’s description late last year of the NEM’s health – “in intensive care” was the phrase that hit the headlines.

The AEMC this week is at pains to point out how much is being done to address the integration issue – which became joint top of mind nationally (along with angst about energy costs) when the lights went out in South Australia 18 months ago after a big storm. The commission says 10 major steps have been taken to tighten NEM security arrangements and others are coming up in 2018 after four further review processes are completed.

And it also makes a point that should not be overlooked in all the public fuss: “We are focused on addressing the problems we have today as well as looking to what is required for the future.”

Anne Pearson, the commission CEO, notes “it is not well understood that we (currently) have a good supply of available power which makes the system reliable (but) there is a separate problem of maintaining the stability of the system when unexpected breakdowns happen.” In short, she says, the NEM grid has to be managed differently to respond to a changing generation mix.

Writing an op-ed in the Australian today, Pearson adds that the system frequency issues now confronting the grid are “eye-glazing” (for us laymen) but essentially the changed mix is making this aspect harder to control, with less time for the market operator to recover the network from equipment failures before bad things happen.

The big complicating factor, of course, is that all the market changes being pursued, including the “national energy guarantee,” have to implemented without adding to consumer costs – especially for households in the present fevered political environment – and even in a way that enables charges to fall. This is a feat that even Jack of serial fame couldn’t achieve with one bound and, I suspect, it is unlikely to be achieved during the current political season (which runs until after the Victorian, New South Wales and federal elections).

If politicians did not fully appreciate this particular risk, they should be better informed now following publication of a NEG submission to the Energy Security Board from the Australian Competition & Consumer Commission.

In it, Rod Sims, the ACCC chairman, poses a number of questions, including this: “how will the trade-off between reliability and affordability be determined (via the NEG) to ensure that end-users pay no more than the value to them of increased reliability?”

As last weekend’s Batman and SA polls demonstrate, the judgement of the people is not to be taken for granted by politicians and the community is looking at political conjuring tricks with increasingly beady eyes.

The rift between soundbites from politicians and the complexities of power system management, including its interaction with gas supply, is wide and growing wider.

Here, for example, is Sims again in his letter to ESB chair Kerry Schott: “How can the NEG be designed in such a way that it does not impose significant regulatory costs and burden on retailers? Additional regulatory costs ultimately result in higher prices for consumers.”

And again: “If the current contracting instruments in the market need to be redesigned to incorporate emissions and reliability metrics, there is a risk that a series of smaller, less liquid markets (will) develop in place of existing arrangements. Such an arrangement would expose both retailers and generators to more risk and result in higher prices.”

All this stuff, to quote Pearson, is “eye-glazing” for what Prime Minister Paul Keating used to describe as “the mob” – ie us.

The sort of work that the AEMC has undertaken and is continuing to pursue is essential to the efficient functioning of the NEM but it is way too complicated for “the mob” – and it is only part of the interventions being eyed by political leaders and their advisers across a federated government system.

We all know that the NEM cart has flirted with the edge of the ditch a number of times in recent months; keeping it on the road towards a genuinely affordable as well as secure and technically reliable future (let alone a greener one) is a Herculean task and the heavy lifting is far from over.

In closing, the AEMC analysis points to modeling that burgeoning solar PV uptake and more energy end-use efficiency should see NEM power demand stay flat for a while longer before falling by 1.6 per cent by 2026-27.

PS: You may be interested to know that in the seven days from the middle of last Wednesday to the middle of today, including an awfully hot Sunday in New South Wales, the total input of electricity on the east coast (including an estimate of rooftop solar PV) was 3,913 gigawatt hours – of which black coal contributed 2,201 GWh, brown coal 590 GWh, gas plants 396 GWh, hydro systems 288 GWh, wind power 259 GWh, rooftop solar 158 GWh and utility-scale solar 17 GWh. (Source: the OpenNEM widget)

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