From Watts Up With That?

Essay by Eric Worrall

First published JoNova; A just published Australian Energy Market Operator report highlights the urgent “opportunity” for the provision of reliable electricity to Australia’s East Coast grid.

2023 Electricity Statement of Opportunities August 2023

With up to 62% of its coal fleet now expected to close before 20331, Australia’s NEM is perched on the edge of one of the largest transformations since the market was formed over 20 years ago. The scale of opportunity to meet an imminent and growing need for firm capacity, new forms of energy production, and significant consumer energy investments is unparalleled in Australia’s energy history. This ESOO shows that imminent and urgent investment is needed to meet this opportunity, or the reliability of the NEM will be at risk.

In this 2023 ESOO assessment:

When considering only energy supply infrastructure developments that meet AEMO’s commitment criteria2, AEMO forecasts larger reliability gaps than were forecast in the February 2023 Update to 2022 Electricity Statement of Opportunities, and in some cases, larger than forecast in the 2022 ESOO. Over the next 10 years, in the 2023 ESOO Central scenario, reliability risks are forecast to be higher than the relevant reliability standard requires in:

South Australia in summer 2023-24 (against the Interim Reliability Measure [IRM] of 0.0006% unserved energy [USE]) and from 2028-29 (against the reliability standard of 0.002% USE).

Victoria this coming summer and over the entire ESOO horizon against the IRM, and from 2026-27 against the reliability standard.

New South Wales from 2025-26 against the reliability standard.

Queensland in 2029-30 and 2030-31 against the reliability standard.

Once federal and state government programs, actionable transmission developments, and orchestration of forecast consumer energy resources (CER) are also considered, beyond the short term, reliability risks have the potential to be managed within relevant standards over most of the next 10-year horizon.

While these programs and developments have not yet progressed far enough to implementation to meet the strict criteria to be included in the ESOO Central outlook, federal and state governments have policies and frameworks to develop and implement delivery plans.

All jurisdictions have a range of policies that support the development of new capacity to replace retiring generators. Each policy must now prioritise delivering the transmission, and renewable energy and firming generation they target, ahead of announced closures. Just-in-time investment may not maintain suitable reliability, and delivering on the current development opportunities is now essential.

The impact of potential coal, gas and diesel fuel shortfalls has been identified as a material risk to the reliability of the NEM. In addition to the need for new generation, transmission and other solutions, the ongoing availability of coal, gas and distillate fuels, and effective management of their supply chains, will be critical to the reliability of the NEM.

These forecasts highlight the high value of solutions in which resources owned by consumers, such as residential electricity generation and storage devices, and increased demand flexibility, can help meet power system needs. With a high level of consumer participation and coordination of consumer energy assets and demand to help meet power system needs, the need for utility-scale solutions would be much lower.

Read more: [Page 3-4] https://aemo.com.au/-/media/files/electricity/nem/planning_and_forecasting/nem_esoo/2023/2023-electricity-statement-of-opportunities.pdf?la=en&hash=D8CC2D9AC8D9F353194C9DD117095FB4

Once you cut through the “opportunity” doublespeak, the stark reality is South Australia has already fallen below the interim reliability measure. Other states are set to join them in the near future – NSW (2025-25), Victoria (2026-27) and Queensland (2029-30 and 2030-31).

Any businesses operating in South Australia, New South Wales, Victoria and Queensland are sometimes required by the government to curtain operations to reduce the risk of domestic supply blackouts during periods of peak demand, like heatwaves or cold snaps.

Why has the outlook suddenly worsened?

The big problem is a perfect storm of neglect of fossil fuel assets, and the failure of renewable systems and battery grid firming measures to contribute sufficiently to grid stability. The green electrify everything push is also forecast to drive up demand for grid electricity, just as grid stability is on its knees from lack of dispatchable capacity.

• Generator unplanned outage rates are forecast higher than previously, reflecting recent trends of poor performance among some generator technologies.
• AEMO has observed that the initial target delivery dates provided by developers of new generation and storage investments often have not accounted for delays that could occur during the project financing, planning, development and delivery stages of projects. To ensure the accuracy of its reliability outlook, AEMO now applies delays to reflect observed development and delivery risks of new projects in the reliability forecast.
• New and improved weather data and modelling for renewable generation has improved the accuracy of variable renewable energy (VRE) correlations with maximum demand, identifying a higher forecast occurrence of low wind and high demand conditions in Victoria, resulting in higher forecast reliability risks for South Australia and Victoria.
• Many new wind, solar, battery and pumped hydro developments have advanced sufficiently to be considered in the 2023 ESOO, however solutions which orchestrate and coordinate consumers’ generation and storage devices to support reliability have not yet demonstrated success at significant scale. Consistent with other reliability input assumptions, AEMO has now only assumed consumers will install CER and make them available to be orchestrated to help meet power system needs at current levels; this is lower than the levels of CER orchestration previously assumed.
• Forecasts of energy consumption and maximum demand are higher in some NEM regions, driven by projected electrification of households and businesses, and forecast expansion of industrial facilities.

Read more: [Page 4] Same link as above

When will the blackouts start biting? The coming southern hemisphere Summer, December this year to February, is looking very iffy in Victoria and South Australia.

2023-24 outlook

Reliability risks are forecast to be greater than the Interim Reliability Measure in South Australia and Victoria this summer. Any adverse conditions for wind or solar generation, which happens quite frequently with Victoria’s notoriously unpredictable Summer weather, coupled with expected El Nino heatwaves, could tip the grid in Victoria and South Australia over the brink.

• Electricity consumption over the year is forecast to be marginally lower than in 2022-23, as growth in newly electrified loads (switching to electricity from alternative energy sources such as gas and diesel) is more than offset by business energy efficiency savings and lower household disposable income, lessening previously forecast growth.
• Annual maximum demand forecasts for 2023-24, however, remain similar to those previously forecast, because consumer demand during hot weather is forecast to be less impacted by energy efficiency investments and potential consumer responses to high prices. Annual maximum demand occurs close to or after sunset in most regions, after the impact of distributed photovoltaics (PV) has subsided.
• Approximately 3.4 gigawatts (GW) more new generation and storage capacity from a range of technologies is expected to be available compared to what was available last summer.
• The reliability of the thermal (coal and gas) generation fleet generally stayed at historically poor levels in 2022-23, and most plant operators have advised that overall plant reliability is unlikely to materially improve.
• Expected unserved energy (USE) is forecast to be above the IRM of 0.0006% USE in South Australia and Victoria in the coming year, although risks remain in all regions under extreme conditions. Table 1 shows the forecast risk for a larger USE outcome3 for the coming summer. The probability is provided for all possible maximum demand outcomes, and under 10% POE demand conditions. Factors that influence when and how USE occurs include occurrences of generator outages and high demand at the same time as low wind and solar generation conditions.
• For the coming summer, the Bureau of Meteorology is currently advising that hot dry conditions, with elevated bushfire risks, and El Niño weather patterns are likely. The maximum demand forecast range is forecast based on all climate conditions and does not target these specific forecast weather conditions. Hence there is an increased likelihood this summer that demand outcomes will fall in the upper end of the forecast range (that is, the 10% probability of exceedance [POE] forecast is more likely), in most regions.

Read more: [Page 5-6] Same link as above

What will bring relief to Australia’s faltering East Coast grid?

The AEMO included the development of hydrogen electrolyser energy storage capacity, as a major source of grid stability post 2032. Hydrogen energy storage technology which has not yet been developed.

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Potential development of hydrogen electrolysers is forecast to increase NEM electricity consumption by up to 10% by 2032-335. The forecast for hydrogen electrolysis development has increased significantly since the 2022 ESOO, due to the introduction of the New South Wales Renewable Fuels Scheme, which is legislated to commence in 2024, and the South Australian Hydrogen Jobs Plan, which includes a 250 megawatts (MW) electrolyser with a target to commence operations in 2025-26.

Assuming that electrolysers operate to provide new energy options to consumers, including potential hydrogen-ready gas generators that are not yet advanced enough to consider in the Central scenario. The development of hydrogen generation sources is, however, noted among numerous jurisdictional plans.

Read more: [Page 7] Same link as above

But all predicted storage capacity, including all known pumped storage dam projects, even if completed on time, are insufficient to provide the backup and stability that the grid will require once coal plants are closed.

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While generation, storage and transmission developments continue to connect to the power system, the assessment shows these committed and anticipated developments (generation, transmission and other solutions) are not yet sufficient to offset the forecast impact of higher electricity use and advised generator retirements. Delays to any other currently considered development may further worsen the reliability outlook.

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A much larger pipeline of proposed generation and storage projects – totalling 173 GW of VRE and 74 GW of dispatchable resources (including battery, pumped hydro, and other technologies) – demonstrate the opportunity for the market to respond to emerging reliability gaps, if projects are developed in a timely manner. Numerous federal and state government schemes and programs have been implemented to further incentivise or fund the required developments in the NEM. 

…Read more: [Page 9-10] Same link as above

The AEMO is open to ideas to fix the grid reliability crisis opportunity, they published a tender for reliable energy provision a few days after publishing their latest report. So if you happen to have a multi-gigalitre dam and hydro generator which you forgot to tell anyone about, tucked away on an alpine back paddock, the AEMO is waiting for your phone call [h/t JoNova].

Hands up who wants to invest in energy intensive manufacturing jobs and building new factories in East Coast Australia?

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The AEMO report provides the following helpful explanation to what the percentages on the vertical graph mean in terms of grid reliability.

0.0006% (the lower dashed line “interim reliability measure”):

When expected USE is forecast in a region at the level of the IRM, the following reliability risks are forecast:

• USE events would statistically occur approximately once every six years.
• Larger USE outcomes would occur approximately once every 10 years (equivalent to approximately 10% of average regional demand for five hours, or comprising multiple events that aggregate to this total).
• Load shedding events of even greater magnitude are possible, particularly if combined with transmission outages, and/or persistent generator or transmission outages following power system security events.
• Out of market mechanisms may be available and could be utilised to mitigate some of these risks with associated costs.

0.02% (the upper dashed line “Reliability Standard”):

When expected USE is forecast in a region at the level of the reliability standard of 0.002% USE, the following reliability risks are forecast:

• USE events would occur approximately once in every three years.
• Larger USE outcomes would occur approximately once every five years (equivalent to approximately12% of average regional demand for eight hours).
• Load shedding events of even greater magnitude are possible, particularly if combined with transmission outages, and/or persistent generator or transmission outages following power system security events.
• Out of market mechanisms may be available and could be utilised to mitigate some of these risks with associated costs.

According to page 18 of the report, The AEMO is considering retiring the 0.0006% interim reliability measure, or changing how it is calculated. In my opinion this re-consideration is likely because there doesn’t seem to be any point keeping the current 0.0006% definition, given that all East Coast states other than Tasmania have or will shortly begin prolonged breaches of the interim reliability standard. The Net Zero push is explicitly mentioned as a reason the AEMO are considering redefinition or retirement of the interim reliability standard.

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For more information on the devastating impact on grid reliability of the Net Zero push, click here.