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AEMC says grid operating to standards, prompts call for new standards

AEMC says grid operating to standards, prompts call for new standards

The Australian Energy Market Commission’s check of the electricity grid's reliability has found the system is working so well that current standards should be extended for another seven years, however, others say they are measuring the wrong standards.

The four-yearly study examines the balance between keeping the lights on through encouraging investment in poles, wires and new generation and ensuring that electricity remains affordable. It found the current standard is "appropriate", but the Australian Energy Market Operator has previously found that reliability for the current National Electricity Market – which covers the east coast – will not be met for all future peak summer periods.

The AEMC found that the current standards strike a balance between keeping power affordable and keeping the lights on.

Electricity prices reached historic peaks over the last 12 months, with Victoria and South Australia recording the highest prices while New South Wales and Queensland were hit the hardest when it came to additional costs from electricity infrastructure, forcing claims that electricity network companies were "gold-plating" themselves at the cost of consumers.

AEMO also had to enact the Reliability and Emergency Reserve Trader mechanism (RERT) – which calls on large energy users to reduce power – twice over summer in order to avert potential blackouts, and it was only through extensive planning and a little luck that blackouts were avoided.

The AEMC said it remained a balancing act.

“Setting the reliability standard involves a trade-off between the prices consumers pay for electricity and the cost to consumers of not having electricity there when it’s needed,” Reliability Panel chairman Dr Brian Spalding said.

“In doing this review, the panel was extremely cognisant of getting the balance right to avoid what some have called ‘gold-plating’ with excess capacity built but not required for years.”

Examples of this additional capacity include AGL's recently announced $400 million gas-fired power plant, which AGL chief executive Andy Vesey said would likely only be used 30 days a year to meet extreme high demand periods.

The AEMC panel noted that the current reliability standard sees 99.998 per cent of demand met but if it were to strive for 100 per cent of all demand then it would require billions of dollars in additional investment into poles and wires, transmission and additional generation to achieve.

As part of the study, the AEMC also opted to keep the market price cap of $14,200 per megawatt hour and the consumer price cap at $300 per megawatt hour.

Grattan Institute energy director Tony Wood said the AEMC and AEMO appear to have different standards for reliability.

“Reliability seems to be an area of debate between the AEMC and AEMO,” Mr Wood told Fairfax media.

“We know AEMO has said we need to talk about another measure [for reliability].

“The changing nature of the energy system needs to be debated. The question that needs to be answered is whether in today’s world this reliability standard is comprehensive enough and whether it is still applicable in the changing energy space.”

Sydney Morning Herald

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