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AEMO: Australia ‘does not have’ electricity reserves for times of need

AEMO: Australia ‘does not have’ electricity reserves for times of need

The nation’s energy market operator has warned that Australia “does not have the energy reserves it once had” to lean on in times of need as the power market undergoes an “unprecedented transformation”.

The comment by the Australian Energy Market Operator follows NSW losing 3800 megawatts of generation capacity last week, nearly a third of its 12,000MW installed coal generation capacity, raising the threat of blackouts.

The outages put the network at full capacity, with peak demand in the state outstripping supply and sparking a surge in spot prices.

This was a “sobering reminder that even outside of the traditional summer peak periods, there is still a need to ensure adequate resources are available to manage the system,” AEMO said on Sunday.

Generators at five of the six NSW coal-fired power stations were hit by outages heading into the long weekend. At the same time, AEMO noted a thick cloud cover and rain reduced the output of solar generation across the state by up to 254MW a day over several days.

“The energy system is undergoing unprecedented transformation. With the recent exit of almost 5000 megawatts of generation in the last decade, Australia does not have the energy reserves it once had to lean on in times of need,” AEMO said in a statement on Sunday.

AEMO reiterated its concerns about the planned retirement of AGL’s Liddell coal-fired power generator in 2022, saying there was a need to “ensure a reliable portfolio of resources”. It also provided its support behind the federal government’s planned National Energy Guarantee, which has reliability components built into the policy.

AEMO spokeswoman Avi Tan said conditions in the electricity market were expected to improve this week as generating capacity came back online after the unplanned outages last week. Federal Environment and Energy minister Josh Frydenberg told The Australian the event highlighted how important it was for the states to agree to the National Energy Guarantee to not only lower power prices for households and businesses but to also boost reliability.

“Since the closure of the Northern and Hazelwood power stations there has been a reduced amount of dispatchable supply which has led to an escalation in spot prices at times of high demand and low generation from solar and wind across the National Electricity Market,” Mr Frydenberg said on Sunday.

NSW generation units at Vales Point, Tallawarra, Liddell, Bayswater and Mount Piper went offline last week due to planned and unplanned maintenance issues, with only Eraring, the state’s biggest and most modern, operating at full capacity.

The outages threatened a third day of shutdowns at the Tomago aluminium smelter, the state’s largest single energy user, to avoid multi-million-dollar losses on the high energy prices.

AEMO said there was no involuntary load-shedding in NSW or transmission outages that affected events in the state over the evening peak on Friday night.

But Tomago had to shut down one of its three aluminium potlines for 45 minutes on Tuesday evening and two others for an hour each on Thursday to avoid exposure to energy prices that peaked at $14,200 a megawatt hour on Thursday, according to AEMO.

AGL previously held an agreement to switch off power to Tomago — the biggest single consumer of electricity in the state.

But it is believed that the current contract guarantees a fixed price for the smelter except in extreme market conditions. In such conditions the hedge is removed, leaving Tomago exposed to market prices that can soar into the thousands of dollars per megawatt hour.

Tomago said that, at the rate of use at the 24/7 plant, its cost of smelting aluminium on Friday jumped to more than $200,000 a tonne, locking in losses of $5 million an hour.

Tomago confirmed it switched off each of its three pot lines on separate occasions last week.

Speaking to The Australian, Tomago CEO Matt Howell said the production outages at Tomago highlighted the need for sufficient and reliable baseload power in Australia.

“I guess what it does illustrate is how precarious the system is when you start to rely more on weather-dependent renewables rather than conventional thermal baseload,” he said. “Renewables are not enough for energy-intensive industries like aluminium and steel.”

At the peak prices near $14,000 a megawatt hour experienced in Australia last week, he said it would have cost Tomago $US22,000 ($29,000) to make a tonne of the metal colloquially known as “congealed electricity”, 10 times the current spot price of $US2300 a tonne.

While Canada and Germany are often praised for their promotion of renewable energy sources, Canada also has 19 operational nuclear reactors, while Germany has nuclear reactors as well as access to the EU’s massive interconnected electricity grid — luxuries that are unavailable in the Australian electricity market, Mr Howell noted.

Gas-fired power stations would not fix the problem in his view because the cost of electricity they produce is too high. Snowy 2.0 is a “great idea” but limited by the cost of pumping water.

“We need a constant supply of electrical power,” Mr Howell added.

In a review of the events leading up to the weekend stress, AEMO noted about 3800MW of generation resources expected to be available across the peak was not available in NSW.

At the same time, a number of generating units in NSW were out of service due to planned maintenance.

“A further two unplanned forced outages however did result in 1320MW dropping out of the market and resulted in tighter reserve levels,” AEMO said.

It coincided with overcast and low-wind weather that limited renewables generation and forced NSW to draw more heavily on power from Queensland and Victoria.

The Australian

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