Eutility's weekly news

AEMO wants action on power reserve to protect from blackouts

AEMO wants action on power reserve to protect from blackouts

Australian Energy Market Operator chief executive Audrey Zibelman has challenged other energy agencies to deliver AEMO the tools it needs to build a "strategic reserve" to protect the power system from blackouts this year and next summer.

AEMO has raised 1150 megawatts of "demand response" capacity to help prevent blackouts this summer, but the mechanism the agency had used to ensure enough supply called the Reliability and Reserve Trader or RERT, won't be available for the summer of 2018-19.

The rule-making body, the Australian Energy Market Commission, has changed the rules governing the RERT so that from 2018 the mechanism can only be used on short notice, leaving the market operator to lobby for a strategic reserve in its place.

As parts of the nation sweltered through extreme temperatures over the weekend into the mid-40 degrees, including 47.3 degrees in Penrith, west of Sydney, business slowdowns and closures for the holidays helped alleviate the demand for energy supply.

Ms Zibelman told The Australian Financial Review she wanted to determine the best process for achieving the required rule change for a strategic reserve in early January, so that the rule change could be delivered in time for AEMO to put the strategic reserve up for auction in June, and have it in place by the summer.

Such a rule change would normally have to go through the AEMC, but Ms Zibelman is exploring whether the Energy Security Board (ESB) could take the proposal straight to the Council of Australian Governments Energy Council, an avenue she says was recommended by Chief Scientist Alan Finkel's review of energy security.

Bypass AEMC

"The question would be can the ESB recommend it and send it direct to COAG, or does it have to go through the AEMC rule-making process? That's something we need to sort out and I'd like to get it sorted out in the beginning of January so we know what process we are on," she said.

AEMO has 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 this summer.

Ms Zibelman said it would be unfortunate to lose any of them and highly inefficient to have to go through the process all over again because AEMO did not have the tools it needs.

"The most important thing for AEMO is that it happens because if it doesn't our concern is that we'd be going into next summer with a big unknown."

The blunt approach could put her at odds with AEMC chairman John Pierce, who has been criticised for slow-walking rule changes to support demand response before. It comes as the agencies are preoccupied with another priority – designing the National Energy Guarantee.

But the ESB brings together the heads of AEMO, AEMC and the Australian Energy Regulator under an independent chair, former investment banker Kerry Schott, to resolve such conflicts and ensure the agencies are all rowing in the same direction.

Ms Zibelman believes demand response can deliver much larger amounts of capacity to help balance supply and demand in the grid. Demand response rewards customers for curbing their energy usage or sending energy back to the grid from "behind the meter" resources such as solar panels and batteries at times of extreme demand.

'It's like a big power plant'

She 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.

An initiative by Queensland distributor Energex to control demand by cycling customers' pool pumps and air conditioners up and down could potentially lower demand by 800 MW, she said.

"It's like a big power plant just sitting there," she said. "There is no reason [why] something like that could not be done right across the network." Energex isn't contracted under the RERT.

AEMO had to negotiate RERT contracts bilaterally in a "compressed" time this year. Ms Zibelman said a strategic reserve auction with plenty of notice would give energy companies time to be creative and allow competition to drive down prices.

AEMO raised up to 200 MW of demand response via auction in October in a trial funded by the Australian Renewable Energy Agency, a process Ms Zibelman said was more efficient than contracting individually.

"My experience has been in other markets that when you have something like a strategic reserve and you're very clear on when you're going to do it and you do it every year, everyone looks at this as an opportunity.

"And eventually with demand response it would be the same thing, it would become almost routine, and therefore a lot more efficient. And the question would become over time, if we get enough demand response in the market, do you even need a strategic reserve, or is the ability to control demand your reserve?"

Financial Review

Post a comment

Captcha Image