Big power resists AEMO 'strategic reserve' push after NSW squeeze
Energy companies are resisting the Australian Energy Market Operator's campaign for new powers to deal with unexpected generator outages and weather-induced demand surges following last week's near miss in the NSW grid.
"The National Electricity Market is coping pretty well through a period of significant transition, with reliability of supply still high even as coal plants age and close and as we significantly boost supply from renewable sources like wind and solar," said Greg Jarvis, Origin Energy's head of energy.
"A power station is not dissimilar to other machines like cars; when they are young they don't need much attention and things rarely go wrong, but as they get older the need for servicing increases as does the likelihood of a breakdown – just as we've seen in NSW last week with both planned maintenance and unscheduled unit outages."
Origin's giant Eraring coal power station was one of the few in NSW to keep generating through last week's extremely tight supply conditions during which Tomago Aluminium voluntarily switched off potlines for 45 minutes to an hour apiece on Tuesday and Thursday when soaring electricity prices made its operations unprofitable.
"While the system faced unforeseen challenges last week, the response was well managed and the market responded as intended."
AEMO chief executive Audrey Zibelman is seeking a permanent strategic reserve and "day ahead market", as well as better weather forecasting, to deal with increasingly volatile weather. AEMO successfully negotiated the summer demand peaks in Victoria and NSW with the help of its Reliability and Reserve Trader mechanism or RERT.
Last week the market operator issued "Lack of Reserve 2" notices for NSW on Tuesday, Thursday and Friday as NEM prices soared above $2400 a megawatt hour and at times neared the $14,200 maximum. LOR2 indicates that if a specified volume of supply capacity doesn't come on line there could be a risk of blackouts.
Seeking a permanent strategic reserve: AEMO CEO Audrey Zibelman with Energy Minister Josh Frydenberg in AEMO's control room in Melbourne.
AEMO and Paul McArdle of energy consultancy GlobalRoam attributed the squeeze to about 3800MW of supply capacity going missing – thanks to a rare combination of planned and unplanned coal plant outages, low wind and solar generation and demand exceeding forecasts during a sudden cold snap. Gas and hydro generation – Snowy Hydro's Colangra gas plant and Lower Tumut hydro – also did not perform to potential.
The extremely tight supply/demand balance is unusual for June and did not result in any load shedding, although Tomago Aluminium – owned by Rio Tinto, CSR and Hydro Aluminium – voluntarily switched off potlines because it faces unhedged prices at times of extremely tight demand.
Tomago managing director Matt Howell said the smelter loses $5 million an hour or every part thereof that the electricity price hits $14,000/MWh, and blamed the growth of wind and solar energy and the closure of coal-fired power for the increased frequency of price spikes.
Dylan McConnell, a researcher at the University of Melbourne's Climate and Energy College, said it was hard to say the squeeze boosted AEMO's case for a strategic reserve, given that "nothing went wrong, the lights stayed on and the market did what it was supposed to do".
Energy Minister Josh Frydenberg said that "As AEMO has advised there was enough supply and no impact to power system security last week," but it was further evidence of the need for the National Energy Guarantee in August to "not only lower power prices for households and businesses but to also boost reliability in the system."
Thursday, June 14, 2018
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