Sligar and aSSociateS provideS in Sight into the political, environmental and technological iSSueS concerning the future of the competitive electricity market together with detailed knowledge in Specific areaS.

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POWER SYSTEM IN TRANSITION

Prepare for the known future rather than correcting the past

Maintain the balance of non-dispatchable to dispatchable generation to minimise excessive reserve margin

Drive needed generation by extending the transmission network preferably in an east/west direction

Background

Power systems consist of a demand by customers for power that is supplied by electricity generators via a delivery network with high and low voltage components. Australia has four power systems, three centralised and one distributed. The largest of these is the national electricity market (NEM) covering the eastern States and manage by the Australian Energy Market Operator (AEMO). By law the power system must supply customer demand at all possible times.

Generation resources may be divided into two types, those that are available when requested, called “dispatchable” and those that may be available when requested called “non-dispatchable”. Dispatchable resources include fossil fuels, hydro, nuclear, geothermal and biomass. Non-dispatchable resources include wind, solar and wave weather based technologies. Storage batteries are a dispatchable short-term form of generation to solve specific system problems but insufficient for major energy supply.

The power system does not comprehend “renewable” generation. Renewable generation is made up of of both dispatch able and non-dispatchable technologies. Renewable dispatchable technologies include hydro, geothermal and biomass while non-dispatchable technologies include weather related wind, solar and wave.

Present power system

The power system has been driven in a deterministic fashion with operators selecting generation plant on a competitive basis from bids to match the immediate demand from customers. Generation has been mainly provided by fossil resources, which were predominantly dispatchable. A reserve margin has been necessary, traditionally of 15-20% of installed capacity to allow for unit failure and transmission limitations to maintain system stability/continuity.

Transition

Power systems have been fairly constant for many years but are now in transition to a new regime. There has been tripartite agreement between Australian political parties to increase renewable generation with corresponding reduction in fossil generation, with limited understanding of the consequences. Any such system changes should focus on the known future rather than correcting past problems. This political initiative changes industry investment from a medium capital expenditure (capex) medium operating expenditure (opex) regime to one with high capex but low opex.

Proposed power system

The new power system is driven in a stochastic manner, operators determining likely weather driven generation and scheduling additional dispatchable generation to match customer needs. Essentially the system will pass from a weather following one to a weather driven one.

Solar and wind, the lowest cost technologies at present are both non-dispatchable and have an availability of 20-40%. As the proportion of non-dispatchable generation increases so does the necessary reserve margin for stable operation. A major report from AEMO suggests a value about ten times the previous one of ~200% for 100% renewables (including 55-65% non-dispatchable generation). This implies that for a considerable proportion of the time much of the generation capability is unused but necessary to cover adverse weather conditions.

As the level of reserve margin increases steps need to be taken to utilise this investment to maintain economic efficiency. The present solution to shut down these generators when there is excessive capacity is unacceptable.

Alternatively the concept and utilisation of interruptible supply needs to be highlighted in a similar manner as interruptible demand is utilised in the present power system. The availability of low cost power from excess wind/solar to feed appropriate load can make necessary reserve margin investment more profitable.

Investment

Market based investment in the generation component of the industry has not been effective for many years except when considerable incentives have been provided. While such incentives were used to initiate investment in early wind and solar, future investment cannot depend on incentives and must be based on sound investment principles.

Regulation

Market forces cannot be expected to provide the necessary ratio of   dispatch able to non-dispatchable generation to minimise the additional reserve margin requirements and some form of market guidance will be needed. This could be provide through the energy regulator, using extension of the transmission network to provide a lead for generation expansion but not interfering with the competitive market significantly. Traditionally installation of transmission capacity followed a decision to install necessary generation and this would be reversed.

The present transmission network i north/south based on available coal resources and city load centres. additional solar will provide a concentrated injection along a narrow band of longitude, promising system instability. A possible solution lies in extending the network in an east/west direction fro Mt Piper first to Broken Hill and Olympic Dam ( major load centre for South Australia) to provide solar for many hours per day and far broader weather patterns for wind.

These changes in the power system regime can be effected smoothly given sufficient time. However, political imperatives require much speedier action leading to possible disruption. Regulatory action needs to anticipate these changes and ensure appropriate rules are in place before disruption occurs to ensure ongoing minimum necessary investment in the most economical efficient power system.