What happens when 1GW of coal capacity suddenly disappears

The so-called “intermittency” of wind and solar has been copping the blame from much of the mainstream media for recent price spikes in the wholesale electricity market. But the variability of renewable energy sometimes pales in comparison to the sudden loss of output from coal-fired generators.

The latest market report from the Australian Energy Regulator, which oversees market operations to ensure that everything is as it should be, shows one such incident on Tuesday July 12, when 1GW of coal- and gas-fired capacity was suddenly lost, sending prices soaring to more than $300/MWh.

The AER report notes that the Callide coal-fired generator in Queensland had been having coal quality issues all afternoon, gradually withdrawing more and more capacity because the coal being mined at its doorstep was not good enough to shovel into the boilers. Over three hours it withdrew 136MW of capacity.

This is not unusual. The big brown coal generators in Victoria, Loy Yang A and Loy Yang B, had similar issues last month, as we noted here, sometimes causing up to 480MW of capacity to be lost, again sending prices sky high.

The situation at Callide was made worse when a unit at the big Vales coal plant in NSW suddenly tripped, taking 630MW of capacity out of the system at 5.42pm.

rebids July 10 national AER

On top of that, Origin Energy withdrew 275MW of capacity from its Mortlake gas-fired generator to “avoid uneconomic restart” – meaning it was not convinced that it could get its money back if it switched the generator back on, despite a jump  in demand. So it withdrew that unit from the market.

The events caused prices across the National Electricity Market to jump to $300/MWh for most of that trading interval between 6pm and 6.30pm.

The point of this is to highlight that the NEM is subject to all sorts of variations – from sudden changes in demand, to the sudden loss of so-called “reliable” “base load” generators, and the variations of wind and solar. Wind and solar changes can be anticipated, mostly. Sudden trips can not.

This is one reason why major energy users are pushing for changes in the rules to encourage more battery storage, which can respond to changes in demand and supply almost instantaneously, and which the market regulators and operators think can reduce volatility in wholesale prices. Incumbent gas generators don’t like these changes, however.

In the same week as the Vales trip, electricity prices in South Australia were particularly volatile, thanks to the high gas prices and the restraint on the interconnector into Victoria. The AER reported 16 events during the week when the 30-minute price went to three times above the average.

The three biggest events – that went over $5,000/MWh – are subject to separate reports by the AER, which may take another few weeks to complete. They will provide fascinating reading.

One of the high-priced events in South Australia, on July 13, is particularly interesting. It is one of those events that sent the 5 minute price to near $14,000MWh, causing horror in the mainstream press, with blame sheeted to wind and solar.

According to the AER investigation of events, supply was tight due to constraints on the interconnector and the price of gas was high. But Origin Energy then re-bid 44MW of capacity from its Quarantine gas plant from $482/MWh to $13,239/MWh, to “ensure economic dispatch”. i.e. that it made enough money during the next 30 minute period.

The situation was complicated by the fact that 52MW of capacity from AGL’s Torrens Island plant was suddenly not available because of a delay in returning it online, due to ramping issues (the time it takes to get old gas generators going – another reason to push for battery storage).

That appeared to make the jump in wholesale price at 9.05am that morning a fait accompli.

“When the above rebids became effective at 9.05am the dispatch price increased from $579/MWh at 9am to $13 330/MWh,” the AER noted. Then, just as suddenly, more capacity flooded into the market and the price went negative for the remainder of the interval.

But the point is this: The National Electricity Market is a complex beast. Simply blaming wind and solar for high price spikes is ridiculous, as the energy minister Josh Frydenberg noted last week.

These price spikes used to happen every second day before the arrival of wind and solar and some fossil fuel generators have been pinged for illegal practices, and for unfairly pushing up the cost of wholesale electricity.

Little wonder that the South Australian government is pushing to open up a new connector and open its market to more competition.

Comments

6 responses to “What happens when 1GW of coal capacity suddenly disappears”

  1. Ron Horgan Avatar
    Ron Horgan

    It’s remarkable how dysfunctional the business as usual model really is.
    I had no idea it was so chaotic,

    1. Cooma Doug Avatar
      Cooma Doug

      The market is complex but works well given the realities of a large base load system that does not respond on the load side at all. Put some response options on the other side of the meter and its a different game.

  2. Jan Veselý Avatar
    Jan Veselý

    The dispatch power semimonopoly is gaming the market in SA. This makes big profits in short term but stimulates concurrence to step in and enter the market. So, they are de facto stimulating build of new interconnectors, battery storage, load shifting, new pekaers, …

  3. Malcolm M Avatar
    Malcolm M

    Meanwhile in the Vic-NSW market such rebidding practices are a lot less effective, because Snowy Hydro can quickly bring in peaking capacity. As a company owned by the NSW, Vic and Federal governments, such practices would bring a quick rebuke from its owners. But if the owners were private …

    This is actually one of the big differences with the SA market – there are no generators under government ownership.

    1. Cooma Doug Avatar
      Cooma Doug

      Snowy Hydro Ltd…..
      Has share holders yes but is independant and an independant market competitor.
      Snowy responds to all market signals according to all market rules as do all major generators.
      One market rule of note is that a generator can be forced to generate. They call it being constrained on. These processes are implimented automaticly by the very complex constraint and system security management.
      It is a complex process to recognise all business opportunity and to have turned energy management realities into viable products. The ancilliary service market a wonderful example of such value recognition and capture.
      Some generators have the advantage of ideal location on certain environments. Snowy for example can be a huge winner in a Melbourne heat wave when coal generators are failing in Victoria. This is because of its location. Having said this it can also be in a bad place under other circumstances. It may be forced on to generate hundreds of MWs at extreme low prices.
      Not much of what happens is logical. But it is reasonable to say that wind and solar will make it all more predictable and reliable as well as enabling more predictable bidding and system security management.

      To suggest that Snowy can be used to manage the wholsale market response by some non market intervention is simply not so.

      To suggest wind and solar makes the task harder is also wrong. It makes system security issues more predictable. Large base load has for decades caused the most severe security issues and the unpredictable
      nature of coal gas and large infrustructure failures are the big problem.

  4. Les Johnston Avatar
    Les Johnston

    This analysis highlights the variability of the fossil fuel generators and the need for dispersed capacity. Very interesting analysis and highlights the need to avoid simplistic commentary espoused by political interests.

Get up to 3 quotes from pre-vetted solar (and battery) installers.