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Ageing coal generators may be unable to cope with energy transition

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The Australian Energy Market Operator has highlighted one of the biggest problems in Australia’s electricity grid – namely that some legacy coal and gas generators have no performance standards, and it may not even know what their control settings are.

The admission comes in AEMO’s submission to the Finkel Review, in which it also pleads for much faster decision making on critical rule changes – such as the 5-minute rule – and for such decisions to be “forward looking” and “proactive,” rather than “reactive”.

Wrong-way

Its frustrations with the glacial pace of rule-changes – the province of the Australian Energy Market Commission – have been reflected in the broader market and at ministerial level.

AEMO notes that some rule changes can take years to be finalised, and even then may not result in “forward looking” decisions, or take into account new technology developments.

It wants to be able to do some of that rule-making itself, in recognition of the importance of its role in dealing with the actuality of technology changes and grid challenges, and of keeping the lights on.

“The current arrangement is therefore not sufficiently responsive or forward-looking to meet the needs of the paradigm shifts the NEM and its participants need to embrace,” AEMO writes.

It says processes and settings within a broad policy space could be managed by agencies such as itself and the Australian Energy regulator.

“One example is the critical need to continually adapt the technical standards applied to generators seeking connection to the grid. These standards are currently embedded in the Rules and have not been updated in some time.”

It made special mention of the 5-minute rule proposal, which proposes to change the time period for settlement on the wholesale electricity market from 30 minutes to 5 minutes to stop market gaming.

The proposal has come from zinc refiner Sun Metals, which says the obvious distortions in the market often force the company to slow down production so it doesn’t have to pay inflated prices. It has since commissioned a 116MW solar plant to reduce its dependence on expensive coal power.LoyYangcoal

 

“It is well known to distort bidding behaviour and create unintended risks, issues which may become more severe over time given the technological changes underway,” AEMO wrote in its submission.

AEMO says it wants a quick resolution to this rule, but consideration has been repeatedly delayed by the AEMC, in the face of intense pressure from the fossil fuel generators, those accused of that distorting bidding behaviour, who want to protect their hold on the market and not allow in new competitors such as battery storage.

On the issue of standards, the AEMO, while welcoming new technologies, which it says offer a multiple of options to deal with upcoming grid issues in the energy transition, is concerned about the status of “legacy” coal and gas generators.

It says those connected before 2007 – which is nearly all of them –“do not have standards to which they have to adhere in respect to some aspects of their performance.”

On top of that, AEMO admits to having only “limited knowledge” of the settings for these generators. So much so, that is has no idea how they might perform in system faults, because data “can often only be obtained through testing or by observing extreme disturbances on the power system.”

It went on: “This means that as the power system evolves, AEMO will face challenges in determining how existing technologies will behave under the changing system dynamics.”

This is a critical element and one that has been raised by other energy engineering specialists.

Earlier this week we wrote of a new paper that questions the settings on major generators, and their impact on grid stability, The authors are concerned that the settings have been relaxed to the point where they are useless, and could cause immense damage to the generators themselves, and to the system as a whole.

AEMO now says the lack of knowledge about the settings on legacy plants could cause it to act more conservatively in running the grid, or impose added costs to ensure they are protected.

But it questions whether others should pay these costs, or the generator owners should cough up to bring their generators up to date.

“The NEM has generally maintained a principle of grandfathering, i.e. if the equipment was approved for connection at some historical time, then it should not be obliged to meet standards that might apply now,” it writes.

“This approach has obvious benefits in lowering investor risk, however its retention presents challenges during the dramatic technical changes occurring in the power system currently, meaning that either:

  •  The network must be operated more conservatively in order to protect sensitive legacy equipment.
  •  Investments in expensive new regulated network equipment must occur, which may be more costly than retrofitting or retiring the legacy equipment.
  •  More burdensome obligations must be placed upon new entrants in order to protect the legacy equipment.”

It is yet another highlight that the principal issues surrounding Australia’s electricity network are not new technologies, which can be combined with incredibly fast response and smart software, but in the clunky old generators that are falling out of date.  

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  • DevMac

    It really sounds as if all the people doing the driving have been asleep at the wheel for the past decade. Blind Freddy could have seen the renewables revolution coming and done plenty of economics-y number crunching and scenario war-gaming to find a whole bunch of soft spots in the existing systems.

    However, one of the unintended consequences of rampant economics-based capitalism appears to be a break-fix mindset as opposed to an on-going maintenance mindset. Not just on-going maintenance of physical hardware and infrastructure, but of the policies, processes, regulations, and standards surrounding it all. All that stuff costs time and money and doesn’t have immediate measurable bottom-line benefits, and so isn’t a priority for private enterprises that have purchased monopolies from the government.

  • DevMac

    It really sounds as if all the people doing the driving have been asleep at the wheel for the past decade. Blind Freddy could have seen the renewables revolution coming and done plenty of economics-y number crunching and scenario war-gaming to find a whole bunch of soft spots in the existing systems.

    However, one of the unintended consequences of rampant economics-based capitalism appears to be a break-fix mindset as opposed to an on-going maintenance mindset. Not just on-going maintenance of physical hardware and infrastructure, but of the policies, processes, regulations, and standards surrounding it all. All that stuff costs time and money and doesn’t have immediate measurable bottom-line benefits, and so isn’t a priority for private enterprises that have purchased monopolies from the government.

    • Robin_Harrison

      It might also have lot to do with the number of politicians and administrators on the FF industry payroll. It’s interesting how increasingly ludicrous they’re sounding protecting their paymasters.

  • David McKay

    The old operators believed they could resist the new energy technology wave. Still attempting to squeeze the last drops of cash from the system. They hold out hope of an LNP lead (clean) coal revival prior to election 2019.

    • Robin_Harrison

      Last chance to feed at the trough.

  • Chris Fraser

    Should we speak of the right to ‘grandfather’ old generators and create no cost burden on them, when between 2007 and 2012 we threw $50B at the transmission system of which very little was even warranted ?I suspect the rules of bidding time periods, and generating a decent, clean 50 Hz do not belong with private interests.

  • Cooma Doug

    Now this is a good write. It’s getting simpler and clearer…sincerely. Your last paragraph is great. I would change one word

    “It is yet another highlight that the principal PROBLEMS surrounding Australia’s electricity network are not new technologies, which can be combined with incredibly fast response and smart software, but in the clunky old generators that are falling out of date.”

    As for the grandfathering debate. Lets do it well for the affected employees, but not for the old technology.

  • DJR96

    This all falls into line with what I’ve been advocating. [With a bit of luck Giles might publish an article soon. No pressure Giles 😉 ]

    The fossil-fuel industry simply have to stop fighting change because they’re actually doing themselves and the nation more harm.

    This article finally makes the acknowledgement that synchronous generators actually aren’t that good at forming a secure grid. There are much better ways to do that now which needs embracing. That’s not to say there is no place for the old incumbents going forward. We still need their generation capacity and will do for some time yet as replacement generation is built.

    But we all know, and the FF players must be honest with themselves and acknowledge that they will be phased out in time. It is just that their role in the NEM is going to change. They won’t have the responsibility of forming the grid, just supply the energy. Which means no one will have to worry about all the technical connection standards much at all. There is a big saving for them there alone. They should embrace this!

  • Don McMillan

    It is not new technology that is the problem it is the lack of competition – or market depth. The most efficient market is a result of competition from many many companies not an organised “plan” or a controlling body. In Australia market intervention, over regulation and political decisions [responding from interest groups] have created an unreliable and expensive electricity network and energy supply.
    I cannot see how we can avoid massive industry catastrophe – Historically alarmist like myself are usually proven wrong. Lets hope so.

    • Richard

      It shows how captive we are to fossil interests. Understandable given that coal and mining represent a large part of our export income.

      More importantly. What are we going to do when we have no more coal or gas exports? That problem is coming down the line only 20 or 30 years away at the most. It could be all over far sooner.

      And don’t believe anyone who says otherwise. Between solar panels, Ev’s, wind farms and batteries, fossil is finished. Now it is just a case of how fast we can ramp up and roll out the new tech.

      • Don McMillan

        Australian Coal and Natural gas we have many centuries of resource if we choose to develop. Natural Gas development in Australia is finished which is why AGL is proposing to import US Shale gas. Renewables cannot make plastics, fertilizes, steel, chemicals etc. The question facing OZ do we want to make them here or import them.
        Most feedback from activists and followers of this website are relaxed with shutting down manufacturing and import everything.
        Combine this with the closures of our oil refineries we are now importing petroleum refine product from the Middle East and Singapore/Malaysia/Indonesia. Our military have enough supply to last 2 – 4 weeks? Again activists and people on this website tell me no-one will invade us. Alarmists like me must be wrong.

        • Richard

          The real question is, does any of this matter if the place is fried by climate change or over run by millions fleeing uninhabitable places caused by relentless fossil fuel burning. Perhaps I’m being alarmist.

          • Don McMillan

            We will not fry as nature will balance things out but the process will be troublesome. How I see the problem is not looking at FF in isolation as destruction of forests, fisheries, aquifers etc. must be included. This is due to population growth [everybody ignores] since the 1980’s it has double, so FF and the other issues can only expand. Here in OZ a little more focus on our region assisting places like Indonesia would be more constructive. Indonesia FF increases greater than OZ decreasing Plus forest destruction makes our focus a lot of pain for little gain. All the best

          • Peter Campbell

            “We will not fry as nature will balance things out …”
            There speaks a person who does not understand positive feedback.

          • nakedChimp

            Or thinks that ‘will balance things out’ means, that humans (+the required ecosystem to sustain them) are guaranteed to survive in that NEW balance.
            Unfortunately natural history tells a different story for stuff like this..

          • Richard

            We can barely control out own situation so it is laughable to think we can try and control others.

            The best thing we can do is lead by example and show how beneficial it is economically and environmentally to move to a low carbon economy. Given we have benefited so much from the burning of fossil fuels with gay abandon for over a century. It’s the least we should do.

          • Don McMillan

            So why are we exporting our environmental responsibilities. All our factories are looking at or have started moving offshore. IPL is closing their Brisbane plant and opening moving to the USA. Same with Bluescope. The Methanol plant in Vic is to be dismantled and moved to the the US.
            Instead of developing our own natural gas AGL is planning importing US Shale gas to supply east coast for the next 20 plus years. Strangely there is no objection from the activists.
            In the end we are subjecting poverty and unemployment on the ones who can least afford it.

          • Richard

            Because we have an unregulated free market system that sells our gas to the highest bidder. The highest bidders are over seas.
            We are now the largest exporter of gas in the world.
            We only need a small fraction of that at regulated
            prices for domestic use.
            It’s the governments lack of regulation of the gas sector that is destroying domestic jobs. Nothing to do with renewable energy.
            And in fAct the lack of regulation is driving up gas prices and also investment in renewable .
            The fossil interests are doing a great snow job of blaming all the woes on renewable while they make off with the loot. And it looks like you’ve fallen for it hook line and sinker.

          • Don McMillan

            Under the OZ constitution the gas resources are owned and managed by state governments. So Qld Government was comfortable for the gas to be exported as QLD was looked after, they have no responsibility or jurisdiction to NSW. NSW at the time believed they would rival QLD as a Gas producer. Remember the NSW government promoting building a CSG-LNG plant at Newcastle. The Domgas users in NSW was not interested in signing any QLD gas contracts [I witnessed his]. Why? NSW gas was predicted to flood the market [why the Newcastle LNG was proposed] and most important pipeline tariffs. Importing gas from QLD the pipeline tariffs makes NSW manufacturing un-competitive. $3 – 4 Billion dollars was invested in NSW CSG & Gas exploration.
            Remember the OZ constitution it was the NSW [liberals] that decided to sacrifice its local manufacturers and users when they kicked the gas industry out of the state. It was State Government intervention that destroyed $3 – 4 billion dollars of investors money! This is not a free market.
            High gas prices is a political choice.
            I have been promoting that areas, e.g NSW, that believe Natural Gas is bad should not be allowed to import the product. Same as objecting to killing elephants but permit importing ivory.

          • Richard

            I agree politically it’s a mess. But since they linked up the gas pipes on the eastern sea board to the Gladstone terminal. The price in the southern states has sky rocketed and the now there is going to be a shortage.

            The Morons in charge have known this was coming for years, but of course they are not paid to actually do anything other than protect the interests of their political donors, play stupid political games, and throw the populace a bone or two every now and then if they start barking a bit loudly.

            All the more reason to roll out renewable energy and storage as soon as possible. No more being held to ransom by the fossil industry. At least the source of energy will be free and not able to be manipulated – the sun.

          • Don McMillan

            The industry including myself have been warning politicians for over a decade. The natural gas industry works in 10 – 15 years cycles – exploration to the time gas is delivered. The politicians work in 3 year cycles. That is the problem – any politician looking long term is unelected.
            AGL has decided to extradite themselves from the Exploration and production gas industry. They have publicly declared they are going big time into renewables and storage. Why then are they looking at building regasification terminals in NSW, Victoria and South Australia to accept US Shale gas – these contracts are for 20 plus years?

          • Richard

            Fully understand. Perhaps the overseas contracts for Australian gas are such that all gas is fully committed to those markets. There is no room for domestic supply. So if we need gas here we will have to import it.

            Now that is one F’d situation.

          • Don McMillan

            Richard watch this week. The PM is meeting the CSG-LNG producers. What the CSG-LNG guys will agree to is to release some gas to the local market and the they’ll will buy LNG from Qatar or USA shale to supply their overseas commitment. The cost of this will be borne by the taxpayer through direct payment or more likely tax concessions [hidden]. This is effectively subsidising natural gas. Because the federal government is in debt we end up borrowing money to pay this subsidy which ends up in the hands of the USA Shale or Qatar gas companies. All this could be done locally without taxpayers help. I hope my prediction is wrong.

        • Calamity_Jean

          “…we have many centuries of resource….”

          You’ll have “resource” forever if nobody wants to buy the coal, gas, or oil. Renewables are now cheaper and the cost is still falling. Pretty soon your coal and gas will be unsaleable.

          • Don McMillan

            Great that is how private industry in a free economy works. There are plenty of investors and buyers for this “cheap energy”. There are words and there are actions, which do you believe?

          • Calamity_Jean

            “Great that is how private industry in a free economy works.”

            Theoretically. In practice, it takes a while for the information to get around, for people to be convinced. In addition, electrical supply isn’t exactly “private industry”, since it’s subject to considerable regulation and political influence.

          • Don McMillan

            Correct and we here in OZ is making a complete mess of it. In the US, coal power stations are shutting down and replaced with gas power stations without subsidies and delivering amazingly cheap power – & lowering CO2 [+50%], negligible nitrates, sulfurs and particulates etc. This is why OZ companies are moving to the USA [IPL, Bluescope etc] Victoria’s methanol plant is being dismantled and moving to the US. American’s have been more effective than OZ. We’re lowering our emissions by exporting them!

          • Calamity_Jean

            “In the US, coal power stations are shutting down and replaced with gas power stations without subsidies and delivering amazingly cheap power….”

            You’re half right. About half of the shut-down coal power plants are being replaced with natural gas. The other half are being replaced with solar and wind power. https://uploads.disquscdn.com/images/81b0176858ab5ac1a8a64e9522d9ac7dc0d13c7b2da76e7fead9880b669b7513.png

            “…we here in OZ is making a complete mess of it.”

            I’m sorry to say that does appear to be true.

  • john

    With the present situation here is what it means. Quote from article.

    “It made special mention of the 5-minute rule proposal, which proposes to change the time period for settlement on the wholesale electricity market from 30 minutes to 5 minutes to stop market gaming.”

    What does that mean?

    It means with the present 30 minute rule the generators can bid up the price gaming the system so we see the ridiculous situation that Queensland which has Government and private ownership just bid up the price.

    So Queensland has the highest price for some periods in Australia, this is rubbish.
    It is an example of how a market price can be rigged frankly.

    To fix it put in a decent market regulation system which stops this kind of ripoff.

  • Ray Miller

    Thanks Giles great article again.

    How can AEMO have limited knowledge of generator settings? How could the setting up of the NEM exclude technical requirements of equipment connected? By comparison the technical requirements for the likes of PV inverters have very stringent technical requirements imposed.
    Old generators need to pay for their own equipment to get them up to date, after the profits made over the last summer?

    It is very clear that the AEMC is unduly being influenced (read corrupted), how can the current commissioners keep their jobs? Maybe Minister Frydenberg should intervene and do something to address one of the major issues causing gaming of the system, increasing costs as well as stalling investment in modern technology that WILL solve and improve reliability of the whole system.

  • nakedChimp

    When a building changes ownership, the new owner is responsible to get it up to scratch in regards to electrical standards.
    How often did those generators change hands in the past?