Wind farms and new solar parks in Australia are expected to take an increasingly prominent role in providing stability services as well as energy to Australia’s electricity grid, but it appears that the incumbent generators are not going to give up without a fight, or at least an opportunity to line their pockets first.
As the Australian Energy Market Operator outlines significant opportunities for wind and solar farms to provide the sort of services previously only expected of coal, gas and hydro facilities, new data is pointing to a dramatic increase in the cost of these services that appears to be largely unexplained.
Research by the Climate and Energy Institute points to a five-fold increase in costs associated with the FCAS (frequency and ancillary services) market since 2014, to $200 million – with many of these rises occurring in states with little or no renewable energy, and no apparent lift in demand for the services.
Currently, FCAS is being provided by coal and gas generators, and may be yet another example of fossil fuel technologies exercising their extraordinary market power to push up prices, as they have done almost without censure on the wholesale energy markets.
The deployment of wind and solar has been largely focused on providing energy and selling output into the wholesale energy market, but this is likely to change significantly in coming years as the technologies shift into energy security, providing frequency and voltage services, and providing inertia to the gird.
Jenny Riesz, from AEMO’s Future Power System Security Program, told a conference in Sydney on Thursday that there were significant opportunities for wind and solar to play a major role in providing services to the grid traditionally provided by coal and gas and other technologies.
“Renewable energy technologies are a solid contributor in the energy space, they are not a fringe technology anymore, either in Australia or internationally,” Riesz later told RenewEconomy.
“Now they need to step up to provide other services (to the grid). And that is a huge opportunity for wind farms and solar PV and other inverter-connected technologies.”
Unfortunately, Australia’s energy debate has been mired in accusations that technologies such as wind and solar can’t provide the essential grid services, and a debate that is often couched in simplistic terms about “baseload” coal and gas and “intermittent” wind and solar.
Wind farms, despite a lot of commentary to the contrary, can provide many of the services traditionally provided by coal and gas plants. But they need to be configured that way, and the market needs to provide the right signals.
Riesz says the first cab off rank for the new offerings of wind and solar is providing frequency control services – traditionally provided by coal, gas and other generators.
A trial at the newly built Hornsdale wind farm in South Australia will be the first in Australia, but Reisz says the manufacturers have no doubt that the machinery can do the job.
The difficult part for the market operator is creating a market design that provides the right signals for wind and solar farms to participate, and doesn’t have other consequences.
So, for a wind farm to provide FCAS, it will end up providing less power. But that may affect its contractual arrangements, Riesz says. These issues are not insurmountable, but they are important technical detail that need to be resolved.
The same applies in providing other services traditionally supplied by so-called “synchronous generation”.
“As Australia move to a future grid, these services will not be provided for free, so we have to create new mechanisms,” Riesz says.
These services include fast frequency services, fast regulation services, and synthetic inertia – all of which can be provided by wind and solar, and other technologies such as battery storage and synchronous condensers, if the market signal is there.
Some significant rule changes are already being considered that could help re-shape the energy landscape, such as changing the settlement time-frame from 30 minutes to 5 minutes to align with dispatch, and make the market more efficient and less prone to manipulation.
There are also calls to change the ancillary service market rules and have reserve and voltage control bids along a similar frame – possibly before the energy market changes.
This could encourage rapid response technology on the supply side – from wind and solar farms and battery storage – and also on the demand side, again with battery storage and with demand management.
In essence, it’s about the much-touted shift to a smart grid with exciting new technologies. The trick for regulators is to manage that market transition without breaking the market that exists.
That, admits Riesz, is a “non-trivial” problem, and estimating how much of this new technology is needed is still a work in progress. “As you get less and less synchronous plant – we will get to the point where we will need a lot of very sophisticated power system modelling,” she said.
As work progresses, there are some interesting developments in the existing market, most particularly the surge in FCAS revenue across Australia – up five-fold since 2014 to a total of around $200 million in 2016 – and there is no ready explanation why this has occurred across the board.
These graphs provided by Dylan McConnell, from the Climate and Energy Institute in Melbourne, show that South Australia has recorded the biggest increases.
The jump in 2016 may have been slated to the closure of the Northern brown coal power station, and the FCAS provisions imposed by the market operator when the interconnector was undergoing major upgrades.
But the data reveals that the price also jumped significantly in 2015, well before the Northern closure, and those price jumps have been repeated in other states such as NSW and Queensland, which have insignificant amounts of wind and solar compared to the size of the grid.
And there doesn’t appear to be anything in the data that suggests a dramatic increase in contingency or regulation requirements – in fact, quite the opposite in some jurisdictions.
Indeed, Queensland has hardly any large-scale renewable energy, although up to a dozen large-scale solar farms and wind farms are scheduled to be built or begin construction in the coming year.
“In my mind this points to competition issues rather than underlying increases in FCAS requirements,” McConnell says.
