For $6 extra, AEMO keeps lights on and defies renewable skeptics

Remember the predictions of inevitable blackouts made before last summer? Conservative commentators were hoping, even praying, for a major outage – just to show that renewable energy didn’t work, and that we should all go back to coal.

In the end, it didn’t happen. Despite the fact that this was the second hottest summer on record, and the first without both the Hazelwood and Northern brown coal generators, the lights stayed on.

The Australian Energy Market Operator, under the direction of new CEO Audrey Zibelman, embraced the new technologies on offer, including batteries and demand response, to make sure that they did.

And, according to AEMO’s Summer 2017/18 Operations Review, released on Wednesday, it cost just an extra $6 per customer to obtain the 2GW of capacity in a special reserve that ensured there were no more blackouts or load-shedding.

“When it came right down to it, the cost of getting the reserves …. was $6 for the year, for consumers,” Zibelman told RenewEconomy.

“Basically two cups of coffee is what allowed us to make sure no matter what the weather condition was, we were in good shape and going to get through OK.”

RenewEconomy interviewed Zibelman about the summer report, and readers can listen to that interview via the link below.

The last summer was expected to be the trickiest one for AEMO, given that it followed the closure of Hazelwood, and came before the completion of new wind and solar farms, and additional storage. And given the problems of the previous summer.

Was AEMO surprised and relieved by its success over the summer?

“Pleased, yes. Surprised, no, because we put a lot of effort into our preparations,” says AEMO’s head of operations Damien Sanford.

“We are pleased with the level of cooperation that we got from industry, and the feedback from my control room was that it was the best we have seen for some time.”

Indeed, according to some in the sector, AEMO went around and “read the riot act” to many in the industry, to ensure that their machinery was in good repair and ready to deal with the summer heat.

As a result, coal availability over the summer was the highest it was for almost a decade, despite the well documented sudden trips in some generators that, thankfully for AEMO and consumers, did not occur at times of critical demand.

As for new technologies, Sanford pointed to the performance of demand response, particularly those gathered under the trial scheme sponsored by AEMO and the Australian Renewable Energy Agency, which helped boost the operator’s available reserves.

And he had a special mention for the performance of the Tesla big battery, officially known as the Hornsdale Power Reserve, which was switched on in December, and has delighted those watching its performance.

“We were quite keen to look at that type of technology, and to watch it perform … and the fact that it did perform as well as it did over the summer period was very pleasing for us,” he told RenewEconomy.

Sanford pointed to the battery’s performance in the heat – no signs, despite its location in the mid-north of South Australia, of any loss due to heat stress, unlike most other technologies – and he pointed to its ability to flex, and be available at periods of high demand.

AEMO, and others, have already pointed to the ability of large-scale battery storage to reduce prices in the ancillary services market, but Sanford also pointed to its role in helping meet demand peaks.

“It’s good to know that the reserve is there, and we can inject it very quickly (into the grid). Solar, and thermal generation can de-rate with high temperatures, but we didn’t see that with Tesla and we kept a close eye on it.”

Next summer, there are likely to be three additional batteries on the grid – one at the Wattle Point wind farm in South Australia, one with the Ganawarra solar farm in Victoria (Tesla), and another at a network juncture near Bendigo (Fluence).

“We are hoping to see the same level of performance with new batteries,” Sanford said. “We are quite excited about those technologies and the other renewables coming into the grid over the next 12 months.”

Indeed, more than 2GW of wind and solar will connect to the grid by the end of the year, and likely another 2-3GW in 2019, depending on final completion date.

To try to ensure that the lights stay on in the future, AEMO intends to introduce several new initiatives. One is the retention of the strategic reserve.

It used to be that AEMO could rely on previous data on likely temperatures to make preparations, but now there is a growing risk of even hotter days and more demand.

“We continue to see more and more hot days, more and more heat-waves over multiple days, and more and more hot weather over multiple regions,” Zibelman told a breakfast audience at the South Australian Chamber of Mines and Energy in Adelaide.

“We need a reserve to deal with fact that we may have another really hot day, and a generator out. The last thing we want to do is tell people there is no electricity supply when the temperature reaches 40°C,or 42°C, or 47°C as we had in New south Wales last summer.”

She noted that in the last summer, the added cost of the 2GW of reserve amounted to $6 per consumer.

“We’re happy we got through the summer without major incidents,” she said, pointing to the planning, training and extra reserve that had given AEMO “quiet confidence” that it would.

Zibelman is also focused on exploiting the enormous growth in behind-the-meter solar and (soon) battery storage, as well as calling on demand management rather than building new generation that might only be used for a few hours a year.

She also spoke of AEMO’s use of “machine learning” to help predict demand and supply, retaining the reserve mechanism and also implementing changes to the definition of lack of reserves notices (LORs).

This is the result not just of the ageing fleet of coal and gas generators, but also because of the likely continued increase in temperatures, and the increase in wind and solar. So AEMO wants to change the way that potential shortfalls are measured, just to be sure.

The idea has been flagged in various reviews by AEMO, including its response to the National Energy Guarantee.

The result of this means that instead of say, warning of a potential shortfall when the margin falls to 300MW in a given situation, it may trigger an LOR when the margin falls to 400MW. That will give it more room to move.

In the last summer, AEMO says there were only two close run events when it had to enact the emergency reserves known as the RERT mechanism.

These occurred on November 30 in Victoria and January 19 in Victoria and South Australia, when a strong heat-wave event hit both states the same time.

It used these and two other events – one on a public holiday on the final weekend of the Australian Open tennis tournament – to illustrate how these tighter reserve assessments will change the way it operates, and why it would more quickly summon emergency reserves.

In the November 30 event, rather than triggering a LOR2 (one level below actual load shedding) when there was only 594MW in reserve. Under the new rules, it would have lifted this margin to 1,094MW.

On January 19, the level would have been increased from 560MW to 1,099 MW in Victoria, and from 350MW to 501MW in South Australia.

On February 14, in coal dependent Queensland, the peak demand day for the summer, the LOR 2 level would have been increased from 750MW to 859MW.

To underline its reasons, AEMO pointed to increased temperatures and high humidity, and the increased threat that more than one big generator could be lost.

It points to January 28, when a heat wave caused electricity demand to reach record levels for a weekend of 9,144MW, as residents sat down to watch the tennis, switch on the air con and other appliances.

It modelled that scenario for a weekday, concluding that there would have been demand of 10,202MW, and reserves of just 71MW – inadequate to cover any unexpected failure.

Under the previous rules, some 500MW might have been activated, but under the new rules, it would require 860MW to maintain secure supply in the event of unexpected outages.

This is just part of a suite of mechanisms being pushed by AEMO to ensure adequate supplies as the nature of the grid is changed, and as more renewables enter the market.

So, given the success of the past summer, is the hard part over for AEMO? It says forecasts for the coming summer won’t be released until later this year, under its annual Electricity Statement of Opportunities, and its much touted Integrated System Plan.

In any case, Sanford says he is not fazed about the increase in wind and solar.

“We were never uncomfortable with higher level of renewables, we just needed to have a coordinated plan,” he says.

“The last thing that AEMO wants to do is to hold up renewables, but our primary responsibility is the safe and reliable operation of grid.”