The Australian Energy Market Operator has identified new shortfalls of system strength in New South Wales and Victoria following an updated assessment of the grid and the expected early closures of coal fired generators.
The new shortfalls have been identified for the Newcastle and Sydney West regions in NSW from 2025, when the 2.8GW Eraring coal fired power station is due to close.
In Victoria, three regions have been identified from 2026 – at Hazelwood, Thomastown and Moorabool – as more coal units exit the grid and as the rise of rooftop solar creates new minimum demand conditions.
AEMO says it will turn to technologies such as battery storage, inverter tunings and synchronous condensers to address the shortfall.
The declarations are the result of a new assessment of system strength and inertia needs stemming from its new “step change” scenario that is now considered the most likely forecast by AEMO and the overwhelming majority of energy market stakeholders.
(See table below for explanation of system strength and inertia).
That “step change” scenario forecasts that all brown coal generators will exit the market within a decade, and the grid will feature a renewables share of around 80 per cent by 2030.
Those assumptions are particularly relevant given the political battle (such as it is) over the policy settings for climate and energy, and the pace of the green energy transition, and the business battle over the future of AGL.
Tech billionaire Mike Cannon-Brookes is trying to stop AGL’s proposed demerger and says the company should be exiting coal by 2035 at the latest. AGL says exiting coal by 2030, as some advocate, is impossible.
AEMO says the announcement earlier this year that Origin Energy proposes to close Eraring seven years early in 2025 was consistent with the “step change”s scenario produced in its planning document, known as the Integrated System Plan.
It has now updated the system strength needs, which had previously been set around the “progressive change” scenario, which assumes a slow exit from coal, at least over the near to medium term.
“Other fault level nodes also see projected reductions in fault level under the Step Change scenario, although none below the minimum requirements,” AEMO says.
“AEMO considers that there will be a range of potential options to address system strength issues, including inverter-tuning, synchronous condensers, network augmentations, potentially batteries with advanced inverters, and contributions from existing market participants.
“There may also be opportunity for innovative reductions in minimum requirements in New South Wales as part of system strength management.”
The forecast system strength issues in South Australia have already been largely addressed by the installation of four synchronous condensers in key parts of the grid.
This allowed the maximum amount of wind and solar produced at any time to double, and for gas generation to be dialled back to a minimum. They have already delivered savings of around $30 million in “direction” costs in its first full quarter of operations.
Synchronous condensers have also been installed elsewhere in the grid, particularly in NSW and Victoria, but these have been haphazard and the result of the ill-fated and ill-thought “do no harm” rule that was dumped because it was creating more problems than it solved.
The shortfall declarations by AEMO should enable it to make a co-ordinated response to the issue, led by the main transmission networks, rather than shunting the problem over to individual wind and solar installations as the “do no harm” rules required.
Many think that “advanced inverters”, particularly those linked to battery storage installations, will be the most effective solution to system strength issues.
But while have installations are trialling the technology, (such as the Victoria Big Battery, pictured above) and it is used in off-grid locations, it is yet to be fully embraced by those managing the grid. ARENA has allocated some $100 million to fund more trials.
On the issue of inertia, AEMO said it foresees no issues.
“Despite the retirement of Liddell Power Station in 2023 and the announcement of the potential early retirement of Eraring Power Station in August 2025, no inertia shortfalls are declared because the region is not considered sufficiently likely to island from the rest of the NEM.”
