AEMO says fossil fuel failures, renewable delays biggest threat to grid | RenewEconomy

AEMO says fossil fuel failures, renewable delays biggest threat to grid

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AEMO says the biggest threat to Australia’s electricity supply is hotter temperatures, failure of large fossil fuel plants, and delays in investment in new wind and solar. Smart solutions such as demand management and storage will mean no need for new coal generators.

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(See also story: AEMC endorses 5-minute settlement to underpin battery storage).

The Australian Energy Market Operator has cited climate change, and the potential for large fossil fuel generators to fail in the summer heat-wave as the biggest threat to Australia’s electricity supplies in the coming years.

It also makes clear that there are plenty of alternatives to new baseload coal generators, and underlines that any delays to new wind and solar plants could also jeopardise security of supply, particularly in Victoria and South Australia.

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The greatest risk is in South Australia this coming year, hence the need for emergency back up generators, although AEMO hopes not to use this if demand response and battery storage can fill the void. But the big risk is fossil fuel failures and high demand.

In NSW the risk increases in 2022 once Liddell closes, but AEMO says the risks can be mitigated in both states if “additional renewable generation was to be developed to deliver a national renewable generation outcome.”

That message, however, appears to have fallen on deaf ears. At the same time as AEMO published its annual Electricity Statement of Opportunities on its website, prime minister Malcolm Turnbull rose in parliament to announce that the Coalition was asking AGL Energy to keep Liddell open an extra five years until 2027.

This is despite the fact that AEMO says there is no risk to security standards from the closure of Liddell, and any risk would be further reduced if more renewable energy was constructed.

It’s the very first sentence of the ESOO report that strikes the most however:

“The overall responsiveness and resilience of the system is at risk from increased vulnerability to climatic events, such as extended periods of high temperatures, and the risk of loss of, or reduction in output of, major generation units.”

Last summer, the electricity system was hit by a range of failure in fossil fuel generation, including the loss of 1,000MW of Liddell at the very height of summer, and the simultaneous trip of major gas fired generators in NSW and South Australia. Numerous other coal and gas plants lost capacity at various times due to the heat.
But the report is also notable for its emphasis on renewable energy technologies and “demand-side” measures such as demand management and battery storage, particularly in South Australia.

The big concern is this coming summer, because not enough is in place, and much of the existing gas capacity is old and frail and, frankly, unreliable.

“From 2018–19 to 2021–22, progressively decreasing levels of potential USE conditions are observed over the next four summers, due to increasing renewable generation,” AEMO says.

“New strategic reserves to deliver firming capability during this period are recommended, given AEMO will not be able to engage long notice RERT as it is doing for summer 2017–18.

AEMO boss Audrey Zibelman said in an accompanying statement that Australia was undergoing an “unprecedented” transformation and needed “new approaches” to ensure AEMO has a reliable portfolio of dispatchable energy resources capable of responding quickly and effectively.

“The power system does not have the reserves it once had, and therefore to balance peak summer demand in real time, targeted actions to provide additional firming capability are necessary to reduce heightened risks to supply,” she said in the statement.

She said up to 1,000MW of “strategic reserves” would be needed across South Australia and Victoria over the medium term, but that AEMO was indifferent to what fuels or technology resources are utilised.

But she said firming capability could include generation on the grid, storage, demand resources behind the meter, flexible demand, or flexible network capability, such as the demand response and battery storage being implemented now.

AEMO also released a more detailed report on the need for new baseload and dispatchable generation that was requested by the federal government. The Coalition has yet to release it, although Turnbull announced the initiative on the Liddell coal generator, seemingly ignoring AEMO’s comments on renewables.

AEMO makes no mention of the need to keep Liddell open in its report, which is not surprising given its age and failures in last year’s heatwave, and its lack of flexibility to respond to quick changes in supply and demand.

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In fact, AEMO says that even with Liddell retiring as expected in 2022, there is no breach of the system’s reliability standards. And security can actually be enhanced if there is a big push for more distributed renewable energy. The only threat to reliability is if another coal generator was to close at the same time.

The Coalition government also appears to have released some elements of the report to its favourite media outlet, The Australian, which duly ran a front page lead “Bill shock looms amid power crisis” that claimed a “dangerous shortfall in baseload power that could drive up household eletriity bills.”

Of course, the Coalition made no mention how renewable energy and demand side response and battery storage could address the issue, along with a coherent climate change strategy.

And then Turnbull rose in parliament to announce his request to keep Liddell open, which appears to follow on from a Minerals Council report urging the same thing. It suggests that the Coalition is paying more attention to the fossil fuel lobby than the market operator.

“The challenges and transformation we are seeing are similar to those faced by other countries around the world,” Zibelman says in her statement.

“In the European, Asian and United States markets, it is increasingly recognised that changes in market design to retain and incentivise appropriate levels of investment in system security and reliability are required.

“Affordable, secure energy for all Australians remains our goal, and AEMO is committed to continually reviewing global practices working with the Commonwealth and States, and through appropriate consultative processes to produce considered recommendations that can be adopted by the Energy Security Board and the COAG Energy Council.”

AEMO sees no issues in Queensland or Tasmania. (Western Australia and other isolate grids, such as those in the Northern Territory and around Mt Isa are not included in the report.

In South Australia and Victoria, the absence of some plant, and the risk that some big units may fail, creates a real risk of load shedding for a few hours  this summer.

AEMO puts the risk at between 39 and 43 per cent for Victoria and 26 per cent and 33 per cent for South Australia, but they should be at least partly addressed by the actions currently planned by the South Australia government and AEMO (emergency back-up, storage, and demand management).

The forecasts contained in the report do not include the demand management initiatives put together with AEMO and various state governments, nor do they include part of the Tesla battery, the 30MW Electranet battery and the  emergency back-up commissioned by the state government.

But from 2018–19, the risk of unserved energy in these regions drops noticeably because of a number of committed generation projects are due to be commissioned (almost all of them wind and solar), and due to ongoing energy efficiency and installation of PV systems by consumers.

In the meantime, AGL rejected the idea of extending the life of Liddell, saying it would not increase reliability or lower prices and went against its commitment to begin its exit from coal.

And the Australian Energy Market Commission also said it would recommend changes to settlement rules, shifting from 30-minute to 5-minute settlements, in a move that will encourage battery storage and other fast response technologies, and help reduce gaming of the markets by big generators.

But the AEMC’s decision to delay this shift until mid 2021 at the earliest has incurred the wrath of the likes of Professors Ross Garnaut, and the Australia Institute, who say it will slow the energy transition and The Australia Institute, who described the delay as a deliberate attempt to hobble new industries.


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  1. Dee Vee 3 years ago

    Well, its no surprise the state with the highest jeopardy to security of supply is the state with the largest reliance on solar and wind generation. Absolutely ludicrous of AEMO to say there are cost effective alternatives to Coal baseload power – if indeed they did actually say that.

    • Jo 3 years ago

      Dee, you must be really an expert as you know things so much better than AEMO.

    • Joe 3 years ago

      You must have read a different article to one above that I just read.

    • Barri Mundee 3 years ago

      Perhaps you can present some evidence of your own, otherwise you are basically trolling.

      • Joe 3 years ago

        Barri….Dee Dee a Trollie…I think you have outed our scribbler. I’ve seen the same question posed elsewhere that Dee Dee is a ‘busy scribbler’ on Guardian Australia.

    • Thucydides 3 years ago

      LOL. Not just AEMO saying that – it’s everybody except the LNP: financiers, generators, regulators, consumers. Australia’s energy landscape is a shambles because ultra-conservatives are determined to protect their patrons in the fossil fuel industries, or die in a ditch trying – and take the Party down with them.

      • Roger Brown 3 years ago

        Die in the dirty coal ditch trying , sounds great!

      • Cooma Doug 3 years ago


        I did hear that Dee Vee is a brand of brief red men swimming costumes.

  2. howardpatr 3 years ago

    The Coalition spin doctors are already out there working on jellyback Turnbull.

    Might be another trip to Cooma coming up; though it seems the public have well and truly seen through him and Frydenberg

  3. brucelee 3 years ago

    AGL commitment is reassuring.

  4. Tom 3 years ago

    “Our summers are getting hotter. We need to burn more coal to supply all the air-conditioners”


    • Joe 3 years ago

      And our winter is so cold…… so burn more coal to warm the planet.

  5. Cooma Doug 3 years ago

    Great article Giles.
    From my experiance it all makes sense. I expect however base load fossil fuel gens will be recognised as the greatest risk to system security long before they could ever build one.
    Thinking that adding large base load gens is a mistake and will become obvious to the public in a few years. Already obvious in the industry.
    There are more options and more energy to be made available in load side management than could be built in large base load generation by 2023.

    • Chris Drongers 3 years ago

      The plan must be that keeping Liddell open will keep the baying wolves of the right from challenging Malcolm for a year or two. By then the AEMO own graph shows that the risks of blackouts due to insufficient generation/storage is much reduced.
      As Cooma says, two years and an election from now, more rational heads than the right wing of the ignorance party will be supporting the transition to a low carbon world and be satisfied with the gradual obsolescence and closure of the remaining coal plants. Without having spent a coup of billion taxpayers dollars building a stranded coal fired asset.
      Hope Mal’s pitch to AGL does not put the taxpayer more solidly on the hook for Liddell’s eventual remediation than the NSW $1 deal already has.

      • solarguy 3 years ago

        AGL said they would consider selling Liddell to a responsible buyer, but who will that be and which bank will lend on it? No one but Uncle Mal with our bloody money, that’s who!

    • Patrick Comerford 3 years ago

      The public didn’t wake up to the disaster that the NBN and FTTN has become and that they voted for until now and are beginning to squeal that its a dud. So how can anyone have any confidence that the same persons who gave us FTTN is now capable of fixing the energy crises that Abbott and Turnbull the very same people have also created

  6. Patrick Comerford 3 years ago

    To our “great leader”, how’s the FTTN project going Mal. It made as much sense during the NBN fiascos that you are responsible for as the bile you are spewing out now with the energy fiasco that you are also presiding over. Getting it wrong once can maybe put down to bad advice but getting it wrong twice proves you are incompetent.

    • Joe 3 years ago

      The comparison with Turnbull’s Copper Crapper aka NBN is not one to be laughed at anymore. $Billions being sunk into an obsolete NBN, which will have to be redone, and now who knows how many $’s to be sunk into maintaining redundant Coalers. Who knows, Big Mal may have a vision of a Fleet of Government Subsidised Coalers….Alan Finkel’s CET will be ‘The Coal Energy Target’. I mean, Two Tongued Turnbull’s pet project ( I mean feasibility study) of Snowy 2.0, if ever gets off the ground, will take 6 years.

  7. David leitch 3 years ago

    Really this is so poor by Turnbull on so many levels. The minerals council’s advice is better than that of AEMO. Entrenches the existing players, reduces competition, stifles new investment. More CO2 rather than less. It means higher prices not lower. Truly disgraceful economically and socially. How was Turnbull ever successful?

    • stalga 3 years ago

      Fake sincerity and fake integrity.

    • Joe 3 years ago

      He sold his sold to the devil to get the job of PM. Now the devil has to be paid.

    • solarguy 3 years ago

      Really poor is an understatement I’m afraid David. You would get more sense from a parking meter than from Mal!

  8. david H 3 years ago

    One thing that can be guaranteed is that if AGL are coerced into keeping Kiddell open to 2015 we will be paying an absolute fortune for it.

    • Joe 3 years ago

      C’mon, Fossil Fuel isn’t subsidised. It is only RE that gets paid huuuuuge subsidies that is totally responsible for the price gouging energy price rises. Ha, ha, ha.

      • david H 3 years ago

        Joe, My point is that Liddell is heading for 50 years of service which is well past its design life and AGL know that and what it will cost to do a file extension on the PS. I am sure AGL will not pick up that tab but they will screw government for as much as they can get and we will pay for it.

        • Joe 3 years ago

          David, I was being sarcastic with my comment. I am 100% for RE and I have no love for FF. Liddell should close as per AGL and not be put on ‘taxpayer life support’ just to get Two Tongued Turnbull out of his current political messes.

  9. Peter F 3 years ago

    If Liddell is so critical how come it only operated at 50% capacity last year. From last summer to 2022 there will be about 10-12 GW of new renewables on roofs and on the grid generating about 20-25 TWhr. Liddell generated about 9TWhr last year.

    As for peak capacity last February Liddell and Hazelwood between them managed a combined peak of 2.5GW. part of Pelican Point and Eagle Farm will be taken out of mothballs and the SA backup plant added the total adds about 850MW. Victoria SA and Queensland are all adding storage and demand response There will be at least 350 MW of grid based storage on the system by 2022 and at the current trajectory probably about 1,000-1,500 MW behind the meter so peak capacity can be the same as it was in 2016 without keeping Liddell open.

    In addition we should be able to activate at least 2GW of demand response by then

  10. Robert Comerford 3 years ago

    Given the b.s. being spewed out over the last two days on radio stations and the ABC TV and no doubt all the fossil fuel funded TV networks I could be forgiven for thinking they had read a different report than the AEMO one I saw.
    Seems the management of AGL have no idea of market economics and big mal is going to use our money buy back Liddell.
    There seems to be no end to this stupidity.
    Every radio station I had access to this morning had people ranting about how it was all the fault of renewables.
    Opposition… what opposition?? They are nowhere to be seen on this issue. Time to stop stuffing around and refute this nonsense lie by lie.
    Oh sorry…. they think they are going to win the next election… mustn’t mention the carbon tax!

    • solarguy 3 years ago

      I listen to the radio when I’m in the office and it’s truly sickening and maddening to hear these weak heads say what you have mentioned above. However on Lateline (ABC) Monday night they had Bob Katter and Albo, unlikely mates, but both sharing the Qld solar dream. It was a surprise to learn that Bob is for renewables and was quite excited about the Kidston project and others. It was mentioned loud and clear by all concerned, that solar and wind are cheaper than coal and gas.

      • BushAxe 3 years ago

        Katter annoys alot of people but he’s not stupid when he can see developments that benefit his constituents.

      • Joe 3 years ago

        It was a brilliant piece on Lateline with the Katter and Albanese at Kidston.

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