Ageing fossil fuel plants putting supply at greater risk, says AEMO

As the federal government continues its civil war over the fate of climate and energy policies, the Australian Energy Market Operator has warned of a heightened risk of outages this coming summer and future years because of the increased fragility of ageing coal and gas plants.

AEMO – in its annual Electricity State of Opportunities (ASOO) report, long a key reference point for energy investment – gives a bleaker outlook on the risk of “unserved energy” – or blackouts and load shedding than it did last year.

The reason of this is simple and two-fold. It has more clarity over weather forecasts, and it now understands – after more than 100 trips of big thermal units since December 1 – that the ageing fossil fuel fleet is becoming increasingly unreliable and is posing the biggest threat to energy security, particularly in the soaring summer heat.

“The forecast risk of load shedding in 2018-19 has increased since the 2017 ESOO, primarily because modelling has now factored in a reduction in thermal generation reliability observed in recent years,” AEMO notes. That means it can rely less on ageing coal and gas plants.

AEMO says new investment in wind, solar and storage, and the key components of its Integrated System Plan will ensure that Australia’s strict reliability standard of 99.998 per cent is not breached in any state in the coming ten years.

But it is concerned about the risk of outages or load-shedding this coming summer in Victoria, which because of the concern about the state of the coal and gas generators, and the risk of extreme weather conditions, rises to a risk of one in three.

It uses that to underline the need of the reserve trader mechanism (RERT), that includes demand management and other backup generators that it had in place last year. It was only deployed twice, but ensured there were no outages, despite a grim forecast.

AEMO had to fight to retain the RERT against those who argued the market would decide (that didn’t work out well for South Australia in February, 2017 when Pelican Point sat idle). It says its concerns about reliability underpin the need for it to be in place well ahead of time, and not put together at the 11th hour.

AEMO also notes that the longer term forecasts underpin the need for the recently-released 20-year planning blueprint, the Integrated System Plan.

Based on the “do-nothing” scenario, and only currently “committed generation”, the reliability standard could be breached in NSW from 2023/24  after the closure of Liddell, and from 2024/25 in South Australia, as rooftop PV pushes the state into negative demand and after the closure of the Torrens A gas station. (See figure above).

But AEMO hastens to point out that this risk estimate is only based on a “do nothing” scenario. When the RERT is factored in, the ISP is adopted (as CoAG has resolved to do), and the influx of renewables from targets such as Victoria’s 40 per cent VRET by 2025 is factored in, the reliability standard is not breached. (See table below).

Importantly, it notes that the risk of outages is reduced, not increased, by the flood of new wind and solar projects due to be connected to the grid in coming years, particularly in Victoria, where some 5.4GW of wind and solar is needed to meet the VRET, along with some storage,

AEMO expects over 5.6 gigawatts (GW) of committed new generation and storage capacity, and upgrades to existing generation. Most of this has become committed since the 2017 ESOO, with some 2.7 GW of utility-scale wind and solar generation added in the past quarter alone, mainly in Victoria.

Despite the lack of any sizeable increase in dispatchable capacity, the level of USE in Victoria is forecast to fall to be within the reliability standard under both ISP development plans.

“This is due to the substantial volume of additional new intermittent generation developed in Victoria to meet the VRET, combined with the ability to import additional reserves from New South Wales via the RiverLink interconnector, in the ISP plan.”

Another curiosity is in Figure 3 – the addition of Snowy 2.0 – the $6 billion plus project favoured by the Coalition – actually increases the risk of unserved energy in South Australia and Victoria, and lowers the risk of unserved energy only in NSW.

This is due to the impact on transfers, and the impact on other forms of storage, particularly battery storage, which is expected to be less under the Snowy scenario.