Climate change taking toll on reliable electricity supply, industry panel says | RenewEconomy

Climate change taking toll on reliable electricity supply, industry panel says

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AEMC Reliability Panel says climate change making reliable electricity supply more difficult, but that emerging technologies like battery storage will help address these challenges.

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Climate change is making it harder to maintain electricity supply reliability, and more battery systems may be the answer, according to a review of Australia’s power system performance, published by the Australian Energy Market Commission’s Reliability Panel.

In its 2019 Annual Market Performance Review, the Reliability Panel found that electricity reliability deteriorated in the 2018/19 financial year, finding that the number of instances where the electricity market was not in a “secure operating state” increased compared to the previous year.

The panel noted that the electricity reliability standard was not breached during the year, but both Victoria and South Australia experienced periods of load shedding and that it was high-temperature and high-demand days that were proving the most challenging for the energy system.

The panel said that climate change, and the impact of severe weather events, was a growing concern when it came to managing grid reliability, and it was expected to get worse when considering future reliability challenges.

“As the number and range of weather events such as prolonged extreme temperatures, cyclones and bushfires increase as a result of climate change, the challenge of maintaining the secure operation of the power system will grow,” the reliability panel said.

“The Panel notes that climate change already casts significant uncertainty over the stability of this power system operating environment, and will continue to do so into the future.”

“In short, the Panel notes that climate change is likely to exacerbate the underlying environmental conditions which policy-makers, system operators and market participants have historically considered to be stable, and have factored into decision-making processes with a high-degree of confidence.”

The panel said that it was likely that the impacts of climate change would place tougher demands on the current assets within the energy system, and that more extreme weather placed more infrastructure at risk of damage or failure.

“In the short-term, hot weather reduces the efficiency of generating units and increases consumer demand, storms and bushfires can remove assets from service, and consumers usage patterns differ depending on the temperature,” the panel’s report says.

“In the long-term, market participants in the NEM make investment decisions based on the likely performance of assets over long horizons – typically decades. To the extent that regular weather patterns and extreme events reflect structural climatic patterns, not transitory forces, market participants extrapolate such patterns to inform the viability of assets in the long-term.”

However, the panel was also optimistic that emerging technologies, including the growing amount of battery storage installed within the Australian energy system, provided a clear opportunity to address reliability challenges.

In recent months, large-scale battery systems have proven highly valuable in efforts to maintain secure supplies of power, including during multiple instances where South Australia found itself “islanded” from the rest of the National Electricity Market.

“The current story of Australia’s power system is one of immense challenge and equally immense opportunity,” chair of the Reliability Panel and AEMC commissioner Charles Popple said.

“While many of these problems are relatively new, so are many of the solutions. Battery storage for example, can give consumers more active control and ways to use electricity, like selling stored energy when prices are high, providing network support or storing solar energy for later use.”

“There will be other solutions we aren’t aware of yet as technologies continue to evolve. New technologies and business models will have an increasingly important role in maintaining power system security,” Popple added.

However, the reliability panel did also note that the growing proportion of viable renewable energy sources which rely on the surrounding environment, particularly wind and solar, could lead to greater fluctuations in supply levels, exacerbated by more extreme climate impacts.

“As renewables continue to constitute a greater proportion of the generation mix, the power system’s dependency on underlying environmental conditions is increasing at the same time that environmental conditions themselves are likely to grow more extreme and frequent,” the panel said.

To aid energy system planning the reliability panel has established a dedicated data portal, providing public access to energy market data to help market participants understand trends and emerging challenges.

The panel said that it was important that the energy market look to longer-term solutions to the reliability challenge, and was concerned by a growing reliance on emergency measures.

“The Panel is concerned by the increasing reliance on interventions to maintain reliable supply,” the panel said. “There is an emerging concern that reliability issues may arise in non-peak periods, for example when generators and network equipment is taken off-line for maintenance.”

“Using emergency tools means the market is not delivering sufficient capacity to meet demand and indicates a need for new investment that can be relied upon at times when consumers need it.”

The AEMC’s Reliability Panel consists of senior representatives drawn from across the energy sector, including market regulators, generator and network companies, large energy users and consumer groups.

On Thursday, the AEMC approved a rule change that would allow AEMO to secure longer-term contracts under the Reliability and Emergency Reserve Trader (RERT) mechanism, but only for Victoria, following a request from the state’s energy minister for a special arrangement.

The AEMC is also set to approve new rules that will allow for demand response measures to be traded in the electricity market, allowing large industrial and commercial users to receive financial payments for reductions in energy use.

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