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Energy reliability: risks so small “they are barely visible”

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Modelling done for the AEMC’s Reliability Panel has put a lie to the scare campaign on Australia’s energy supply – led by the federal government – saying the risks of power supply not being met are “so small, they are generally not visible on the chart.”

The assessment of Australia’s power supply includes the expected closure of the Liddell coal-fired generator in 2022, and contrasts with the Coalition government’s scare campaign about potential blackouts if the closure goes ahead.

Reliability Panel

In its “base” scenario – modelled on the current settings of the RET, the Victoria renewable energy target and no particular action from the federal government on climate – the risk of supply shortfalls in NSW even after the closure of Liddell is 0.0000010 per cent.

That’s right – 0.0000010 per cent (five zeros after the decimal point) – which is to say, one-millionth of one per cent.

“With the reliability standard shown on the chart, the USE (unserved energy) outcomes in the period (2017-2024) are so small, they are generally not visible on the chart,” the modelling report by EY says.

Indeed, it had to change the Y axis dramatically just to get the yellow and the blue in the chart above. Notably, the only visible outcomes are in Victoria, and NSW – but both well within the current standard.

It’s normal modelling produced zero outcomes of unserved energy from 2018 on to 2024. (See graph below)
Reliability Panel

Overall, the expected supply shortfall is just 1/300th (one three hundredth) of the shortfall allowed under current reliability standards (0.002 per cent).

“No USE (unserved energy) is forecast in Queensland, South Australia or Tasmania in any year,” it adds.

Contrast this to what the government, including prime minister Malcolm Turnbull and energy minister Josh Frydenberg have been telling us about the “greater chance of blackouts” if the ageing and increasingly unreliable Liddell coal generator in NSW is closed.

This is what conservatives have been telling us: “This not only puts the state at risk of blackouts but more importantly it drives up the cost of electricity,” says Craig Kelly, the chair of the backbench committee on energy.

The government has been using the scare campaign about blackouts to try to force AGL to either keep the plant open, or sell it to a company such as the rival retailer and generator Alinta.

And Alinta, which on Monday reportedly tendered a formal but non-binding offer to AGL to buy Liddell,  has been lapping it up and also warning of a “greater risk of blackouts”, in the hope of getting a forced sale and a cheap entry into the NSW market.

But the modelling done for the Reliability Panel by EY is emphatic. The reliability standards would not be breached. It says: “EY’s modelling found that NSW would require a further 1,300 MW of NSW coal capacity to be retired to exceed the reliability standard in NSW.”

Its modelling also showed that the greatest risk of any supply shortfalls was in Victoria, but the chance of this was also so remote as to be barely visible – in fact, the risk was 0.0000065 (six and a half times in a million – see top graph).

In only three out of 200 simulations trying to create a shortfall did the modelling actually succeed, and this would be on a single January day in Victoria in 2021, and would rely on a sequence of unlikely events.

This would require half the brown coal capacity being unavailable at the same time, only 5 per cent of wind, limitations on the network links to NSW, and extremely high demand.

In fact, the only scenarios that might lead to a breach of the reliability standard would be in the case where one-third of the gas-fired capacity in South Australia was retired within the next couple of years, or if one half of all brown coal capacity in Victoria was retired before 2024.

Both outcomes are highly improbable, and if they did occur – contrary to the new rules that require significant notice of retirements, then presumably the market operators could have time to respond – most likely with demand management and behind the meter resources.

And try as it might, it couldn’t model any supply shortfalls in Queensland, even if it forced the retirement of 1,500GW of relatively youthful coal generation. It said this would simply send an economic signal for the construction of 2,000MW of wind and solar, with no threat to supply.

The EY modelling also dismissed concerns that a move to five-minute settlement periods – rather than the current 30 minute settlement period – would have any substantial impact on reliability settings.

The modelling was used by the Reliability Panel to recommend that Australia’s existing reliability settings, which include delivering energy 99.998 per cent of the time, remain in place.

This is one of the tightest reliability settings in the world – and equates to the allowance of just 11 minutes of outages per customer per year.

The Reliability Panel dismissed suggestions that the reliability standard should be lifted to 100 per cent, saying that would require billions of dollars of additional investment.

“Setting the reliability standard involves a trade-off between the prices consumers pay for electricity and the cost to consumers of not having electricity there when it’s needed,” said panel chairman Dr Brian Spalding.

“In doing this review, the Panel was extremely cognisant of getting the balance right to avoid what some have called ‘gold plating’ with excess capacity built but not required for years.”

Many argue that gold plating has existed for years, particularly with network costs. Yet 98 per cent of all outages experienced by consumers comes from equipment failures, bushfires and storms – and not from unserved energy.

The Reliability Panel also said the settings on the market price cap ($14,200/MWh), the administrative price cap (in case of interventions), the cumulative price threshold, and the market floor should all stay unchanged.

Spalding said the panel had modelled a range of scenarios that included a world with more household battery storage systems and more wind generation. It also factored in the current state of uncertainty in the market and how the market is transforming.

RenewEconomy asked minister Frydenberg’s office for a response to the Reliability Panel modelling, and whether warnings of blackouts had been exaggerated, but had received no response by the time of publication.

Update: AGL said in a statement it had received a “highly conditional” and non binding offer of $250 million cash for Liddell from Alinta and its Chinese owner. It said it would think about it.  

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  • Carl Raymond S

    My TV has been suffering from truth blackouts. There is no easy fix. It needs a brand new federal government.

    • Steven Gannon

      The brand new govt will hopefully have enough control of the senate, the cross bench are mostly de-facto Liberals and far-right wingnuts, and most of them will be there for another four years.

    • Joe

      Ha,ha,ha…..but so true. Of course there is no chance that the truth of ‘potential blackouts’ will get a run in Rupert’s newsrags. Hopefully the Fairfax media will run the story to correct the record and expose The COALition for what they are….out and out liars.

    • Gordon Bossley

      Sadly I suspect that the deceipt is an integrated characteristic of the parliament, no matter who is in majority.

  • geraldf

    someone should send this off to that muppet craig kelly…. and fraudenberg for that matter.

  • Chris Fraser

    The reason Frightenberg’s office hasn’t got got back to you, is because they’re still learning their graphs.

    • Joe

      …and still up there on ‘Our Reef’ telling the world…$500 millions, job done, reef saved….now lets dig Adani’s Coalmine.

  • Joe

    On the Alinta offer to AGL to buy clunker Liddell, hasn’t Andy V already said on more than one occassion that the Liddell site is staying with AGL. I mean AGL has just announced the build of a new Gasser so what is this business with Alinta then?

    • Glynn Palmer

      AGL’s analysts should be hard at work doing their net present value calculations comparing keeping the Liddell property or taking the $250million from Alinta.

      AGL’s plans for the Liddell site include a 250MW battery and converting the power station to synchronous condensers. Converting to synchronous condensers probably means they don’t have any expensive plans to rehabilitate the site for other uses.

      • Mike Westerman

        It’s hard to believe you could get $250M of value out of it. At $50/MWh net margin and 60% CF, that’s over 6y during which time it’s sure to have something major go wrong. But on the other hand, AGL may not want to risk having a competitor, even if not that low cost.

    • Brian Tehan

      Frydenbeg and Turnbull asked them to make an offer didn’t they? And didn’t AEMO already say that there would be only be issues if a lot of the renewable projects in the pipeline didn’t get up.
      All of this farce is to keep Frydenbeg and Turnbull happy.

    • @disqus_S3PmIYKIK4

      One thing is certain: if Alinta does buy it then, through some mechanism or other, the tax payer will be paying for it.

  • yahoo2

    is this the same Alinta that sat on their large generation certificates for 3 years while Pt Augusta was pleading for support investment in new generation?

    Funny how they are in the Federal Govt’s good books after paying the fine straight into general revenue….no questions asked.

  • itdoesntaddup

    The Reliability Panel modelling seems to be extraordinarily unreliable. One part in 10^8? That’s about 1 second every thirty-eight months, or 1 minute every 190 years. Sorry – that’s just not credible.

    • Chris Baker

      What is it that they are saying? Is it 1 second per person, of unsupplied energy every 38 months? Maybe that is right, because its so very rare that there’s not enough generation that causes a blackout. Most blackouts are caused by the lines falling down, or tripping, and so very rarely due to not enough energy available. I wonder how the SA black event is categorised? At which point in the long chain of events of failing transmission elements can you point the finger at generation? Even after the main interconnector tripped, you could say there was enough generation available in the rest of the NEM, but the interconnector was down and so the power couldn’t be delivered. The wind farms tripped because of control settings that were not optimal, not because the generation was not available.

      • Jonathan Prendergast

        Agree Chris. The following February SA blackout was due to generation, but this was 50,000 customers (of 1 million?) for 30 minutes

      • The SA blackout is defined by reliability panel as a security issue, not reliability. The load shedding was reliability – not enough energy – but that would not have been forecast. The reason there was not enough supply was because the most modern gas fired generator in the state sat idle. and the issue was compounded by an error from the network operator that cut off three times more people than was needed.

        • Chris Baker

          The fact that the gas fired generator sat idle points to the futility of the supposed National Energy Guarantee. The NEG may possibly ensure that there is enough capacity available, such as that gas fired generator you refer to, but if it does not address how such units might be guaranteed to be dispatched when needed, it won’t actually achieve its main objective.

          • The NEG will be supplemented by emergency powers such as the RERT, which gives AEMO power to call on supply when needed, or use demand management batteries etc. All AEMO needs to do is keep an eye on the weather forecast, which they failed to do in either s.a. event/ They do now apparently>

      • itdoesntaddup

        At which point in the long chain of events of failing transmission elements can you point the finger at generation?

        Pelican Point. That point.

    • I guess they decided there was clearly enough supply in the system. It’s not the first time they have reached such conclusions, not sure why you would be complaining about it now. oh, i know. renewables.

      • itdoesntaddup

        No grid system in the world has a probability of failure of 1 in 10^8, however it is powered.

        • Sounds like you no more than the Reliability Panel. Imagine their relief.
          Again, they are focusing on the sufficient supply of energy. They are not addressing transmission and other issues, which account for nearly 99% of all outages – and which simply amplifies the point of why the reliability scare is a furphy

          • itdoesntaddup

            Ye the next time there is a Loy Yang trip that causes a blackout, you will be all over it.

  • IT67

    Official response from Frydenberg’s office just in:

    “Yeah, but, but 0.0000010% is so, SO much biggerer a number than like 0.0005%…..

    I mean it’s obvious, there’s more, kinda, errrrr, numbers in it”