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Wednesday, April 24, 2024

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Wednesday, April 24, 2024
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Know your NEM: Climbing a wall of worry over wind and solar

Figure 10: Baseload futures financial year time weighted average
David Leitch
20

Whats interesting this week – Climbing a wall of worry

I did plan to do an update on overseas shares of wind & solar PV to point out how low the share of wind & PV in the NEM still is relative to many other regions in the world.

And then to go on and show that in the rest of the world, or should that be the real world,  regions with a progressive approach to integrating renewables are not seeing reliability problems.

The grids I’m talking about are Europe, and its sub grids, California, and Texas. I may still do that note, but it’s on hold because ERCOT, the independent system operator in Texas, and the main source of electricity information about the site, is no longer allowing access to its public website from computers not located in the USA…….. :-%@*** or in facebook jargon “WTF” . So I’m in the process of applying for an exception and in a holding pattern.

Meantime.  The following table simply shows the wind & PV market share across the NEM as a whole and by State for the 7 months since Hazelwood closed.  Wind & solar PV are 54% of demand in South Australia and the grid is still functioning.

Recall that in many ways South Australia is a bad place to run a high renewables share grid because its interconnector links are poor, and it has no hydro resource at all.

Across the NEM the wind & PV share is now 12%, still well below many other major grids around the world.

Figure 1 Wind & PV share of market. Source: NEM Review
Figure 1 Wind & PV share of market. Source: NEM Review

Of course as we know there are still something over 4 GW of new utility renewables to come on line but other than in Queensland I doubt they will move the average price dial that much. More is need in Victoria. That’s the State that has to replace Hazelwood and so far there clearly is not enough new renewables in Victoria to do that.

Turning to the weekly action

The only weekly action of note this week was the soft demand in South Australia & Victoria, down 8% and 10% in year on year terms.

Whether that was weather related or partly the car industry, small in absolute terms, but meaningful in year on year changes for a week, is not known. There was also a fractional movement in REC prices but just theoretical.

Figure 2: Summary
Figure 2: Summary

Share Prices

Figure 3: Selected utility share prices
Figure 3: Selected utility share prices

 

Figure 4: Weekly and monthly share price performance
Figure 4: Weekly and monthly share price performance

Volumes

Figure 5: electricity volumes
Figure 5: electricity volumes

Base Load Futures

Screen Shot 2017-10-30 at 1.54.56 pm

 

Figure 10: Baseload futures financial year time weighted average
Figure 10: Baseload futures financial year time weighted average

Gas Prices

Figure 11: STTM gas prices
Figure 11: STTM gas prices

 

Figure 12: Thirty day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO
Figure 12: Thirty day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO

 

David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.

David Leitch

David Leitch is a regular contributor to Renew Economy and co-host of the weekly Energy Insiders Podcast. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.

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20 responses to “Know your NEM: Climbing a wall of worry over wind and solar”

  1. Peter F Avatar
    Peter F

    Not only is the grid still functioning in SA, for the last 8 weeks at least power has been 16% cheaper than NSW and SA has been exporting up to 1/3rd of generation and seems to be exporting about 90% of the time.

    SA has a grid connection equivalent to 27% of peak demand. Very few European countries except Denmark and Switzerland come anywhere near that level and it has far better combination of wind and solar resources close to the grid than almost any other country on earth so these two factors more than compensate for a lack of hydro.

    Germany has managed 26% wind and solar for the 9 months (40% all renewables) since the end of January. Peak hydro is 5.8GW compared to 83 GW peak production so to have equivalent backup SA would need 220 MW of solar thermal/pumped hydro. However as Germany’s peak occurs in still, dark weather and SA peak occurs in sunny late afternoons with some wind, the current renewable level of 53% does not seem exceptional.

    With the emergency generators just installed and the replacement of TIPS A planned by AGL, the completion of Solar Reserve’s plant and the Cultana pumped hydro system as well as the other renewables being built now, will mean that SA can run indefinitely independant of the NEM, their only reason to import power is that they can buy imported coal or hydro cheaper than their own gas.

    If the Lyon and Zen plants are completed with storage, as well as the others mentioned above, SA will have 750MW of “despatchable” renewables. Throw in some biomass and demand response and SA’s entire “base load” could be covered for an hour or two, without firing up a gas plant or importing a single Joule from Victoria.

    A side benefit of adding storage is that even if wind and solar output are low the storage can be recharged by CC and reciprocating gas plants which are both cheaper to run than OC gas plants, so even if the gas share of generation stayed the same, gas consumption would fall.

    As for power production, the announced renewable projects in SA plus ongoing rooftop solar will add about 4TWhr/yr which will take them over 80% renewable. Then the question is, How much to store/curtail/export?

    If we dared to dream about a strong combination of energy efficiency, 800 MW of pumped hydro plants and 100,000 battery installations, 500MW of waste to energy/biomass and another two Solar reserve plants, SA could reach 90% renewables by the election after next

    1. David leitch Avatar
      David leitch

      Peter

      I agree with most of what you say. I won’t be surprised if the South Australian blackout turns out to be a positive for renewable energy in South Australia.

      1. RobertO Avatar
        RobertO

        Hi David, you mean that you do not belive our esteamed PM , that RE is the total cause of problem in SA, All our “Shock Jocks” do and they spend many hrs telling people that. Even the RWNJ told the story on TV that it important that RE gets to no more that 26%- 28% RE (Craig Kelly)

        I do like your stories.
        Too many others on other media site do not have the knowledge or understanding of where RE seems to be going, and at the pace it seem to be achiving dispite the Fed Gov trying to stop it. Thank you for your good work.

    2. Peter Avatar
      Peter

      Nice summary. I agree with this although I would challenge one statement, “…SA peak occurs in sunny late afternoons with some wind.” We have stinking hot afternoons when the ocean is like a mirror surface because its so still. That is what we had last summer when we had load shedding despite Pelican Point sitting there half-operating and AEMO over-predicted the wind energy production.

      1. Peter F Avatar
        Peter F

        I did say some wind, but if gas plants run the equivalent of 300 full load hours per year, I don’t think anyone should be too upset, that would be less than 10% of annual consumption. Tracking solar, solar thermal and wind turbines that cut in at 3m/s rather than 5 and behind the meter batteries are all going to lower demand for gas even on those hot mirror seas days.
        In any case I should be talking about net 90% so like for the last month you have been exporting a lot of wind power so occasionally you will be generating/importing FF power which will offset that.

        1. Mark Diesendorf Avatar
          Mark Diesendorf

          Because wind power is proportional to the cube of the wind speed, there is negligible benefit in reducing the cut-in wind speed to 3 m/s. Wind power at 5 m/s is 125/27 = 4.6 times wind power at 3 m/s. To make matters worse, designing a wind turbine to cut-in at 3 m/s might entail reducing the maximum wind speed where it cuts out and that’s where most of the wind power exists.

          1. Peter F Avatar
            Peter F

            The point of a 3m/s wind turbine cut-in is that it achieves that by having a much larger rotor diameter to power ratio. At 5m/s ground wind speed where a 90-3,000 on an 85m tower is only producing 300kW a 136-3600 on a 110m tower will be producing about 2,100 kW.
            It is true that the cutout speed will drop by 1-2m/s but at that speed all the standard turbines will be running flat out so there will be no shortage of wind energy.
            The challenge is minimizing the gaps in generation not maximizing the total power and then having to curtail it.
            The more gentle ramp up and down of low specific power turbines also makes them easier to integrate with other power sources

          2. Chris Baker Avatar
            Chris Baker

            Changing the cut speed also moves generation to a time when the price is higher, and who cares if you reduce output at a time when prices are low or negative? This supposes such a wind farm would be merchant. It also increases utilisation of supporting infrastructure such as substation and transmission lines. I think there are various drivers to have larger rotor diameter to power ratio.

          3. Peter F Avatar
            Peter F

            Even if the wind farm is not merchant, it is less risky for a retailer to buy a long term contract because they will have to spend less on gap filling backup

          4. itdoesntaddup Avatar
            itdoesntaddup

            The cost in wind turbines is the rotor diameter (and tower height), so if you place a small generator on a large turbine you will get high cost energy, even if it is more reliable. TANSTAAFL

          5. Peter F Avatar
            Peter F

            There are four roughly equal cost elements in a wind generator, tower, rotor, nacelle and transport installation/grid connection. Two of them stay the same with a taller tower and longer blades. The other two have been valued engineered so that a modern 110m tower is about the same cost as an 8-year old 90m tower, the same with rotor blades where now carbon fibre has reduced weight. So in fact combined with better installation techniques total cost per MW has been falling.

            If you get more energy at higher price points in the demand curve the fixed cost is more than offset by the increased energy. In fact Vestas latest generation 2MW wind turbine produces 40% more annual energy production for roughly the same installed cost as an eight year old model. As the average value of that energy is higher, the ROI has gone up by 50% or more with constant power prices

          6. itdoesntaddup Avatar
            itdoesntaddup

            The selection of a turbine is a function of the anticipated wind profile at the installation site. When market prices are higher, it becomes possible to justify turbines that are tuned to secure more energy in lower winds than alternatives that would secure more energy in windier sites. The available energy depends only on the wind profile and the rotor swept area. How much of that gets used depends on the choice of generator and ancillary equipment (gearbox etc.). High capacity factor turbines (i.e. undersized generators) are only justified by high market prices. They may have less time when their output is zero, but in all but the poorest sites, they will produce less energy than a same size rotor and tower with a larger generator.

          7. Peter F Avatar
            Peter F

            Your last statement is true but meaningless. One of the limiting factors for wind farms is the grid connection. If the grid operator only allows X MW to be connected at a particular point then it is far better to produce more energy from a given site than have higher peak power that in many cases may be curtailed.
            Even within a windfarm it is an optimisation question. Because it is now possible to produce long blades economically and smaller generators are lighter than larger ones, taller towers are also economical so the optimum solution is a turbine which generates over longer periods using the same or smaller transformers and control systems etc.
            By definition the larger proportion of wind power on a grid the lower the value of power produced in strong winds because there is abundant supply. Further, peak wind usually occurs at times of medium to low demand further devaluing the output. Thus the best place to put your money is into taller but lighter towers and longer but lighter blades which on average will give higher utilisation and higher returns for the whole system, not in larger generators or bigger grid connections

    3. BushAxe Avatar
      BushAxe

      There’s another 230MW PHES proposal on the opposite side of the Spencer gulf as well (it’s being done on the quiet).

  2. Farmer Dave Avatar
    Farmer Dave

    Hi David, thank you for your many contributions to this web site and to the weekly podcast. I live in Tasmania, and so am interested in how the wholesale electricity price is set here, given that we have close to a monopoly generator in Hydro Tasmania (government owned) and some possible competition from the Victorian generators, but they rely on Basslink, which I understand is controlled by Hydro Tasmania. By “set” I mean the underlying approach, rather than the formal mechanism.

    Having looked at your weekly NEM reports, it seems to me that if I was in charge of Hydro Tasmania and decided to set local prices in such a way to earn me a good profit, but without drawing attention to what we are doing, then the kinds of prices we see week after week would be the result. Another way of putting my question is: what would happen if the Tasmanian government followed the recent example of the Queensland government, and directed its electricity companies to reduce prices as much as possible, consistent with their long-term sustainability?

    1. David leitch Avatar
      David leitch

      Dave

      Your question is interesting but could not be answered without considering the potential changes to the role of Tassie Hydro in the national market over the next few years. I’ve been meaning to write something about this for months and will put it back on the agenda.

  3. danielspencer Avatar
    danielspencer

    Thanks, for this David. Is that 54% in SA figure including interconnector?

    1. David leitch Avatar
      David leitch

      It does except that some of the wind generation in South Australia will have been exported to Victoria. Equally or almost equally some of the imports from Victoria might be from Victorian wind. As previously pointed out the experience in Denmark and a growing body of theory shows how good transmission links help to increase the overall dispatch ability of wind and reduce the total amount of firming capacity required.

      1. danielspencer Avatar
        danielspencer

        thanks!

  4. James Avatar
    James

    You are absolutely correct that inadequate interstate transmission capacity is a major barrier. Snowy 2 cannot operate without major transmission enhancements and major new renewables to pump water.

    As a long term strategic investment, enhancing interstate transfer capabilities offers many benefits. Wind and solar can be located in the areas with the best wind and solar resources. The gaming by major players to restrict transfers and force operation of expensive gas generation would be restricted. Finally we would have a truly national market.

    A DC two conductor dc link connecting SA, NSW and Queensland would cost less than 10 Billion Dollar. The cost to customers, if it was a regulated asset, would be about $2 per mega Watt hour, a trivial amount compared with the $40 to $60 per mega Watt hour increases in generation prices we have seen recently. If these costs are even approximately correct such a project would easily pass a RIT-T evaluation.

    Operationally DC links allow better control of ac network flows. Cost reductions and performance improvements of modern voltage source converters have made thyristor converters almost obsolete.

    With our vast wind and solar resources, appropriate investment, and effective rather than restrictive regulation, Australian energy costs should ultimately be amongst the lowest in the world.

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