Know your NEM: Generator Reliability Option might be dumb idea

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The COAG endorsement of the Finkel Review (apart from the CET) won’t mean much in the short term, but the generator reliability option might be a dumb idea. Meantime, smart companies are showing how to save costs with solar and storage.

Figure 2 Gas generation up about 25-30% on PCP Source: NEMReview
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News of the week

The main news of the week was, I guess, the COAG Energy Council endorsement of much of Finkel. In practice we doubt if this means much in the very short term.

The key things that will matter though will be what the newly formed Energy Security Board actually does. That will depend on who the Chair is, and we don’t know that yet.

Secondly, the Generator Reliability Option [GRO] has been approved but to action this it requires the AEMO to come back with advice and then the AEMC to approve a rule change.

So, there is lots of water to flow under the bridge as the details are sorted out. We want to stress that making every generator responsible for its own dispatchability is on the face of it dumb.

There is no other way to put it. The idea is to make the system reliable not necessarily each individual generator. Still we will just have to wait and see how its implemented.

One way might be to create a market for dispatchability that intermittent and other generators could purchase from.

We will just have to wait and see but certainly this will be a great test of just how talented Audrey Zibelman and the AEMO actually are.

Energy-insiders-icon-final copy(To hear RenewEconomy editor Giles Parkinson and ITK analyst David Leitch discuss these issues, please tune in to our Energy Insiders podcast, which can be found here).

In the meantime developments in dispatchability continue all over the NEM.

We will have lots more to say about pumped hydro and hydro in general over the coming weeks, but in this space at this time we wanted to draw attention to two great case studies of behind the meter PV and storage presented at the recent Australian Energy Storage Conference.

Last year these case studies were hard to find. This year they are more common.

Figure 1 just provides some indicative numbers. Bundaberg Christian College is getting a 7 year payback on its system. LonelyPlanet has no risk and no cost.

Where these case studies exist there must be plenty more. Exciting times in the behind the meter industry.

Figure 1 Behind the meter commercial is a money maker
Figure 1: Behind the meter commercial is a money maker

Turning to the weekly action to July 14.

  • Volumes: NEM wide volumes were down 1% on PCP and all States other than NSW and Tasmania were below last year. For the CYTD NEM wide volumes are flat with NSW at 2% and Tasmania 8% showing growth. The growth spurt in QLD has expired.
  • Future prices were mixed with a 1% rise in NSW and a 2% fall in Qld. Victorian prices fell a more meaningful 3%. The futures curve remains in backwardation.
  • Spot electricity prices were 60% lower in South Australia last year which we attribute to much lower gas prices. However spot prices in NSW were up 38% and in Victoria more than double last year.
  • REC No change.
  • Gas prices Were down very sharply on PCP, down 54% in South Australia to $8.9 GJ despite the State having more gas generation and down 11% in QLD to just $6.30 GJ. The fall in gas prices clearly benefits South Australia more than anywhere else due to gas setting the price the majority of the time in that State. However gas is now also setting the price in Victoria, as we previously showed. And its an open cycle (expensive to operate continuously) generator, Mortlake at that. Even though a lot more renewables are being built around Australia, we need more in Victoria to get gas out of the price setting frame.

Nem wide gas generation is up 20-30% since Hazelwood closed to about 2.5 GW. As stated the particularly galling fact is that most of its open cycle, or gas steam turbine

Figure 2 Gas generation up about 25-30% on PCP Source: NEMReview
Figure 2 Gas generation up about 25-30% on PCP Source: NEMReview


 Figure 3 Inefficient gas setting price in Vic & Sth Aust. Source: NEM Review
Figure 3 Inefficient gas setting price in Vic & Sth Aust. Source: NEM Review

Despite that gas prices are lower. Go figure.

  • Utility share prices. Genex shares continued their strong run assisted by every subsidy known to man or beast. Not that we think this is a bad thing, just noteworthy. APA 7% down & SKI 10% down have had significant falls over the past month. This may reflect the market’s view about interest rates. We are just about into reporting season. Next week if time permits we will look at analyst consensus across the sector.
Figure 4: Summary
Figure 4: Summary


Figure 5 Selected utility share prices
Figure 5 Selected utility share prices


Figure 6: Weekly and monthly share price performance
Figure 6: Weekly and monthly share price performance


volumes NEM july
Figure 7: electricity volumes


Figure 8 7 Day moving avg year on year temp change. Source: BOM
Figure 8: 7 Day moving avg year on year temp change. Source: BOM


baseload NEM

baseload NEM july
Figure 13: Baseload futures financial year time weighted average



Figure 14: STTM gas prices
Figure 14: STTM gas prices


Figure 15 30 day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO
Figure 15 30 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. 

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  1. Cooma Doug 2 years ago

    Back in the 1990s we controlled the grid stability for nothing. Frequency control and voltage control had to be done or you had nothing.
    When the market emerged, suddenly all these things are products, money for jam. The same thing will emerge again. The timing and the way you manage your fridge, your air con and hot water are products.

    Just imagine what is possible.
    How about shifting your air con energy to your battery and charging it at peak load time of 5pm on summer day. You get it at half the cost or less because it is also double value as load shed and export. Hell you may not be at home and dont need the air con anyway. You use your phone app to take advantage.

    • David leitch 2 years ago

      Cooma Doug

      I agree with the thrust of some of your ideas and so do others. As Graham Bradley pointed out on the podcast a couple of weeks back, in Qld the network control of the hotter system means heating can take place whenever it suits. But you can’t do that in South Australia because the household meters suck.

      A fridge though is a flat load. Air conditioning is basically a predictable but not moveable load.

      There are markets for new products because we have moved to a new world. Not because there are more consultants although it might sometimes seem that way. cheers

      • Cooma Doug 2 years ago

        Consider a 195 mw Tumut 3 pump.
        It can go from a load of 195mw to a generator of 300mw. It takes 2.5 to 3 minutes to create a shift of 495 mw.

        It only ever happenned for me once in 30 years. The reason being that pumps were only run on very low loads between 1am and 5am or there abouts and we needed a really bad problem to need such response in such loads.

        The rule changes will empower pumps to run when approaching high loads and provide strong support for security. When we look at the time and load structure of summer, air cons could provide the same result, more effectively because of the location. A home with battery could retain the aircon but run from battery. The battery having the same effect by going off charge. The value of wind and solar is to provide this extra back up in the periods of highest risk and just needs the rule changes to support it.

        If home load side response is initiated by on site frequency monitor in milli second times
        (Within the first half cycle) the effect is to manage power swings and effecively take action on voltage control and stability. All they need is the frequency measured at home.
        Then load shift response and rewarded via the market.
        You could see it all on the phone app and make adjustment to response options which would be effective in 5 min.

      • Cooma Doug 2 years ago

        Have a look at this sample of info when you have a minute.

        am listenning to your talks each week and appreciate it very much.

    • Nancyojordan 2 years ago

      my friend’s mom makes $85 an hour on the internet.. she has been without work for 2 months and the previous month her pay check was $18441 working at home for four hours per day… ➤check out ➤this

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