Major solar, wind projects stumble in front of new grid hurdles

The 100MW Numurkah solar farm might be one of the lucky ones.

Located in Shepparton, in a part of Victoria with a relatively strong network, construction on the state’s biggest solar farm to date begins this week and the project owners, Neoen, are confident that no major hurdles will be put in place.

But that’s not the case for many other wind and solar projects in Victoria and elsewhere.

Some, including those that have gotten as far as signing power purchase agreements, are having to go back to the drawing board because of connection requirements the developers either ignored, or didn’t know about.

The issue is most acute in western Victoria, but is also being felt in northern Queensland and south-west NSW.

Many new projects are being told that they face significant curtailment without either adding battery storage or old-style machinery known as synchronous condensers to deal with system strength issues.

Both options are causing headaches for developers, because either way they are trashing their financial models, and could cause extensive delays to projects that many expected would begin construction anytime soon.

The issue was highlighted in our story in May about the threat of curtailment in Victoria, where project developers were warned by the Australian Energy Market Operator that up to 50 per cent of their output was at risk of being wound back.

Further issues were raised in June, when new generation requirements and system strength guidelines were outlined, including some that were opposed by some in the renewable industry, concerned that they were being loaded with un-necessary costs.

It has now come to a head, and last week, a briefing by AEMO head of operations Damien Sanford at a meeting hosted by the Clean Energy Council drew more than 100 renewable energy professionals, utility executives and financiers.

The implications go deep.

They affect the projects themselves, could influence Victoria’s plans to reach 40 per cent renewables by 2025, and the choice of winners of its 650MW auction, and it could impact prices of large scale renewable certificates if the pipeline of projects does not go ahead as thought.

There are varying views about the cause of the problems.

Some accuse AEMO of over-reach and networks of being heavy-handed and inflexible, and in some cases of changing the rules mid stream. AEMO, however, insists that its proposals were well known years in advance and should have been well understood by all parties.

Networks have a strong interest in getting to build new poles and wires and upgrading equipment, and some say that new renewable energy projects are being held out as a scapegoat for issues that have long lingered in the system.

Others suggest some developers have failed to conduct proper due diligence, and should have known better than to force a project into a network area that clearly could not cope. Some even go so far as to raise questions about the skill-set of some developers.

Some point to a combination of both, and more of one than the other according to location.

They also point to the physical constraints of the grid, as well as archaic rules and the lack of visibility about the networks which means some project developers get taken by surprise discovering a rival project in the same area which impacts on their own operation.

Whatever the fault, it all adds up to the fact that the limitations of the country’s ageing grid is catching up and threatening to slow down the rapid rollout of new projects.

Grid upgrades and extensions are needed, but they could take years. And the issue is now coming home to roost for many projects that had planned, or had hoped, to begin construction this year.

To many in the industry, this is a bigger issue than whether the National Energy Guarantee goes ahead, or is voted down at next week’s CoAG energy ministers meeting.

Kane Thornton, the chief executive of the Clean Energy Council, says it’s a big issue.

“We are nervous at the moment that pendulum is swinging pretty quickly here. It is a bigger deal than the having the NEG, or no NEG or some of the other issues,” Thornton tells RenewEconomy in this week’s Energy Insiders Podcast.

“If you have been developing a project that is getting closer to commercial close, or going through the connection process, and all of a sudden the goal posts move or will  potentially move, gee, that’s a big deal.”

Christian Schaefer, head of Systems Capability at AEMO, told Reneweconomy on Friday that AEMO it has been warning of the issue, particularly in Victoria, for several years, and was working hard to resolve the issue with developers.

“There is no intention or interest from AEMO to hold anyone up from connecting to the power system,” Schaefer said.

But the fact was, he said, that some areas had reached their limit. Part of the problem was that the speed in  which solar farms can be permitted and constructed  (6-9 months) had caught up with the system’s ability to upgrade infrastructure (5- 7 years, depending on environment impact and community opposition).

Much of this would be solved, Shaefer said, through the Integrated System Plan, the AEMO blueprint for how the grid should evolve to one dominated by renewables over the next 10-20 years.

But this requires investments that could take years. Some projects want to be built now.

Schaefer confirmed that some project developers had been advised they could remediate shortfalls via “traditional means” such as synchronous condesors, or they could wait for network upgrades.

RenewEconomy has been told that a synchronous condenser could add $8-$10 million in costs to projects already tight on margins. A group of solar farms in north-west Victoria have been told, RenewEconomy understands, that their additional costs could total $60 million.

If RenewEconomy is sounding vague about the identity of the projects affected, it’s because of the sensitivity of the issue.

Developers, contractors and clients affected are choosing to speak “off the record”, partly so as not to put grid owners and market operators offside. And in many instances the details are “commercial in confidence” and subject to financing and legal constraints.

Schaefer also declined to talk about individual projects, but noted that the main area in Victoria where the problem is emerging is restricted by the current 220kV line, looped from Bendigo, to Ballarat, to Horsham and Red Cliffs, which was originally designed to deliver electricity to regional load centres not to connect significant amount of bulk power generation.

In the documents we wrote about in May, AEMO noted that three major wind farms had already been built on this loop, while three more wind farms – Murra Warra, Bulgana and Crowlands – and at least four solar farms, the 110MW Wemen, the 100MW Bannerton, the 90MW Karadoc, and the 81MW Yatpool solar projects, are planned.

But there are others also in the pipeline. It is not clear which of the projects mentioned above or in the pipeline are having to go back to the drawing board.

Neoen Australia, which on Friday announced it had reached financial close for the Numurkah solar farm in Shepparton, which will be the biggest in the state to date, says this project is located outside of the worst affected area.

We asked if there were issues with Bulgana, but it said the project, which will sit alongside a Tesla battery, has also chosen advanced communication software which should limit any impacts. CEO Franck Woitiez declined to comment further.

Wind and solar developers in Australia have had to deal with a range of new hurdles in the past 6 to 12 months, as new generator rules were designed, and in some instances came into force before ratifitication.

Many, even those that had started development, were faced with new controls known as “continuous uninterupted generation.”

This refers to the ability to ride through disturbances at a certain level and has required some projects to either dial down their rated capacity, or install more inverter capacity. Both come at a cost.

There are also more onerous commissioning procedures – with reports due when a project reaches 25 per cent, 50 per cent, 80 per cent and full output. This can be a slow process and explains why so many newly connected solar projects are not yet operating at full capacity.

New projects are also being required to produce sophisticated (and expensive) modelling from a program called PSCAD that analyses the impact on the grid.

In some instances, the requests have been made “retrospectively”, in areas where data is not readily available, and developers of small projects, even less than 1MW, complain they too have been asked by network operators to deliver the same data.

Some projects have also been hit by changes to marginal loss factors, an algorithm that dictates how much output is credited to a generation plant, given the network constraints in the area, and the number of other generation plants and customers on a particular line.

“The amount of engineering required going forward is quite immense, and this in a market already struggling with engineering resources,” says one developer, on condition of anonymity.

One of the issues is who gets to pay – the generators already on the grid, the new generators connecting, or everyone as part of regulated network costs.

Thornton says that the fact that the market oprator is paying much more attention to how new technologies are being connected to the system is overdue and welcome.

But …

“We do need to be careful,” Thornton says. “Some of the issues and challenges in the system – like frequency and voltage control – they are not new issues.

“We just need to be careful we are not just moving the responsibility and the obligation on to new generators …. to deal with issue that being around for a long time.

“There a lot of projects that progressed on certain assumptions around performance requirements. Investments have been made  …. to swing changes on those projects late in the game is certainly presenting a big risk and could be problematic.”

One of the concerns has been the recommended use of synchronous condensers, a technology that has been around since the 1950s, but whose real benefit is questioned by some.

Schaefer says AEMO is willing to adapt, and points to the engineering efforts that have allowed the first wind farms in the worst affected Victoria region to be connected in recent years. And he says it says it is open to new ideas.

“What we encourage people to do is that if they have got solutions we would love to hear from them,” Schaefer said, and these could be added to options considered for the regulatory investment tests (RITs) if they provide additional benefits to the market.

“A large number of small solutions could contribute to a significant outcome – it could be the presence of a large load, or a battery, or some other solutions we haven’t thought of.”