New rules create major road hump for wind and solar projects

The construction boom in large-scale solar farms and wind projects in Australia appears to have hit a significant road hump, with new rules imposed by the Australian Energy Market Operator causing delays, and in some cases adding costs and technology reviews, for project developers.

The issue is causing controversy because the rules changes have not yet been endorsed by the market rule-maker, but AEMO is insisting they be respected because of the sheer number and scale of the projects under construction, and because of their anticipated life-span and their role on the grid.

The changes are part of a suite of actions proposed by AEMO in response to last September’s “System Black” in South Australia. But the biggest impact for solar and wind farms appears to be around the refined definition and requirement for “continuous uninterrupted” power.

This standard – known as S5.2.5.4 – is being reinforced so as to require wind and solar farms to maintain the same level of output in the face of any big changes in frequency and voltage. No exceptions.

The industry accepts that the new ruling is a good thing – and overall should not add significantly to the costs of projects if taken into account at the planning stage. But the controversy arises because some projects that have already begun construction or planning are being told that they have to meet these new standards.

“The number of connection applications  … is an order of magnitude greater than ever before,” AEMO says in its request for a rule change in August. “As generating systems are long life assets, there is a need to ensure that the capabilities they are built with today will meet the needs of the power system of the future.”

The easiest way to meet this requirement with solar farms is to “oversize” the number of inverters attached to the installation – giving it the extra capacity to respond to voltage to ensure it can maintain output. Or, like wind farms, it could add capacitors to the installation.

This is expected to be a significant impediment on the 21,000MW of wind and solar plants that AEMO says have been proposed, but it is having an impact on a number of projects that have already won approval in the current investment boom, but which are now facing tighter rules.

Some project developers are looking at upgrading equipment, such as inverters, while others are looking at changing other machinery or even changing their output assumptions, creating potential problems between developers and contractors. Some are said to be challenging AEMO’s ability to impose such rules.

No project developer would go on the record because of the “sensitive” nature of the agreements, but according to RenewEconomy’s enquiries, around 20 projects that previously had initial approval – or believed they had – have been told they would have to modify their projects if they are to be registered.

Among those affected are many of the large-scale solar projects that won funding from the Australian Renewable Energy Agency’s large-scale solar tender, and many other large-scale wind and solar projects: the new rules apply to those above 30MW.

The one exception to that limit is the small the Lakeland solar and battery storage project, which will be notable for being the first large-scale grid connected solar farm paired with battery storage, with 10.4MW of solar and 5.4MWh of battery storage.

But it needs to meet the standard because it wants to be a scheduled generator. Its commencement date has already been delayed several months (it was hoping to be up and running in June) because of the need to meet the continuous uninterrupted power rule and it is still waiting for final connection approval.

Another complication is that the AEMO requirements are not necessarily the same as those of the local network operator .

“There is an inherent tension between the obligation to comply with what the network wants, and what AEMO wants,” said one project manager who declined to be named.

“AEMO is focused on active power and wants enough megawatts to meet its supply needs, while networks are worried mostly about voltage and frequency, that’s where they are held to account.

“My observation is that none of this stuff is bad – it is just demanding that solar plants do a little more than they have been doing. It’s a technical issue and relatively easy to manage if you do it up front.”

However, the issue arose in those projects where contracts had already been signed. “The challenge is trying to retrofit this sort of design parameter in a contract that is already costed and has reached financial close.”

Another project manager, who also declined to be named, said increasing the number of inverters, for instance, by 10 per cent may only add 1 per cent to overall costs. He said some developers were putting their hopes in a new upgraded inverter – SMA’s 2.75 model – that has yet to be released.

“The biggest problem is the way that it is being implemented,” he said. “It has been introduced retrospectively and some projects are having to redesign their system because of it.”

In principal, the rules have been welcomed. “What AEMO is demanding is a transition in the solar sector from being the lower cost to the highest value plants, so it can inject the right amount of energy at the right time with the highest quality,” said one.

But others suggest that these standards are higher than what is being applied to fossil fuel generators, which would struggle to match the performance requirements of the inverter-based technologies.

“There wouldn’t be a synchronous generator that can do that,” said a third project manager in reference to response times of 30 milliseconds.

AEMO says in its rule application to the AEMC that the new rules have not been imposed on existing generators, although it is looking at whether it should do this.

It is also planning to decide by mid next-year what to do about “governor controls” on large coal and gas plants, which have been relaxed by many plant operators and some see as the biggest weakness in Australia’s grid – and may have played a greater role in the S.A. blackout than is generally acknowledged.

This project manager also questioned whether the new rules imposed by AEMO had any force, given they have yet to be approved by the Australian Energy Market Commission. “Legally, I don’t think they have a leg to stand on,” he said.

The new rules were submitted by AEMO to the AEMC as a proposed rule change just one month ago. They can be found here, and the detail in the appendix from page 61.