The main Australia energy market rulemaker has rejected a push to create a new market for critical grid services – at least for now – arguing that there is no urgency, and seemingly putting its faith on spinning machines to save the day and keep the lights on.
The draft decision by the Australian Energy Market Commission – announced on Thursday – follows a request from the Australian Energy Council, the lobby group that represents mostly the legacy coal and gas generators in the grid, to create a market for inertia, a critical service that is essential for grid stability.
The push by the lobby group was seen as an effort to provide more revenue sources – and boost the economics – of the ageing coal and gas generators that sometimes struggle to compete in a market rapidly transitioning to wind, solar, battery storage and inverter based technology.
But the new technology providers also support the idea of an inertia market, noting that batteries equipped with grid forming inverters can also provide inertia, and they welcome a market that would ensure they got paid for providing that service. The main point of difference comes in the market design.
But the AEMC has decided that a market for inertia is not needed, at least yet. And the most controversial part of that decision appears to be its contention that there is plenty of time.
“We’re not missing out on consumer benefits by waiting,” Anna Collyer, the chair of the AEMC, said in a media statement announcing the decision.
“Our analysis shows foreseeable inertia needs are likely to be met through synchronous condensers being installed for system strength, which provide inertia as a co-benefit at low marginal cost.
“This is about getting the timing right. Technical enablers like real-time inertia measurement need further development, and recent security framework reforms will enable innovation and learning before we layer on additional changes.”
But many of the industry are not so sure. They fear that the AEMC is being overly influenced by a report it commissioned from HoustonKemp that suggested that two thirds of conventional synchronous inertia will be in the system until 2035.
Iberdrola Australia described that analysis as “unrealistic”, and warned that inertia shortfalls had already been experienced in some parts of the grid. “Shortfalls of inertia will lead, at best, to additional constraints, higher costs, and higher emissions and, at worst, to an insecure grid and unserved energy,” it wrote.
The critics also fear that AEMC’s confidence about syncons may also be misplaced, given the extraordinary lead times in a global market hungry for these spinning machines. They say the wait could be five years, or more.
And others still even question whether syncons will always do what is written on the lid. Tesla, for instance, in its submission, suggested syncons are susceptible to angle stability issues, which causes the rotating elements of the condenser to fall out of sync with the rest of the grid, meaning they can’t deliver the inertia required.
Tesla, which has pioneered the rollout of grid forming inverters at scale in Australia, also argues that its technology can set the inertia constant of “in a range wider than that of synchronous machines” and these can be tuned based on both local and broader network conditions and requirements.
And Tesla also disputes the AEMC’s assessment of costs, noting the the price of syncons – because of the strong global demand – is going up, while the cost of battery technology is falling rapidly. It says the report 2030 cost assumptions for battery storage are already two times higher than prevailing prices.
The debate is intense, and reflects the competing views of different technology providers and different schools of engineering, a near constant in an industry that is experiencing a rapid switch in technologies and market design – from big centralised fossil fuel synchronous generators, to distributed inverter based wind, solar and battery tech.
You might compare the argument around inertia – and what can deliver it and what is best for the grid – to the ageless debate about whether its best to bring the teapot to the kettle, or the kettle to the teapot. Both sides are right, although in this case, with all due respect to my wife’s passion for tea drinking, the issue is very important.
Iberdola worries that relying on transmission companies, and planning for just a “one in ten year” event will lead to a fragile system, and it says there is a risk that sufficient resources are not available. Equipment that fails to do the job is as useless as a teapot with no tealeaves.
Iberdrola also argues that AEMO, the market operator, should be required to increase the share of inertia from non-thermal resources from zero today to 100 per cent in 2035, in a straight line. It says this would be consistent with the fastest scenario in its Integrated System Plan.
Even AGL, still the country’s biggest generator of coal but with a growing portfolio of owned and contracted battery storage facilities, is supportive of an inertia market.
“As cost is a key factor, as we highlighted above, by defining inertia and determining the inertia requirements for the NEM, an approach that values inertia and provides incentives to provide inertia will encourage the right investments to be made at the least cost,” it writes in its submission.
“For example, this would encourage more grid forming inverter-based technologies over grid following technologies. This would allow for the provision of more synthetic inertia.
“While we acknowledge there are differences between synthetic inertia and synchronous inertia, if the market is designed to ensure the inertia requirements of the system are met, these differences should be able to be mitigated.”
The biggest fear is that the grid will find itself short of inertia, and this will be used as an excuse to delay the retirement of ageing coal generators – not because they are needed for the energy they produce, but because of the ability to provide grid services that might have been able to be secured elsewhere.
But some parties, including those pushing for the markets, are not unhappy with the AEMC decision, saying that a market designed now risks favouring traditional synchronous generation, rather than the new inverter-based technologies.
They also point out that it makes sense – given that the Nelson review of market design has also recognised the need for grid services markets . “That will be the key market to watch,” said one observer, who requested anonymity.
“I think big issue with the AEMC was the concern that this wouldn’t incentivise new generation, and it would just pay the existing coal and gas to prolong their lifetimes. It is a difficult one to navigate!”
