Rooftop solar systems are going to have such an impact in coming years that they will meet up to 77 per cent of total grid demand on occasions within five years, sending minimum operating demand down to levels that had never been contemplated until recently.
The Australian Energy Market Operator says the pace of rooftop solar is increasing beyond its own expectations and homes and businesses will likely add at least another 8.9GW by 2025, on top of the existing capacity of 14GW.
This will have a major impact on prices, demand and the operations of the grid. These solar systems alone could supply up to 77% of total electricity demand at times by 2026 in the four mainland states that are part of the National Electricity Market (South Australia, Victoria, NSW and Queensland).
“As a result, minimum operational demand across the NEM mainland is expected to drop to a record low of 4 to 6GW by 2025, down from 15GW in 2019,” AEMO says.
This is a major change for the grid operator, which until recently was more concerned with how to manage demand peaks, and ensuring enough supply at those critical periods, than demand lows, and ensuring there are enough essential “grid services” in operation at those times.
Daniel Westerman, the CEO of AEMO, says this underlines the importance of market reforms that are being put forward by the Energy Security Board, particularly as they refer to distributed energy resources (DER), such as rooftop solar, battery storage and electric vehicles.
“Without additional operational tools, we may no longer be able to operate the mainland NEM securely in all periods from 2025 due to a lack of security services when demand from the grid is so low,” Westerman warns in the latest Electricity Statement of Opportunities, released on Tuesday.
“These conditions may occur earlier than 2025 under abnormal network conditions, such as network and generation unit outages, possibly associated with bushfires or storms.”
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One of the main problems with rooftop solar from AEMO’s perspective has been the relative lack of visibility over how they operate, and the inability to manage or orchestrate their output.
Various proposals have been put forward – some of them controversial – including the ability to “switch off” rooftop solar when AEMO decides there is too much in the system for it to maintain grid security, or the introduction of “dynamic exports” and controls over household load.
That is going to require a different way of thinking about those resources, including from customers, and the need to gain “social licence” to be able to manage those technologies.
“The transition to a power system supplied almost entirely by renewable and distributed resources in some periods represents a major change in power system and electricity market operation,” AEMO writes.
Some of the things needed to address this are:
– Getting a social licence for active management of distributed energy resources (DER) like distributed PV – consumers are at the centre of this transition, and AEMO and the energy industry need to build relationships of trust with them.
– Foundational power system security adaptations – engineering solutions can provide a robust and resilient foundation for the power system to operate securely.
– Adapted market and regulatory frameworks – these can unlock opportunities for consumers to fully participate in markets, and provide incentives so the choices made by consumers and industry stakeholders align with system needs.
With operational demand falling so dramatically, the challenge is to find “loads” that can soak up the output of all that rooftop solar.
Snowy 2.0 could be one option, but AEMO notes that when this starts pumping from around 2025, it will have only minimal impact and was not sufficient in itself to address the problem.
That means a focus on battery storage – both at grid scale, and at the “community” level and in households themselves, at the point of generation.
Battery storage is not a commercial proposition for most people – unless they have a pressing need to protect goods that could be impacted by local or widespread outages – so the introduction of new functions – such as grid services could provide some revenues.
This will largely depend on the development of “virtual power plants” – rooftop and battery systems that are “aggregated” by specialist companies, but there is controversy over the design and metering standards for such systems.
Other “demand flexibility solutions” could be provided through new uses for electricity, such as hydrogen production and electrification of industrial processes and transport.
AEMO estimates there is around 21GW of battery storage and 6.3GW of medium to long-term duration storage projects in the pipeline across the NEM.
It says there are at lest 10 green hydrogen projects that could deploy electrolysers of at least 100MW capacity each, and there is the possibility that electric vehicles may also take off by the end of the decade, potentially adding up to 87TWh of demand (more than 40 per cent of current total demand) that will need to be managed.
But the issue of “social licence” is also important.
“Social licence must be built with consumers who are at the centre of this transition, and who use their DER assets to cool and heat their home, charge their EVs, or reduce their energy bills,” it notes.
“Historically, AEMO has managed a power system supplied primarily by centralised generators. As distributed PV becomes an increasingly important part of the energy supply chain, it is important that AEMO increases its understanding of consumers.
“A collaborative effort will be required to build social licence with consumers on how DER can be integrated into networks and the broader electricity system and market, involving a wide range of stakeholders.”
Note: You can register for a webinar to be held on Wednesday, September 1, at 4pm, titled NEM Reforms: Who rules the market, featuring NSW energy minister Matt Kean, AEMC boss Anna Collyer, and Clean Energy Advisory Group CEO Simon Corbell, to be hosted and moderated by Paul Curnow from Ashurst. Please go to this link.
