Solar and wind projects fear big delays from new “one at a time” connection rules

Australian solar and wind farm developers say they fear new projects could face months or even years of delays under new “one at a time” connection rules proposed by the Australian Energy Market Operator.

In an industry briefing on Friday, AEMO unveiled its draft proposal to introduce a protocol known as “sequencing”, where only one wind or solar project connection is assessed or processed at a time.

Sequencing was first used after congestion and system strength issues became a major problem in the West Murray region of north west Victoria and south-west NSW early last year, resulting in big delays for even already built projects. But now AEMO is looking to extend the protocol to other parts of the grid.

“In some areas of the grid multiple concurrent connections are progressing … in circumstances where there is limited certainty or insufficiently detailed information to adequately assess the impacts and interactions of each with the others,” AEMO says in its draft rule proposal.

“This can present a serious threat to power system security where several proponents are seeking connection in network locations with low system strength or other constraints such as voltage stability, transient stability or thermal limitations.”

Solar and wind developers are concerned because they fear there could be little transparency over the potential delays, causing problems in securing finance, landing and confirming contracts for turbines and modules and contractors, and pushing back revenues if a project is built and has to wait to connect.

They are also concerned about the main thrust of the new proposal, which is to remove stated time constraints for AEMO to approve new connections.

“AEMO wants to be able to remove their obligations to process connections in a certain timeframe,” said one development manager of a major renewable energy company. (Several contacted RenewEconomy but none wanted to go on the record because of the sensitivities involved).

“That means there would be no obligation on AEMO to connect generators – it could be months or years.”

Another pointed out that most of those projects impacted by the West Murray delays were able to declare “force majeure” because of an unexpected obstacle to their connection. But that would not be an option in a new regime written into the rules.

“Once this rule change is in the National Electricity Rules and AEMO declares some new area a sequence area, the proponents of projects under construction will be unlikely to be able to declare Force Majeure as becoming a sequenced generator is entirely foreseeable,” one said.

“Sequenced projects will miss the deadlines in their PPAs (power purchase agreements), lose their project finance and go bust.  But, of course, this is not a problem for AEMO as they make it clear that commercial issues are not their concern.”

The reaction to the new sequencing rules highlight the growing tension between AEMO, and other industry bodies on one hand, and some wind, solar and even battery storage developers on the other, the latter frustrated by both the complexity and uncertainty in the rules.

AEMO says the system will need up to 50GW of new wind and solar to replace existing coal, but it is being overwhelmed by some 80 gigawatts of new development proposals and enquiries.

And while it has put together a 20-year blueprint known as the Integrated System Plan which plots a path to 90 per cent renewables by 2040 – and could accelerate this transition to the mid 2030s in its latest update – it is seeking to gain control over the pace of connections.

“It is critical that the NER recognise the challenges of processing multiple connections simultaneously where they are both interdependent and highly reliant on the accuracy of complex computer simulations for successful assessment,” the AEMO document says.

“This rule change proposal seeks to permit AEMO to apply an alternative connections process in limited circumstances where it is unable to appropriately discharge its power system security obligations whilst also meeting certain regulatory time limits to perform certain tasks under the connections framework.”

AEMO argues that as the nature of the overall generation mix continues to change, it is becoming more difficult to undertake accurate power system studies, particularly for decreasing system strength in many parts of the grid.

And it wants more time to contemplate these issues and ensure the modelling is right, and it admits that models and licence conditions are being adjusted because each new project might have an impact on other existing or proposed projects.

“Models are adjusted as access standards are negotiated, and access standards and generator capabilities are increasingly dependent on the connection location, current or likely power system conditions and co-development of system strength remediation,” it says.

There are now any number of large and smaller wind and solar projects that have suffered either delays or output constraints – or both – as a result of concerns about system strength and grid congestion.

The worst affected were those in the West Murray region, and other major projects beyond that immediate region have also suffered big delays – including the Dundonnell, Stockyard Hill and Moorabool wind farms.

In some areas, the fine tuning of inverters has helped find solutions, but that has usually emerged after the projects have been connected and commissioned and new modelling unveiled new issues.

There was also controversy at the meeting last Friday over the refusal of AEMO to release a letter it said it had received from the Australian Energy Regulator, apparently relating to the legality of its interim “sequencing” order in the West Murray, a region that became known as the “rhombus of regret”.

The developers suggested that the letter indicates why AEMO is trying to get on the front foot and ensure that sequencing, and the removal of time-based obligations, now becomes part of the rules, and not granted as an interim measure.

“What is AEMO trying to hide by not providing this advice particularly as they seeking a rule change for the subject of this advice?” asked one.

“This rule change, if implemented will have a chilling impact, increasing the risks for any new renewable generation project.

“There is no disincentive for them to sequence areas; it’s only upsides for them …and sequencing connections in new renewable energy zones would be likely as lots of generators will be trying to connect at the same time.”

The Clean Energy Council says it is working with AEMO on a solution.

“The critical issues that emerged in the West Murray Zone over the past few years triggered AEMO to take a different approach to managing the connection of new renewable energy projects,” said a spokesperson.

 “Any change from the current open-access arrangement to some form of sequenced connection of generators can have profound implications for renewable energy proponents, the timing and configuration for their projects and risks adding to the already growing investor uncertainty in the energy market.

 “The CEC is working closely with AEMO to better understand the problems with the current arrangements, evaluate alternative approaches and agree on any better way forward. The CEC and AEMO hosted a workshop last week, taking feedback and consulting on this issue and will hold another workshop in coming weeks.

 “These are complex issues which require careful consideration, and we welcome the continued consultation and collaboration with AEMO to ensure any change is well understand and effective.”

Update: AEMO later issued a statement saying it and the CEC had launched a joint response, the “Connections Reform Initiative”, to further improve the connection process for renewable and hybrid projects in the National Electricity Market (NEM).

“This initiative builds on existing work the CEC and AEMO have led with CEC members, transmission and distribution businesses and other industry stakeholders to address systemic issues of the connection process,” the statement said.

“We thank the Clean Energy Council and its members for their suggested improvements and collaborative approach to paving the way to help connect the large volume of new projects in an efficient and consistent process.”