It’s time to shake up the grid

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Australia’s National Energy Market needs a massive shake-up to evolve to a smarter, more stable distributed renewables-based system. And not every participant will make it out alive.

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The chair of leading Melbourne-based energy tech company GreenSync has warned that a major shake-up of the current National Energy Market status quo will be required as the grid evolves to a smarter, more stable distributed renewables-based system.

And not every participant will make it out alive.

Neil Gibbs, who is also the founding chair and principal at energy industry advisory firm Marchment Hill Consulting, sees an electricity network that works from the customer up, and where every asset that can contribute to the system – behind or in front of the meter – can participate in the system.

“The central thesis of GreenSync’s position is that everything that can be digitised and controlled – i.e. things that exist beyond the meter – should be considered as part of the system, because they contribute, or can contribute to the system,” Gibbs tells RenewEconomy.

“That is what our deX (the Decentralised Energy Exchange GreenSync launched in September 2017) is intended to do. It’s intended to embrace those assets, those capabilities, bring them into the system, reward people for their investment in those system.”

But like the CEO of the Australian Energy Market Operator, Audrey Zibelman, Gibbs also sees a rather old and clunky obstacle in the way of this goal: the current rules and settings of the NEM.

In particular, Gibbs argues that the current market structure – where bulk electricity by is sold by generators to electricity retailers on the wholesale market, and then to customers on the retail market – is at odds with how the modern NEM needs to work.

More specifically, it is at odds with demand response: the side of the market that energy industry experts including Zibelman – and companies like GreenSync – believe will be crucial to achieving that magic trifecta of affordable, safe and reliable electricity.

And one of the keys to removing that obstacle, says Gibbs, could lie in removing a layer of the current market structure.

“If you’re a network and you’re trying to get a really specific signal to a customer, it’s effectively all but impossible to do in the current arrangements,” he says.

Currently, says Gibbs, “you have to offer a network-wide price, and you’ve got to offer it to all of the retailers, and they do whatever they do to pass it though, and the signal is somewhat muted by their own needs.

“What the deX allows us to do, and what the networks want to do, is have a direct relationship with the energy users. Which is contentious for some of the more antiquated retailers,” he said.

“What we need to see is an unfiltered, unadulterated price signal from networks to customers to say: ‘Your location, it’s worth something to us. If I can just get you to tweak your air-con or do whatever for a particular period of time, then I’m prepared to pay you an incentive to do so’.

“(But) not through the retailers current systems. Because they cannot send a locationally specific, time specific message directly to an individual customer on a single feeder through the retailers. They can’t do that.

But it’s not just the retailers’ role in the market we should be rethinking. Gibbs notes that there are complications and conflicts of interest up and down the supply chain that need to be addressed.

The so-called gen-tailers, for example, with a foot in each market camp, have their own set of problems.

“Gen-tailers recognise that …their customers are open to a more sophisticated energy proposition rather than just a kWh x dollars… and they’ve wanted to move.

“The complication that they experience is that a significant proportion of their enterprise value is vested in their conversion of fuel into energy. So that’s an internal tension.

The networks, meanwhile, “absolutely, intellectually get what we’re trying to do,” Gibbs says. “They really get that there’s better ways to provide service to customers than just building more assets.

“Having that recognition is fine, but creating behaviour change …. there’s a very deep culture of building things to solve problems,” he added.

Gibbs refers here to the well documented network tendency towards “gold-plating” poles and wires, rather than seeking non-network solutions for problems of constrained supply, or congested networks.

“We would like the networks… every distribution network, to use something like the deX platform to register where (customers’ behind the meter) assets are,” he told RE.

“Because at the moment, what they have to do to manage their risks associated with back flow and everything else is to say no; you can connect (an) asset … but it has to be small, and you can’t export.

“And so they’ve got this really unfortunate policy dilemma where they provide a singular connection standard for all customers, irrespective of the actual capability of the local network.

“So if you are on a completely constrained network element you will get the same network application and approval process as a person who’s on a network element that desperately needs more power.”

And this is where network stability and reliability can become compromised.

“If we play back what happened Australia Day weekend,” Gibbs says, referring to the outages in Victoria when the state’s “poles and wires” system (mostly substation fuses) was overwhelmed by record demand, driven by heatwave conditions.

“If I was a network, and I was subject to some adverse commentary in the press as a result of that, and forced to pay money as a recompense to those people affected, I’d be thinking very, very long and hard about saying, ‘Hang on, I never want that to happen again’.

“I want to be the business that offers customers a small incentive, financially, in known locations … because this is the point … those fuses fail in locations where they know the spare capacity is low.

“So I think the networks will, absolutely, flip that dialogue entirely.”

But Gibbs says he is starting to see evidence of that NEM dialogue “flip” happening on some parts of the grid, already – particularly in Victoria.

“By summer next year, I expect that some of (the networks) in Victoria, if not all, will be saying to customers ahead of an event like that: ‘here is a signal, a price signal, to avoid power consumption at this period of time. I would like to pay you some money to do that’,” he said.

“Now surely that’s a better dynamic isn’t it: ‘I’m a good guy, I get paid rather than beaten up in the press. I’d be prepared to pay the same money, maybe even more, if I come out of it as the guy that offered customers an incentive’.”

And while that is precisely what some of the more progressive retailers out there are trying to do – such as Powershop, with its Curb Your Power program and its new battery storage based VPP – Gibbs says that because of the current market structure, the outcome is not quite the same.

“For a retailer to offer a service in that manner to solve a network problem, it gets complicated, because they have to trade off their wholesale risk portfolio position and the incentive that they can afford to offer to change that,” he said.

“A network might want to pay $10 to achieve an outcome, but the retailer might say, actually, because of our hedge position, we don’t mind the price running up, driven by demand. So $10 won’t do it for me,” he said.

“What we would like to be able to do, and what we can do, is send location based pricing signals directly to customers to do something that’s in sync with market needs. Whether that’s a network need, a wholesale market need or whatever other need.”

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9 Comments
  1. Farmer Dave 6 months ago

    Interesting article, and I can understand the problems. It seems to me that the designers of the NEM have given us a system that is almost totally unsuited to the challenges in front of us. Just imagine if we still had the previous, government owned, vertically integrated utilities. There were no divisions between generators, networks and retailers to get in the way of offering innovative approaches to getting to 100% renewables. Instead, their owners – us taxpayers – could simply have told them to get us to 100% renewable electricity and to tell us how that could be achieved.

    • Hettie 6 months ago

      Re-nationalise the grid, by referendum. National ownwrship of the grid enshrined in the Constitution so that it cannot be sold again except by referendum.
      And there you have a model to take back all those essential services that have been sold off.

  2. Kevin Brown 6 months ago

    The MSM 24/7 new’s cycle is voraciously seeking content. Is there no entity who can put out details of those generator’s who are gaming the market and bidding up wholesale electricity prices? I am sure that the MSM would lap up these reports and those generator’s who have been gaming the NEM may be shamed into stopping their behavior.

    It would also be good if the MSM reported how the Tesla big battery is now being utilised to shave the generator’s extortionate prices for peaking demand.

    • Hettie 6 months ago

      Kevin, they all do it. It’s how they make their profits. That’s why they are so rabidly anti renewables, especially solar, because solar reduces the peak disparity between supply and demand, and then the big battery hops in to shave the peak even more. Too bad. They’ve been robbing us blind, not maintaining the coalers properly because they make such huge profits when one drops out.
      Sorry guys, game over.

  3. Greg Hudson 6 months ago

    IMO, all this talk of ‘gold plating’ is nothing but spin / total bullshit. *IF* the network really ‘was’ as gold plated as they say it is, there would not have been the substation fuses blowing out, and thousands of people without power in Melbourne. AND BTW… wasn’t this what the Tunbull Govt said was going to happen is SA? But it happened in Vic (say what) ?
    With the people of Vic paying gold plated prices, the distributors ‘should’ be supplying a gold plated service, but they are not. What we really get is not even copper plated, it is aluminium.
    Just my 2c worth…

    • Hettie 6 months ago

      Most of the upgrading of the infrastructure was done several years ago, when summer temperatures were not reaching the extreme highs that we are seeing now.
      The day of the Melbourne blackouts was extremely hot, so air con was going flat chat, and as with any overloaded circuit, fuses blew. Many of those fuses were not in the substations that take up a suburban house block, but in the small ones on top of power poles. Exposed to full sun on a blistering day, with unprecedented loads. People living in affected areas reported seeing and hearing the flash as the power failed.
      The upgrades were to provide for increased load, but apparently did not factor in increased ambient temperatures.

      • Greg Hudson 6 months ago

        G’Day Hettie. I live in Melbourne, and have experienced a 48C degree day (way hotter than the 30C+ something day we had when the fuses blew)… If the gold plating was not good enough at 30C+ I wonder what’s going to happen we actually ‘get’ a really hot (45C+) day?
        IMO we are getting the wool pulled over our eyes with regards the Gold Plating… It really is aluminium plating (not even as good as copper, let alone gold). All the more reason to ensure I get full ‘islanding’ when I get my battery, so I don’t have to put up with the incessant power failures (mostly caused by lack of maintenance to the transformers) and a few cars crashing into poles. Which is another bug bear… Why isn’t all power underground by now ?

        • Hettie 6 months ago

          Essentially most of your questions are above my pay grade, but I would hazard a guess that most of the wonky fuses blew that day and have been replaced. Maybe even it was a faulty batch. Such things happen with most manufactured goods.
          As to underground power, dunno about Vic, but in NSW new developments have underground, and some older suburbs where everything needs replacing the new gear goes underground. Basically it’s money.

        • RobertO 6 months ago

          Hi Greg Hudson, very simple answer to power underground, it’s roughly about 4 times the cable diametre size need to carry the current. It’s all about the heat in the cable.

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