Wind and solar replace coal in South Australia. But will the lights go out?

South Australia is about to go coal-free, and by the end of the year it will be supplying half of its energy needs from wind and solar. Depending on what you think of renewable energy, this is either another big step into the future, or the beginning of the end of the world as we know it.

The imminent closure of the Northern brown coal power station will signal the last of coal-fired generation in the state. It was to happen in March, but it seems the date has been put back to May 8.

The plant’s owners and operators haven’t said exactly why the closure has been put back two months, but the presumption is that since they dug up a lot of coal from its now closed Leigh Creek coal mine, they have decided they might as well burn it.

The closure of Northern means that the state will rely on its 1,500MW of large-scale wind farms and 680MW of rooftop solar for half of its electricity needs. For the remainder, a collection of gas generators and the interconnector to Victoria will provide the power.

That share of wind and solar will grow steadily in coming years. The Australian Energy Market Operator says the state is “leading the world.” Even Premier Jay Weatherill describes it as an “experiment.”

But will it be a burden of an opportunity? Fossil fuel interests and the pro-nuclear lobby – with the support of much of mainstream media – predict a catastrophe, and appear to wish it to fail. The people who run the grid, the Australian Energy Market Operator, with the possible exception of its CEO, say that it is really not an issue.

A new report was released on Friday by AEMO and South Australia transmission operator ElectraNet and it says – quite clearly – that it is pretty much business as usual. But for a few extreme and incredibly unlikely events that it is obliged to assess, the network is not going to fail. The world is not going to end.

“AEMO has not identified any system security challenges that cannot be managed through existing processes and procedures,” it says.

In other words, there is nothing to worry about. And there is as much chance of a failure in a system with no coal and lots of renewables as there has been in the last couple of decades, when there was lots of coal and no wind and solar.

But that’s not the impression you would get by reading mainstream media and watching some mainstream TV. The Australian Financial Review, which has adopted a particularly hard-line anti-renewables stance, went big on the assumed costs of yet another doubling in network infrastructure.

The AFR quoted AEMO chief executive Matt Zema as saying that the growth of renewables could require “billions of dollars” of investment, that the whole network may need to be duplicated, or possibly torn down.” Interesting.

That is an extreme view and not one represented in the report. Zema is not regarded by the renewable energy industry as a great supporter of their technology, and indeed AEMO went into damage control when queried about his comments by RenewEconomy.

It wasn’t the message they were trying to get across, we were told. “He (Zema) listed a number of other options that were not reported,” AEMO said. Among them, they insisted, was the obvious and cheaper solution of battery storage.

The Energy Supply Council, which represents the fossil fuel generators, also jumped in the game, saying that the report “highlighted the increased risks” of renewable energy generation.

It may be that the ESC – which represents the grim flip-side of the “pro-renewable” public image of AGL and Origin and others – wishes it would, but the report says no such thing. “I can confirm the 2016 report suggests there is no increased risk,” an AEMO spokesman said.

Chris Davies, the head of renewable energy management at AEMO, says there are no technical problems. “The system is secure and we can maintain security,” he told RenewEconomy in an interview on Friday.

Which is not to say that everything is the same. Davies said operating a grid with a high level of renewables is as much a cultural issue as a technical one. It means a different way of doing things. “And we have seen more changes in a short period of time than we have seen historically.”

The study gives two examples of when an extreme event might occur. One is a day when solar PV is producing at near capacity, more than 480MW, and there is no wind, very little demand, no price spikes for gas generators to operate, and the balance of supply comes from Victoria.

In other words, it would require a “bloody hot” day with no wind blowing and somehow no one has thought to turn on their air-conditioner. And then this must coincide with an event when most gas plants and both interconnector links are unavailable. It’s a remote possibility, in the short term, but one that AEMO says it is obliged to consider.

“That’s our job,” says Davies. “The intent of this work is to look at the extremes of system – and test it to breaking point.”

It may just be, thought, that such events do occur in about 10 years time. That’s when AEMO suggests that all day-time demand may be covered by solar PV. By then, though, you would assume they would have begun to integrate battery storage at grid level. They’ve given themselves plenty of warning.

Events that cut the connection to Victoria do happen – nine times since 1999, in fact, and most recently in November last year, when supply was lost for less than an hour. This was despite the presence of coal generation, gas, and wind. Having fossil fuels does not prevent an outage when other things go wrong.

That event in November coincided with another issue in South Australia, which is the loading of “off-peak” hot water, which is automatically switched on around 11.30pm, adding nearly 200MW of demand in a few minutes.

It is a legacy issue of having large coal generators in the system with little demand at night. But this can be addressed by changing the timing of the meters. AEMO is urging the local network operator, SAPN, to use funds granted for that program to go ahead and do it.

That is one solution. Another input into that event was the presence of “non scheduled” generation from smaller wind farms, which presented 75MW of extra output in short order. That issue has now been addressed by making these wind farms “scheduled”, meaning that AEMO is now aware of their planned output.

Another issue that frequently arises is the accusation that South Australia has the highest wholesale prices in the country, and that wind and solar are to blame.

This is a gross distortion. South Australia has always had high wholesale prices, thanks to its past reliance on expensive gas peakers and Victorian imports, and these prices have actually fallen since more wind and solar meant less gas and less imports.

In fiscal 2015 however, the state’s average wholesale price was $39/MWh, some 25 per cent cheaper than Queensland ($52/MWh), which has no wind energy.

Why was that? Possibly because Queensland relies on gas and its market is dominated by two players – both state-owned generators, who control two-thirds of the market and whose bidding patterns have resulted in big jumps in wholesale prices. The added costs dwarf the cost of subsidies to rooftop solar.

The withdrawal of Alinta and its coal stations means that the South Australian market will be also be dominated by two players – AGL and Engie, which will control 75 per cent of the dispatchable market through their gas generators.

That may eventuate in price spikes, and is what is making large energy consumers fret. Prices rise because gas is expensive, and market dominance means the ability to control the price.

It is an issue, also, for the market for ancillary services, and one reason why AEMO is looking to broaden the options, including sourcing such services from wind farms. But it is a market issue, rather than a technical one.

Indeed, AEMO says the provision of services will be dictated by market factors, and that is the responsibility of other market regulators. It would like to be able to source ancillary services such as voltage, inertia and frequency from as many players as possible. Wind farms might actually be one possibility.

Battery storage, however, appears to be the most likely solution for South Australia, and probably a lot cheaper than building another inter-connector. In Germany, battery maker Younicos says it can provide the ancillary services for the entire grid at a much reduced cost.

Another possibility is to install solar towers with molten salt storage. These plants, operating in Spain for five years, and now being built in north and south America, and northern and southern Africa, provide “base load” or dispatchable power, and at far less cost than the other clean energy alternative, nuclear.

And they will not require the massive grid upgrade and extension that a nuclear plant would require. Indeed, it should be pointed out that South Australia is using the interconnector a lot less than it did before wind and solar.

Ergon is already installing grid-based storage that it says helps it accommodate more renewables and cut network operating costs by one-third. ElectraNet and AGL and others are looking at installing the largest battery storage system in Australia as a fore-runner for the new grid of the renewable future.

This transition to new technologies is the huge opportunity that Weatherill is identifying. If Australia can master this, and there is no reason why it cannot, it can lead the world – as it already has in off-grid and micro-grid technology.

“We are running a big international experiment right now,” Weatherill said. “We have got a long, skinny transmission system and we will soon have 50 per cent renewable energy, including a lot of wind and some solar.

“We need technology breakthroughs for large-scale storage, such as pumped hydro or batteries, but these are massive technological challenges that are exciting opportunities for the state.”

And as for energy security and reliability, this is not just a test of the renewables industry and battery storage, it is also a test of the market operator and other regulatory authorities and their ability to do their job. The world is heading rapidly in that direction. Australia has the chance to lead.