Clean Energy Regulator Releases 2017 Surrender Percentages

The Clean Energy Regulator has released the 2017 environmental certificate requirements. The number of Large-scale Generation Certificates (LGCs) which must be surrendered each year is fixed. However, the surrender percentage depends on the expected consumption of electricity across Australia less any applicable exemptions for energy intensive trade exposed industries.

The surrender percentage for LGCs in 2017 is set at 14.22%. This is higher than the 2016 surrender percentage of 12.75%, but lower than what was widely expected in the market.

The STC percentage was set at 7.01% which is lower than the 2016 target of 9.68%. Each year, the Clean Energy Regulator must determine how many STCs will be created during the year and divide this number by the amount of power expected to be consumed. With the rate of installation of solar PV in decline and electricity demand increasing, the STC percentage is lower. It was widely expected that the percentage would be lower in 2017 than in 2016, though not to this level. Earlier in the week we saw the price of STCs fall from the clearing house price of $40.00/certificate to $39.90/certificate. This is the first time since April 2016 that the price has fallen below $40.00/certificate.

All consumers who has been accruing STCs and LGCs should be checking with their retailer on how they are going to recover their accrued amounts.

If you wish to discuss your energy needs with Edge or learn more about how we can validate your bills from first principle please feel free to email us at admin@edgeenergyservices.com.au

The Australian Energy Market Operator (AEMO) has released its final report on the South Australia (SA) region black system event on 28 September 2016 (Black System). During the event some 850,000 SA customers lost electricity supply, affecting households, businesses, transport and community services, and major industries.

In the report, AEMO notes that with less synchronous generation online, the electricity system is experiencing more periods with low inertia and low available fault levels. This is making it increasingly difficult to keep the system secure. It is no longer appropriate to rely solely on synchronous generators to provide essential non-energy system services (such as voltage control, frequency control, inertia, and system strength). Instead, additional means of procuring these services must be considered; from non-synchronous generators (where it is technically feasible) or from network or non-network services such as demand response and synchronous condensers.

AEMO has already released three preliminary reports describing the events on 28 September 2016 and the immediate actions undertaken.

AEMO’s final report has 19 recommendations, 3 of which have already been implemented.

System Event

On Wednesday 28 September 2016 tornadoes with wind speeds in the range of 190–260 km/h occurred in areas of South Australia. Two tornadoes almost simultaneously damaged a single circuit 275 kilovolt (kV) transmission line and a double circuit 275 kV transmission line, some 170 km apart. The damage to these three transmission lines caused them to trip, and at 4.16pm a sequence of faults in quick succession resulted in six voltage dips on the SA grid over a two-minute period. As the number of faults on the transmission network grew, nine wind farms in SA exhibited a sustained reduction in power as a protection feature activated. For eight of these wind farms the protection settings of their wind turbines allowed them to withstand a pre-set number of voltage dips within a two-minute period. Activation of this protection feature resulted in a significant sustained power reduction for these wind farms. A sustained generation reduction of 456 megawatts (MW) occurred over a period of less than 7 seconds.

The reduction in wind farm output caused a significant increase in imported power flowing through the Heywood Interconnector. Approximately 700 milliseconds after the reduction of output from the last of the wind farms, the flow on the Heywood Interconnector reached such a level that it activated a special protection scheme that tripped the interconnector causing it to go offline. The SA power system then became separated (“islanded”) from the rest of the National Electricity Market. Without any substantial load shedding following the system separation, the remaining generation was significantly less than the connected load and unable to maintain the islanded system frequency. As a result, all supply to the SA region was lost at 4.18 pm, resulting in a ‘Black System’.

The first round of customers had power restored by 7.00 pm the same day. Approximately 90% of load in SA had been restored by midnight. The remaining load was gradually restored as fallen transmission lines were bypassed, and all customers had supply restored by 11 October 2016.

Findings of the investigation

AEMO published a number of findings from the investigation. Critically it found that the wind farms were able to continue operation throughout the grid disturbances, and it was only the control system setting which caused them to turn off. Changes made to the turbine control settings shortly after the event has removed the risk of recurrence given the same number of disturbances. AEMO was not aware of these settings and they note that access to correct technical information is critical for system security.

The investigation found that if the wind turbines hadn’t switched off the Black System would have been avoided. AEMO cannot rule out the possibility that later events may have caused a black system, despite not being aware of any system damage that would have led to this.

In order to maintain a secure system, AEMO must have sufficient inertia in the system as well as frequency control and voltage stability.

AEMO recommendations

Following the Black System event, AEMO has come up with 19 recommendations to minimise the risk of SA being islanded and if so, can continue to operate if this occurs. These recommendations are in addition to operational changes which have already occurred. As mentioned, the windfarms have already changed their control setting to allow many more ride-throughs before switching off. They are also working to keep AEMO informed of any changes to control settings. The Heywood Interconnector is not running to as high capacity as previously operated to allow for more contingency. AEMO also require a minimum number of on-line synchronous generators in SA.

AEMO’s recommendations are summarised below. Of the 19 recommendations the following are likely to have the largest impact to the National Electricity Market.

• Stricter licensing of new generation
• AEMO to assess options for improved forecasting of wind speeds which can cause windfarms to cut out (not a feature of the blackout event)
• AEMO to modify operational procedures for SA island operations
• AEMO to support ElectraNet in reassessing control strategies to achieve very rapid switching of reactive plant to manage the risk of severe over voltages in SA that might occur due to large levels of under frequency load shedding following separation.
• AEMO to put in place more rigorous processes to monitor weather warnings for changes to forecasts, to trigger reassessment of reclassification decisions where relevant
• AEMO to review and implement, following consultation, a more structured process for reclassification decisions when faced with power system risks due to extreme wind speeds.
• AEMO to investigate a better approach to ensuring that the minimum stable operating levels of generating units are taken into account in the dispatch process
• AEMO to review market processes and systems, in collaboration with participants, to identify improvements and any associated National Electricity Rules or procedural changes that may be necessary to implement those improvements

AEMO plans to complete its recommendations by December 2017 but note that this may not be achievable subject to consultation time.
The full report can be downloaded here

The South Australian Government released their plan for their energy future. It contained a number of new strategies including:

• 100 MW battery farm
• 250 MW gas fired plan for emergency use only
• 200 MW of emergency plan until the gas plant can be brought online
• Local power to direct plant and the interconnectors with Victoria
• Energy Security Target under which a portion of electricity must be sourced from within South Australia
• South Australian Gas Incentives which would provide an additional $24 million for local gas exploration which would primarily be made available for South Australian consumers

The South Australian Government is also planning to tender its consumption to allow a new private generator to be built. Part of the tender would require a synchronous renewable generator to be built.

Currently the policies are vague in detail though an expression of interest for the battery storage has already been issued with responses expected by 31 March 2017.

Edge continues to monitor the announcement to assess the impact on the market. Further analysis will be posted once details are released.

Engie announced on 3 November 2016 that they would close down their 1,600 MW Hazelwood power station in March 2017. The markets have reacted to the news of the closure by increasing the forward cost of electricity across the National Electricity Market.

The outlook from the Australian Energy Market Operator (AEMO) is not looking good for Victoria. If the state experiences hot weather next summer there may not be enough generation available to meet peak demand without further load reductions. Their medium term outlook is published at least weekly and the most current to 17 March 2017 shows that the 2017-18 summer could see reserve shortfalls if there is a warm summer.

Table 1: Medium Term Outlook for Victoria
Source: AEMO

Currently seven of the eight units at Hazelwood is running. Unit eight came off on Sunday 12 March 2017 with an unplanned outage citing a boiler leak. This would not have been part of the shutdown plan but boiler leaks can usually be repaired within a few days so Engie might have decided that it is not worth bringing back on.

The current plant is to take three units out of service on 27 March 2017, another three the next day and the final two units on 29 March 2017. Following this there will be a decommissioning of the plant and a rehabilitation of the site including the mine which can take up to four years.

Hazelwood is a source of heavy pollution in the electricity market and is part of an older generation of technology which needs to be replaced in order to reduce carbon emissions. It has been a very cost effective and reliable source of power for the past 52 years helping to stabilise Victorian power prices and provide support to the rest of the market since interconnection. It will also have a profound impact on the people working in the region.

The Australian Energy Market Operator (AEMO) published their Gas Statement of Opportunity on 9 March 2017. It highlighted that there could be insufficient gas to meet demand from both industrial users and power generators. The report highlighted that there could be insufficient gas as soon as the 2018-19 summer.

Following this report, the Prime Minister held a meeting with nine company leaders on Wednesday 15 March 2017. The gas companies committed to increase domestic supply if needed to meet demand. The Prime Minister is quoted as saying that the gas producers ‘understand the absolutely critical importance of maintaining their social license to be doing business in Australia’. He stressed that the Federal Government wanted to see the market come up with a solution but would not shirk from measures which would ‘protect Australian businesses, jobs and families’.

Yesterday the Federal Government announced funding to conduct a feasibility study into expanding the Snowy Hydro Scheme by adding an additional 2,000 MW of pumped storage hydroelectricity. This additional storage was part of the original design of the Snowy Hydro Scheme but considered unnecessary at the time. The feasibility study is scheduled to be completed by the end of 2017 and if the study is successful the upgrade could be completed as early as 2022.

The use of pumped storage hydroelectricity will add additional capacity to the system but no additional energy. It requires nearly double the amount of energy to push the water up to the higher dam than the amount of energy that is created when released into the lower dams. With New South Wales and Victoria suffering from lack of energy it is difficult to see where the additional power will come from to make this efficient.

Pumped storage hydroelectricity presents a number of desirable properties to the current energy market. It is the only true fast start synchronous technology. Wivenhoe pumped storage hydroelectricity in Queensland can go from being completely offline to 500 MW synchronised and providing frequency services in 11 seconds. For comparison, the best gas generator takes 8 minutes to start up and another five minutes to synchronise.

Pumped storage hydroelectricity will also be able to provide frequency control services even while not generating power. By keeping the turbine spinning but not converting to electricity it can be used essentially as a fly wheel while consuming virtually no water.

Hydros (pump storage and otherwise) typically have a normal operating life of around 100 years though truthfully no-one really knows what will make them stop working. They can also store a large amount of energy economically. Unlike a battery which will typically only be able to store energy for 1 to 2 hours at maximum capacity, a pumped storage hydroelectricity generator is only limited by the size of the upper dam capacity.

The other potential benefit of the Snowy Hydro development is in support of Australia’s Renewable Energy Target.  Whilst pumped storage hydroelectricity is not a renewable source of generation, other parts of the Scheme (run of river hydros) is. If adding pumped storage hydroelectricity to the current run of river scheme is considered a major upgrade, the baseline for the run of river could be reset to zero. This means that the Snowy Hydro scheme would generate an LGC with each MWh of generation. This will be equivalent to approximately 6,500,000 extra LGCs coming into the market, or almost 20% of the total target of 33,000 GWh. Perhaps this is part of the Federal Government’s plan behind meeting the Australia’s Renewable Energy Target.