South Australia separated from the NEM!

04 Feb South Australia separated from the NEM!

The South Australian (SA) region has been separated from the remainder of the NEM regions due to the destruction of the main alternating-current (AC) interconnector between SA and Victoria (VIC).

What occurred:

  • On the 31st of January 2020 during wild storms that lashed eastern SA, western VIC, the 500kV main (AC) interconnection cable running through southwestern VIC was disconnected due to transmissions towers east of Heywood (Victoria) and west of Geelong (Victoria) collapsing in damaging storms and extremely strong winds.
  • When this occurred,
    • Interconnection flows quickly swung from exporting MW’s into VIC, to importing MW’s into SA.
    • Alcoa’s Portland aluminium smelter tripped which only exacerbated the problem,
    • A handful of wind farms were cut off from the market including McCarthur Wind Farm (420 MW) in Victoria, and the three Lake Bonney Projects in South Australian (~278.5 MW)

What does this mean:

  • Basically SA has been left to fend for itself, cut-off from the rest of the NEM
  • All MW’s (majority of all, with the small Murraylink direct-current interconnector still available) and frequency control services must be sourced from SA, locally.
  • Currently all SA generators are running hard and optimising portfolio’s for frequency control services (FCAS) prices rather than regional reference prices (spot price)
  • Additionally, a vast majority of gas-fired generation units including, Osbourne GT, Pelican Point, Torrens Island A and B units have and continue to receive market intervention notices from AEMO requiring them to be online
    • This is adding to the oversupply in the region with wind generation quite strong for this time of the year,
    • Not to mention, the wind generation, being a variable generation type, is not helping from a forecast perspective for AEMO, adding to the FCAS costs and requirements in the SA region.

Solution:

  • AEMO have indicatively provided a two week return time off the back of AusNet’s (interconnector owner) initial assessment and action plan to fix the interconnector.
  • AusNet’s solution is to construct temporary interconnection with power poles and lines to have arrived on site yesterday (03/02/2020).

Current weather forecast and impact on spot price:

  • Currently temperatures are set to be relatively mild for an SA summer at this stage.
  • However, temperatures are expected to reach the late 20’s and early 30’s towards the end of the week, historically, temperatures at these levels have encouraged higher demand and the need for imports from VIC, which will not be possible with the largest interconnector between the two regions out of action.
  • Although we are seeing some extreme lows in spot price, there is the possibility we could see some extreme highs. It is dependent on:
    • AEMO’s intervention in the market with AEMO issuing FCAS targets to participants in the realm of $300/MWh for raise and lower services (due to the inability to source FCAS from outside of SA), and
    • Generators potentially looking to spike spot prices or increase the spot price with no doubt, gas generator running costs no doubt increasing every MWh the interconnector is out of action.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.