Energy market transformation
The Australian National Energy Market (NEM) has been swift in its implementation of some of the Finkel Review recommendations. The new Energy Security Board has been established to oversee the whole system transformation. The Australian Energy Market Operator (AEMO) has also recently announced its own Expert Advisory Panel (EAP) to advise on key initiatives from the review. This panel consists of leaders from the energy industry and is chaired by Ms Chloe Munro who was a former chair of the Clean Energy Regulator and a panel member for the Finkel review.
The Australian Energy Market Commission (AEMC) has announced new rules to ensure grid security which gives AEMO and the networks more power to use alternative methods, such as batteries, for inertia and frequency response. Following this AEMO and the Australian Renewable Energy Agency (ARENA) have announced that it will be trialling the use of a wind farm to provide power system stability services. The trial will assess if the wind farm can provide Frequency Control Ancillary Services (FCAS) services which can be traded via the NEM whilst being remotely controlled by AEMO.
Closure of Liddell coal generator in NSW
Causing a furore in government and the press is the planned closure of the 1600 MW Liddell black coal power station in 2022. The current conservative government are calling for the plant to stay open for another 5 years to provide ‘needed’ peaking and baseload power. This is contrary to the owner, AGLs view, who have stated that to keep the power station open is uneconomical and that the aging coal plant cannot be relied upon to provide peaking services.
CEO Andy Vesey has this week announced his companies plans to replace Liddell with a package of new gas capacity, 250MW battery, 100MW demand response, upgrade of nearby Bayswater coal plant and 700MW of wind and solar generation. The full plans will be presented to government in December.
Denmark – coming or going?
Two different kinds of stories coming out of Denmark this week; looks like the country can’t quite decide whether it wants to be at the cutting edge of energy transition or not. The good news is that wind, solar and interconnection imports now form a reliable enough combination that the Danish grid no longer needs to keep conventional thermal power plants on standby to provide ancillary services. According to Anders Pallesen from Danish TSO Energinet, ‘Going forward, it will only be necessary to have the central power plants operating if the grid is already weakened due to transmission lines or central components being under repair’. The bad news is that sales of electric vehicles (which could have provided further stability to the grid with the right technology and policies, not to mention reducing carbon emissions) have been hit by the combination of the introduction of a sales tax on EVs in 2016 followed by a cut in the rate of tax on all cars a few days ago. The combination has made petrol and diesel cars cheaper while increasing the price gap between these and EVs.
e-Energy Declaration – political intent, but what about delivery?
EU Energy Ministers met in Tallinn in Estonia in late September and signed up to an e-Energy declaration calling on the European energy sector to push ahead with digitalisation. This move falls under the aegis of Estonia’s Presidency of the EU, reflecting the role of the digital economy in that country. The Declaration does not offer anything new in terms of concrete programmes or funding but does commit Member States to ‘work towards developing Digital Energy strategies’. Of course, for the UK the issue is whether it will continue to embrace this agenda post-Brexit.
Hurricanes Harvey and Irma caused widespread damage and misery too many islands and southern states in the US. Analysis by Michael Klare, highlights how the US military played a key role in the emergency operations that followed, arguing that as the planet heats up, the US will face an existential crisis that will require a new, largely non-military strategic posture that puts climate action above other geopolitical priorities.
One impact of the hurricanes was on the power sector, with millions left without power and a recognition that it will take a long time to rebuild much of the electricity infrastructure. In thinking about resilience, the Rocky Mountain Institute have a story on how this could be improved by replacing centralised fossil fuel generators with renewables, efficiency, demand response and other DER’s – pointing to studies that show that greater reliability and resilience can be achieved this way and at lower costs. Several examples of increased resilience through DERs are provided along with examples of economic and wider benefits for taking a more distributed approach. Meanwhile, in Puerto Rico, it’s estimated that only about 5% of the grid is currently operating and that it could take as long as 6 months to get all the residents back on the system. As a way to bring some relief, Telsa is offering a DER solution by sending hundreds of battery storage packs to the island.
Following on from the above story and in complete contrast to it, the US energy sector is reflecting on a DOE market intervention from last Friday. This essentially seeks to shore up the coal and nuclear industry which are under threat of retirement in the face of competition from cheaper natural gas and renewables, by proposing that generators that can store up to 90 days of fuel supply on site being able to get ‘full recovery of costs’. This idea has it foundations in the Trump government aims to support the coal industry and can be traced back to Rick Perry’s grid reliability study in August 2017 and the ongoing political rhetoric on the issues of reliability and resilience in the power sector – which they are now framing in terms of national security.
To try and make this happen the DOE has issued a Notice of Proposed Rulemaking to enhance grid reliance to the Federal Energy Regulatory Commission (FERC), directing them to act on this issue within 60 days. Such a change would be the biggest overhaul of competitive markets since their introduction and needless to say has led to some serious debate from across the energy industry. Unsurprisingly the nuclear and coal industry are very supportive of the idea, whilst people in other sectors and former regulators see it for what it is – a proposal that aims to shore up uncompetitive baseload generation, rather than preserving power supply. Many critics highlight that it will increase customer costs and power sector pollution and actually do little to enhance system resilience. There is some detailed feedback from the industry in this Utility Dive analysis, including the complete lack of evidence on what specific elements of resilience are essential to the system and then how best to procure it.
In a link to above story, it is also highlighted that securing fuels supplies will do nothing for grid outages. In Puerto Rico much of the generating plants remain operational, but the transmission and distribution grids are down, so the islands remain out or power in most areas – 90 days of fuel supply will do nothing in this example.
Its early days for this tactic from the US Government and it remains to be see how FERC respond. Many think the wording is too vague and unworkable, one to watch.
Brazil renewable Growth Continues at Pace
In mid-September the Brazilian state-owned energy firm EPE announced that over 77 GW of projects had registered for the next two rounds of renewable energy auctions. In total 2741 projects have registered, 1900 of them are for wind projects totalling 52 GW of capacity. Solar is the second most popular technology with over 18 GW of capacity proposed. Solar in Brazil is increasing rapidly, with installed capacity expected to exceed 1 GW in 2017, which is remarkable, given at the start of the year there were only 100 MW. In 2014, the Government anticipated in its 10 year plan that until 2023 more than half of all new investments in new power supply would be for renewables, excluding large hydro, with a total cost of $50 billion.
China Renewables Expanding Offshore
In early September the New Development Bank, signed a RMB 2 billion loan ($300 million) with the Republic of China for a 250 MW offshore wind project in the province of Fujian. This is the first offshore wind project funded by the bank, which was established by Brazil, China, Russia, India, China and South Africa (the BRICS) in 2014. The first President of the Bank, K.V.Kamath, has said that 60% of its funding will be for renewable energy. So far, in total nearly $3 billion in loans have been awarded for 11 projects, of which $1.4 billion have been for seven renewable or energy efficiency projects. The Chinese announcement is further good news for the offshore wind sector, as in September in the UK, the price guarantees for the latest round of auctions were announced at between £57.40-74.75/MWh, which is a remarkable 50% below the similar auction in 2015, which itself was a significant fall from the contract prices of £140-150/MWh awarded in April 2014.