AEMO wants new rules to keep up with shift to renewables, rising temps

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AEMO says NEM is not fit for purpose any more, given changes to generation mix, uptake of solar and storage, and soaring temperatures that lessen reliability of conventional generation.

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The Australian Energy Market Operator is calling for broad changes to Australia’s energy market rules, saying they are not keeping up with the shift to wind and solar, battery storage, and rising temperatures that are making ageing coal plants less reliable.

In a new 72-page report underlying the rapid shift in Australia’s energy market, and particularly the uptake of rooftop solar and battery storage by households and businesses, AEMO says that the current rules are no longer fit for purpose.

“Based on the changes we see in the system, AEMO is concerned that the current market design is not sufficiently valuing resource characteristics of flexibility and dispatchability ….,” it writes in the report.

“… and that, in the absence of a market design change, sufficient investments in new resources or existing resources that provide dispatchable capability are unlikely to occur.”

The document is a summary of recent reports and is an endeavour by AEMO to put its case in one single proposal. It wants to kick off discussions on things such as day ahead markets, demand response, strategic reserves, and valuing flexible performance.

The AEMO report comes amid continued discussion about the National Energy Guarantee, and it makes it clear that despite its enormous complexity, and controversy over its design, the NEG addresses just a few aspects of Australia’s reliability and security challenges.

The report also comes just a day after the Australian Energy Market Commission released its annual assessment of the performance of Australia’s energy markets.

Media took the AEMC’s press release and comments by its CEO to focus on the changes in the energy system – more wind and solar, less coal generation – and how it was weakening the system.

The AEMO suggests there are multiple issues at play – the uptake of wind and solar, the rollout of storage, the use of behind the meter generation, changing temperatures – but insists these technology changes are opportunities rather than just negatives.

“The immediate future is expected to see growth in battery storage, pumped hydro, and connected and standalone micro grids and micro markets,” it says.

“Fortunately, many of the same changes in technology and resources that are creating challenges for system operations can also become solutions, if approaches to the market and regulatory conventions are re-calibrated to address the changed conditions.”

“Specifically, the advent of advanced intelligence in the networks, and increased levels of distributed energy resource investment that supports more elastic and flexible price responsive demand, can become an asset for supporting reliability in a more efficient manner if they can be relied upon by AEMO.”

But AEMO also focuses on the changing climate and the increasing weather impacts on the energy system – both because of the effect of heat on ageing coal generators, and on the increasing use of weather dependent energy sources such as wind and solar.

Australia’s coal and gas generator fleet has suffered badly in the past summer, with more than 50 sudden outages recorded, including more than 10 in the month of March.

“The climate is changing, in terms of temperature, and extremity and scale of weather events,” it says, noting that the Bureau of Meteorology says 2017 was Australia’s third-warmest on record and the country’s average mean temperature was 0.95°C above the 1961-1990 average.

Maximum temperatures were the second-warmest on record at 1.27°C above average, coming in behind +1.45°C in 2013. But the 2013 temperatures could now be the average going forward.

As well as this, the grid was becoming “peakier”, which lower minimums due to the so-called “duck curve” caused by increasing rooftop solar and steeper climbs to maximum temperatures – hence the need for fast-reacting dispatchable technology.

AEMO’s proposals have not been popular with some of the big energy players, some of whom question the need for day-ahead markets, for instance, and the use of strategic reserves and the interplay with existing markets.

The AEMC, which would have to approve any rule changes, has also different views on some of the mechanisms needed. But AEMO insists that markets – particularly the way they are designed now – may not provide the solution to all the problems.

“The NEM has served Australia’s energy customers well for many years, but, as with all markets undergoing transformation, it is appropriate to consider whether aspects of the arrangements continue to be fit for purpose, and reflect the dynamic and evolving needs of future energy customers,” it writes.

“This is particularly important at a time where affordability is a challenge for many energy customers, and satisfaction with value for money of electricity is down across most NEM regions.”

In other words, put two and two together. With the spectacular increase predicted in distributed generation and the uptake of solar and storage, and the emergence of micro-grids and the like, the threat is significant grid defection, on top of the load defection that is taking place now.

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  1. howardpatr 3 years ago

    Surprise, surprise, the fossil fuel industry lobbyist, Lord John Pierce, has had the AEMC’s CEO put out a press release and make comments to influence the media in the way the Coalition wants.

    As Reneweconomy said:- “Media took the AEMC’s press release and comments by its CEO to focus on the changes in the energy system – more wind and solar, less coal generation – and how it was weakening the system.”

    When might the AEMC and its Chairman be publicly scrutinised over its Coalition and ESB driven NEG? The AEMC has been and remains behind the eight ball when it comes to the renewable energy future.

  2. solarguy 3 years ago

    The duck curve is going to get deeper with time as more get solar, the utilities need to store this excess in batteries and sell it back during and after peak. That will solve some problems.

  3. John Saint-Smith 3 years ago

    I suspect we will see the head of AEMO rolling if she keeps up this blatant attack on the COALition.
    Australia’s energy and economic future is beginning to resemble the nation’s teeth.

  4. michael nolan 3 years ago

    more wind and solar will weaken the system…………if only we had some low cost storage alternatives for when there is excess wind like last Sunday, and excess solar like Saturday………oh wait, what if we built storage………like maybe pumped hydro and batteries…..

  5. Rod 3 years ago

    Sounds to me like the AEMC and the AEMO are banging heads and publishing conflicting reports..
    I’m pretty sure Audrey and John Pierce won’t be swapping Christmas cards this year.

  6. Mikeo100 3 years ago

    Does anyone know if there are any rules that would allow a new Federal Govt to come in and sack the board of the AEMC. Getting rid of Pierce and co, and replacing them with people with the same mentality as Zimmerman would have an incredible effect on the decarbonisation of the Aussie power sector.

    • neroden 3 years ago

      A new federal government could sack the board of the AEMC. I do not know whether it would require legislation or not, but it could definitely be done by legislation.

      • Mikeo100 3 years ago

        New legislation has problems, it would inevitably involve senate deals that might lead to unintended consequences. It would be far better if the energy minister could just dismiss the board. That said I’d imagine that if the CCA board – with Bernie Fraser throwing rocks at the govt all the time – were unable to be sacked, it’s unlikely that the AEMC board can be either. So new legislation might be required. The alternative might be for Labor and the Greens to adopt a hostile attitude to the current board thus encouraging them all to resign – much like the Coalition did with the CCA.

  7. Ray Miller 3 years ago

    Well AEMO effectively stating the current NEM rules are not fit for purpose is directly stating the AEMC is not fit for purpose! What a surprise! The AEMC needs to be urgently thrown over-board before they do any more costly damage.

    With the demonstrated unreliability of many of the coal and gas machines surely they “are” the considerable risk to the NEM, not the DER which is more like the solution.
    As Giles also points out the extreme temperature risk (and growing) over the vast area the NEM operates in has serious and expensive implications. Yet the temperature sensitivity of the NEM load is almost ignored by AEMO, apart from recognizing the operational nightmare operating the NEM machine is under the current rules and climate and consumer dynamics.

    “Every person in your company is a vector. Your progress is determined by the sum of all vectors.” — Elon Musk
    With vectors having magnitude and direction the NEM and its load is very far from all vectors aligning in the direction of the energy transition required by the planet. The non aligning vectors need to be either changed to align or dispatched quickly.

  8. riley222 3 years ago

    Storage is the area needing the attention of the best minds and funding to back up the best ideas.
    Snowy2 is a good start, smaller multiple hydro schemes next, a new Tassie link and pumped hydro utilising existing infrastructure in Tas , and encouragement of battery storage for existing and new solar panel owners.
    Difficult for the LNP, but unfortunately I really don’t have much optimism that Labor will do much better. Plenty of foot draggers there too when it comes to ensuring the move away from fossil fuels continues. Plenty of Union jobs under threat I think is the problem , we need a bit of lateral thinking in that area too.

  9. neroden 3 years ago

    AEMO is competent right now. AEMC is not.

  10. itdoesntaddup 3 years ago

    Does BoM know the difference between weather and climate?

  11. Jack Gilding 2 years ago

    The report is:
    AEMO 2018, AEMO observations: Operational and market challenges to reliability and security in the NEM, 20 Mar 2018
    “AEMO has published an analysis of the reliability and security challenges confronting us in the NEM and some steps forward for addressing them. The document flags the urgent need for the design and adoption of new market and regulatory changes that will ensure energy security and reliability and better customer outcomes.”—operational-and-market-challenges

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