Published in the Australian Financial Review, January 3, 2020 It’s been a brute of a summer, and we’re only a third of the way through. Record high temperatures and dry conditions have fuelled bushfires across the continent. The scale of the carnage has dominated public discourse. Summer heat waves also test the limits of the electricity system. Extreme heat curtails the performance of the grid, while at the same time driving sharp increases in electricity demand. Managing this double whammy of curtailed capacity and higher demand will only get more challenging as the summer calendar fills with more extreme hot days. The simultaneous transition to increased renewable generation is unlikely to make managing this any easier. Australia’s electricity usage is shaped by the weather. The mostly temperate climate across the populated south-east and west encouraged 20th century developers to build large, open and energy inefficient homes. By the 1990s most of these dwellings had been fitted with air conditioners, using electricity instead of design to moderate weather extremes. As a result Australian households have a peaky demand profile by international standards: low in spring and autumn, higher in winter and summer spiking dramatically in extreme temperatures. In the 20th century the operational solution was simple: a network of stand-by gas peaking generators were ready to switch on, sometimes used for just a few hours a year. This burst of additional electricity was augmented by large scale demand management: getting some of the largest industrial customers to switch off during the heat. The National Electricity Market was designed around heat waves. Maximum wholesale prices of nearly $15,000 MW/h (they’re normally around $80) are a way of ensuring these back up generators can earn enough from their infrequent, but critical cameo roles. If you want to increase reliability, as Energy Ministers requested late last year, then the simplest way is to increase the maximum spot price in the electricity, which creates a financial incentive for more peaking generation and more demand management. This elegant 20th century heat wave management system is now being undermined by poor policy and climate change. The heat waves and their impact on demand and the system are becoming more frequent and intense, while the foundation of coal fired generators on which this system was built are retiring. Summer has three unofficial phases in the electricity world. There’s the first weeks of December where temperatures are still rising while commercial and industrial activity, which accounts for more than 70 per cent of total demand, starts to dial down ahead of Christmas. It’s a lower risk period because there’s increasingly more spare capacity to handle weather extremes. Even so, the pattern of 40 degree plus maximums across south-eastern Australia this summer has pushed electricity demand towards record peaks in South Australia and Victoria. The second, lowest risk phase is right now, during the Christmas-New Year break. This is when Australia is either at the beach or this summer with lower demands on the system. The highest risk period is yet to come: when businesses progressively return to work through late January while the high summer temperatures roll into February and March. Heat waves have a cumulative effect on electricity demand with each additional day. As buildings retain more heat, air conditioners have to work harder to maintain the same temperature. Demand on the fourth day of a heat wave is typically higher than on the first. Demand is also higher during the week than on weekends. Conversely the performance of almost all parts of the electricity system, thermal, renewable and transmission, declines under extreme heat. Coal and gas plants become harder to cool as the temperature gets hotter, requiring them to reduce output to remain within safe operating limits. Some transmission lines sag so much in high temperatures they have to reduce the power they can transport. Solar panels reduce output by between 10-25 per cent in extreme temperatures. In the recent December heat, some wind generators significantly under performed, prompting the market operator to issue an urgent “please explain” to their operators after the last heat wave in December. Whether this is due to the turbines tripping off in high temperatures to protect their internal mechanics, increased transmission congestion or unexpected variances in wind speeds is still unclear. It’s another live experiment in managing an increasingly renewable-based grid under extreme heat conditions that we probably need to sort out pretty soon. As Australia rolls back to work later this month, we are likely to learn more about how challenging it will be to manage an increasingly weather sensitive electricity system. If extreme heat is to be a more permanent feature of the already long, hot Australian summers, then that’s another risk we will need to manage in the transition to a decarbonised system.