The hidden cost of the SA electricity island

A normally invisible service to manage power quality in South Australia has emerged as a multi-million dollar cost following the islanding of the state from the main body of the National Electricity Market (NEM) early last month.

When South Australia was suddenly cut off from Victoria following a major storm on January 31, the immediate challenge was to avoid another statewide blackout.

The state’s renewable generators were exporting at the time, and suddenly hundreds of megawatts of electricity had nowhere to go, pushing up the electricity frequency in the state to the edge of the safe operating range.

With that crisis narrowly averted, the enduring problem over the next two weeks was to keep the lights on using only South Australia’s high renewable/ low firm generation electricity system.

Big surges and drops in renewable generation proved a handful, but the market operator managed it successfully until the transmission line was reconnected to Victoria on February 17.

Reports today in The Australian newspaper have revealed the cost of this exercise: around $93 million, not in supply of electricity, but in Frequency Control Ancillary Services (FCAS) costs.

FCAS is a service provided by big generators and batteries to maintain the frequency of the grid at 50 hertz. This refers to the constant alternating current (AC) wave humming through the grid all the time., For the safety of the system it is absolutely critical that this does not deviate from the magic number of 50 hertz.

To ensure this generators and batteries sell FCAS services to the market, which means they push power in and out of the system to regulate or manage the size of the wave, They bid into the FCAS market to provide this service.

FCAS has historically been invisible and ubiquitous, provided by most large coal fired power stations for a small, nominal fee.

But this over-supply tightens dramatically in a high renewables grid. In the ever revealing South Australian renewables experiment, FCAS providers became much more scarce when the state was islanded.

Over the 18-days when the South Australian grid was cut off, FCAS serves cost a massive $93 million.

To put this in perspective, the entire wholesale market in South Australia uses  around 12 terawatt hours annually, worth around $1 billion a year. The actual value of the electricity sold in South Australia over an 18 day period is typically worth only around $43 million.

It is estimated around $40 million of the inflated FCAS revenue went to battery owners in South Australia, suggesting they perhaps may not be the saviours of the state’s economy as some like to paint them as.

Large scale batteries, like the one at the Hornsdale wind farm, make most of their money out of selling FCAS services.

The cost of the FCAS bill will be shared between consumers and generators. It does suggest some serious thinking needs to go in to how this type of service needs to be delivered in a decarbonised future, and how easy it is to inflate the price of services like FCAS under extreme conditions.