ESOO 2020 – where have all the blackouts gone?

In late 2019, following a torrid summer or two and with dire forecasts of potential blackouts in Victoria if a couple of power plants didn’t get fixed up in time, the collective energy ministers of the NEM decided they needed to act. They told the ESB to work out how best to jack up reliability so that we didn’t have to worry about blackouts anymore. ESB duly delivered a new reliability reserve and are in the process of putting the squeeze on retailers to write more contracts with dispatchable generators.

But the new electricity statement of opportunities report (ESOO) published today by AEMO suggests these fears were somewhat overblown. As usual there is zero concern for Queensland and Tasmania. Victoria and South Australia, the “problem states” of recent years, are not forecast to breach the new tighter reliability standard, let alone the old one, for the next decade, as figure 1 below shows.

Figure 1 Expected unserved energy to 2028-29

Source: AEMO ESOO

On the face of it, the outlook for NSW is worse – although even there the old reliability standard is expected to be met, the figure shows the red line trending above the new interim reliability measure (IRM)from 2023/24  – following the closure of AGL’s Liddell coal plant. But a closer look at the small print is more reassuring: “While announced too late to be modelled, the New South Wales Government’s commitment to provide capital projects funding to 170 MW of dispatchable capacity under its Emerging Energy Program is expected to reduce expected USE to below the IRM in 2023-24”. AEMO also note that they haven’t included the HumeLink transmission augmentation because it has not yet formally received its regulatory approval. Assuming this does go ahead, it will allow Snowy 2.0 (expected 2025-26) to materially contribute to reliability. From 2029-30 on, Vales Point is expected to be closed and at this point a large new tranche of dispatchable generation will be required in NSW.

So, can we all breathe a sign of relief? Not quite – AEMO points out that there are still a lot of uncertainties in its forecasts – COVID impacts on demand and when new supply comes online are big unknowns. Plus it has to think about contingencies that can’t be directly forecast, such as the chances of one or more large old coal plants suddenly going off line, or extreme weather affecting supply or demand (beyond the 1-in-10 summer that it plans for). With these issues in mind, AEMO will still look to procure some emergency reserve resources this summer, at least for Victoria.

In a sign of the times, part of the ESOO is set aside to cover issues at times of minimum demand as well as the more traditional maximum demand. Victoria and South Australia are forecast to have periods of negative demand (i.e. distributed generation – mostly rooftop PV will exceed consumption). The grid is not set up to be secure and stable in situations like this where no large scale generation is required, so this is an issue.

There are many ways to tackle this issue. Some of the most effective in the short run require centrally orchestrated (probably the local distribution network rather than AEMO itself) shutting down rooftop PV. This is unlikely to go down well with the vocal solar lobby, so there could be conflict ahead. More positively, AEMO hold out the hope that with the right regulatory and market settings, such periods would serve as signals to increase demand – e.g. charge up electric vehicles.

As always, the ESOO demonstrates how hard it is to make predictions, especially about the future. But the outworkings of this uncertainty are that emergency reserves are required to ensure we get through the summer even though the central estimate of reliability alone may not warrant it. Large users (in Victoria at least) who are starting to dread the arrival of their Q1 electricity bills where their share of reserve costs get added have another expensive summer to look forward to.