30
Jan
2019

Learning the lessons of a power blackout near-miss

by Tony Wood


Published by the Australian Financial Review, Wednesday 30 January

The big challenge for Australia’s energy policy is to deliver reliable, low-emissions electricity at an affordable price. Last week’s heatwave in Victoria and South Australia showed once again why this is so difficult, physically, financially and politically.

On Thursday, midday electricity demand in SA reached 3200 megawatts, more than twice the average level, and stayed there until after 8pm. This demand was met from a mix of sources. In the middle of the day, solar and wind delivered around 40 per cent. As the afternoon progressed, wind and solar dropped off, gas stepped up and some power was imported from Victoria. Yet, a shortfall emerged. The market operator, AEMO, called on the backup it had contracted well ahead of summer, including diesel generators that kicked in from about 5pm.

In Victoria, widespread problems were avoided with the help of reduced consumption from Alcoa’s Portland smelter. Friday’s story was quite different. Again, high temperatures led to high midday demand – at more than 10,000 megawatts, around twice the average level. The combined contributions from wind, solar, hydro, gas and coal fell short. But this time AEMO’s contracted backup wasn’t enough. Rolling outages were ordered (what the industry calls “compulsory load shedding”), and around 200,000 consumers were without power at one time or another between 12pm and 3pm.

The political responses were immediate. The Victorian Energy Minister, Lily D’Ambrosio, was in a difficult position, having assured consumers on Friday morning, presumably on advice, that all would be well. Her response when it wasn’t was to condemn the unreliability of coal-fired power stations and call for a more rapid transition to wind and solar power.

The federal minister, Angus Taylor, saw the shortfall as a demonstration of the unreliability of renewable energy and the need for additional baseload power as his government proposes. There are elements of truth in both diagnoses, but also reasons to treat both responses with high caution.

A nasty problem

The primary contributor to Friday’s “load shedding” was the unavailability of three units of coal-fired generation in the Latrobe Valley. Had any one of them been available, the peak demand could have been met.

More solar power would have helped in the middle of the day, while the afternoon conditions were not ideal for wind power. A combination of more solar and wind, balanced with gas, storage and demand-response to ensure reliability, could have done the trick.

A new gas or coal-fired power station could have covered the gap. But a government-subsidised plant would probably then lead to the early closure of one of the other coal plants, eliminating most of the benefit. Further, such a plant, particularly coal, would make it much harder for Australia to meet its emissions reduction target.

It’s a nasty problem. People are entitled to be frustrated and angry. But what’s needed is a calm-headed, fact-based response devoid of political positioning and/or overreaction. Three important questions should be answered.

First, was it really necessary to carry out maintenance at this time of the year, and will ageing coal generators become less reliable than AEMO currently assumes? Or was this a very unfortunate coincidence? The answer may influence how AEMO secures backup, and how much it secures, in the coming summers.

Second, was the short-term demand forecasting inaccurate, and could the ultimate need for and location of load shedding have been much better communicated?

Finally, what cost would we be prepared to pay to avoid the events of last Friday? The answer to that question will be harder to quantify immediately after such events. And targeted backup such as local generators and batteries may be more cost effective than a single big answer.

There is some good news. Committed investment in solar and wind generation is forecast to ease reliability concerns over the next few years. The work done by governments, energy agencies and the industry since the 2016 statewide blackout in SA is making real progress. The next policy steps should integrate the answers to the above questions with this work.

It is clearer than ever the first priority is policy with a clear commitment to lower emissions and acceptable reliability to provide clear direction for investors. The two arms of the National Energy Guarantee would meet this goal. The second priority is to ensure that the basis for AEMO’s buying summer insurance balances benefits and costs. And third is the progressive deployment of new technologies that enable far better and quicker matching of demand and supply than we saw last week.

Climate change is a challenge created mostly by first-world economies. We need a first-world solution to meet it head on.