Wind Power Debacle: South Australia an International Joke

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South Australia is, thanks to its ludicrous attempt to run on sunshine and breezes, now on the World stage: for all the wrong reasons.

With total and totally unpredictable collapses in its wind power output, SA is now accustomed to routine load-shedding (dropping suburbs and whole regions off the grid to keep the rest running) and the odd state-wide blackout. Then there’s the small matter of retail power prices which, for businesses have doubled in 12 months and which are all set to double again.

A suite of consequences which have energy experts around the globe quietly giggling and saying ‘we told you so’. One of them is London based Senior Research Analyst with the World Nuclear Association, Ian Hore-Lacy.

Here’s the yarn being spun from London about South Australia’s perfectly avoidable energy calamity.

South Australia’s green dream, or its nightmare?
World Nuclear News
Ian Hore-Lacy
26 July 2016

Recent performance in South Australia – where wholesale power prices have spiked dramatically, household electricity costs are the highest in the nation, and industry is threatening to quit – provides a good reality check. Early in July, electricity prices in South Australia have soared as it struggles with the consequences of an ambitious build of wind farms without firm power backup.

Eastern Australia’s National Electricity Market (NEM) operates the world’s largest interconnected power system that runs for more than 5000 kilometres from North Queensland to Tasmania and central South Australia, and supplies some AUD 10 billion electricity annually to meet the demand of more than 10 million end users.

NEM infrastructure comprises both state and privately owned assets, and is managed under the overall direction of the Australian Energy Market Operator (AEMO), which was established by the state and federal governments. South Australia is a small part of this, connected only to the extent of only one quarter of its peak load.

Though a small part of the NEM, South Australia is poorly connected to the rest, with a 460 MWe link to Victoria at Heywood (Vic) in the south and the 220 MWe Murraylink one further north, providing back-up from Victorian brown coal, equivalent to about 23% of SA’s 3100 MWe peak demand. The Heywood interconnector is being upgraded to 650 MWe in both directions, at a cost of AUD 108 million.

Modeling by Deloitte Access Economics suggests that by 2019 the interconnectors from Victoria will be at maximum capacity into SA for about 23 hours per day. However AEMO forecasts a decline in supply from Victoria after 2020, due partly to Victoria’s greater reliance on wind, the output of which will fluctuate very much in line with that in SA.

The relatively dry and flat state has had a strong policy of promoting wind and solar capacity, and over 40% of its electricity is from these sources (from 1473 MWe wind, but no solar on grid). Gas accounts for 90% of the dispatchable supply (from 2617 MWe), and the former SA coal-fired plants have been shut down (Northern 546 MWe, Playford B 240 MWe). Another 3200 MWe of wind capacity is committed or proposed. Solar PV is widely used, but virtually all behind the meter.

As well as simply meeting power and supply demand, the challenge of power quality (voltage and frequency control) is increased by the high dependence on wind.

The outcome of this generation situation is that NEM spot prices are sometimes very high, when the wind is low. The fossil fuel-fired power stations are uneconomic due to low capacity factors forced by significant priority input of wind generation, coupled with low prices in the wholesale market when (subsidised) wind is abundant. Several have therefore closed down, and a further 770 MWe of gas-fired plant is due to close in 2017. Gas prices are rising due to several factors, which acutely compounds the SA dilemma.

Following winter price spikes in 2015, AEMO commissioned a report by Frontier Economics, which confirmed that the reason was a low level of wind generation at the time. “As has been long predicted, increasing penetration of wind, and its inherent intermittency, appears to be primarily responsible for the (price spike) events.

While the events have coincided with relatively high demand conditions in South Australia and some minor restrictions on imports of electricity from Victoria, low wind production levels are the key common feature of every event.

The market response at such times has been to offer higher-priced capacity to the market, leading to high prices, just as the National Electricity Market was designed to do under conditions of scarcity.”

The Frontier report says the level of wind and solar penetration in South Australia presents a fascinating natural experiment in the impact of intermittent generation on wholesale prices.

“Unfortunately, this test is anything but academic and the people of South Australia are increasingly likely to bear increased electricity costs as wind makes up a greater proportion of South Australian generation,” Frontier said, according to a report in The Australian, “While policymakers may be tempted to act to force thermal and/or wind to behave uneconomically, the likely outcome means South Australian consumers will bear more costs.”

In the first half of July 2016, wholesale prices averaged over AUD 300/MWh in South Australia, compared with under AUD 80/MWh in the four eastern states. In June, SA prices had averaged AUD 133/MWh. Spikes of over AUD 10,000/MWh have occurred. On July 7, SA wind farms were producing 190 MWe early in the morning, but by afternoon they were actually drawing energy from the grid, this effect being most acute due to limited back-up supply.

There are proposals for three new interconnectors from SA to New South Wales, ranging in projected cost AUD 3 to AUD 3.75 billion, but none is proceeding. A further connection from Krongart in SA to Heywood (Vic) is costed at AUD 530 million but is not proceeding.

The new federal minister for the combined portfolio of energy and environment, Josh Frydenberg, has said that it is clear the global energy supply dynamic was moving to lower emission energy sources. He said country comparisons showed that lowering emissions from the energy sector could not be one-dimensional because countries were starting from different positions and faced different challenges.

“One such challenge will be the need to question traditional energy supply” and “such a discussion is currently taking place in South Australia”, he said, referring to the South Australian Nuclear Fuel Cycle Royal Commission, which had “revived the discussion about the role nuclear power could play in a low-carbon economy. Given South Australia has 78% of Australia’s uranium reserves and the stable geology to store high-level waste, this debate is shifting community attitudes and has some way to run,” he said.

July’s experience with over-reliance on wind has focused public attention on the considerations which must govern energy policy, including cost, reliability and low emissions. It has also raised the question, already acute elsewhere, of how much any state can rely on its neighbours to back up its policy indulgences for supply, and provide a dumping ground for occasional surplus power. Either way, the economic implications in any state’s wholesale market are unlikely to be welcomed by neighbours.
World Nuclear News