Rapid change and opportunities in the future National Energy Market

The Australian energy market is undergoing a period of unprecedented change, a CEDA audience has heard at an energy review event in Sydney.

Australian Energy Market Operator Managing Director and CEO, Audrey Zibelman, said that there were several risks that were critical for AEMO to consider during this period of energy transition.

“Power supply mix, it can’t be news to anyone in the energy industry that the mix of power supply in Australia and really across the world is changing,” she said.

“What’s happening in Australia is it’s happening faster than anywhere else in the world.

“When we talk to our international counterparts, they’re amazed at the rate of change that we’re witnessing in Australia.

“It’s really not even being driven anymore by policy as you’ve seen, it’s being driven by cost.”

Speaking on the changing environment of the energy market, Ms Zibelman highlighted seven factors contributing to the energy industry’s evolution: power supply mix, digitalisation, consumer engagement, sector coupling, markets and regulations, climate change and resiliency, and people and capabilities.

“We need to use data and information in different ways, and we have the ability to use it to drive much better outcomes for consumers,” she said.

“Our obligation of course, which we’re quite proud of, which is really very clearly set up in national energy law, is to serve the long-term interests of the energy consumers in Australia.

“There’s no ambiguity; we’re independent, we’re not for profit, we have one purpose.

Ms Zibelman listed six core competencies the AEMO intends to deliver on to deliver better value to customers: reliable and secure system operations, future system design, adaptive markets and regulations, consumer engagement and access, digital and data, and people, culture and capabilities.

“We had a situation in WA the other day, it was a cloudy day so suddenly 400 megawatts of solar jumped off the grid, two minutes later it came back, and so we have to think about how we manage a system like that?” she said.

“We’re going from a system where every generator provided energy and the ability to be dispatchable and services that we’d need like inertia and frequency, to a complexity of some resources like wind and solar, providing energy at 0 marginal cost, but they’re not dispatchable.

“The amount of data that we have to manage the power system going forward is infinitely more than we did historically. We have to recognise that we’re not just dealing with 30 large generators, we have millions of bits of information.

“We did a study, which was a ten-year forecast of what do we see that’s happening in the power system.

“What we found is that for this summer coming in Victoria, and in lots of parts of the National Energy Market, we’re very close to the supply and demand balance, the standard of 0.002 reliability.

“We used to have a lot of old reserves. As plants began to retire, we ate through our reserves and now we need to make sure we have enough energy particularly in the summer months to keep ourselves going.

“In Victoria this summer, we’re very close to a 0.002 standard, the problem we have is that 0.002 standard is met if two of the large power plants which are currently out on unplanned outages, come back, if they don’t come back we’re looking at a very significant risk of outages over the course of the summer.

“They’re expected to come back in December, but if it slipped to January we could be in significant problems.

“In the Electric Statement of Opportunities, we identified a number of actions that we think are going to be critical and they’re aligned with these six pillars and Finkel.

“We have to change the reliability standard, we need to recognise that given the reliance, particularly now as we become more and more dependent on electricity, having sufficient resources nine out of ten summers is probably a reasonable thing to do.

“We need to start thinking about the value affirming, these power plants that we’ve been seeing today where you had negative pricing, that wasn’t because the cost of energy was negative and $0, it’s because we weren’t paying for reliability, affirming capability the way we should.

“We need to start recognising that resources that provide that important dispatchability need to be paid for differently than resources that are just providing energy.

“Looking at transmission interconnection, we have to recognise that investments like that in a market that is efficient, is actually going to allow us to drive costs down and that’s where we want to go.

“Everything we’re thinking about is recognising that the system’s changing, we have generators retiring and our goal is to find ways to replace those retired resources using new technologies, new capabilities of the system.

“In the end what we’re doing is driving value back to consumers and the purpose really of our energy policy I think has to be all around that because as we recognise in this industry, you can’t have an economy without safe, reliable, secure and affordable energy.”

Event presentations

Audrey Zibelman, Australian Energy Market Operator (AEMO) MP3 | PDF

Moderated discussion MP3

Delegate handout PDF