Matching the pace of transformation

David Swift, Advisor to the CEO, AEMO

Our visionTo deliver energy security for all Australians, and meet the changing needs of the market by involving multiple jurisdictions, participants, and communities.

We operate Australia's National Electricity Market and power grid in Australia’s eastern and south-eastern seaboard, and the Wholesale Electricity Market and power grid in south-west WA.

We also operate retail and wholesale gas markets across south-eastern Australia and Victoria’s gas pipeline grid.We are a company with three control centres and multiple offices across five States. Our costs are recovered through fees.

Ownership

Marketparticipants

40%Governments of Australia

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The Australian energy industry changed on 28 September 2016

Black system event - with a state losing power, impacting 1.7 million Australians

• Loss of three transmission lines (tornado wind speeds 190-260km/h)

• Six system faults, protective settings activated, disconnection of wind farms, 465 MW loss

• Heywood Interconnector compensated, safety protection measures activated, 900 MW from Victoria to SA lost.

The Australian energy industry changed on 28 September 2016

Black system event - with a state losing power, impacting 1.7 million Australians

• Restart proceeded with the use of a System Restart Ancilliary Service generating unit

• 40% of load that could be restored had been restored by 9pm local time and after midnight, 80-90% of the load capable of being restored had been restored.

• All load was restored by 11 October.

The Australian energy industry changed on 28 September 2016

Black system event - with a state losing power, impacting 1.7 million Australians

AEMO’s key finding • The technical challenges of the changing

generation mix need to be managed with the support of efficient and effective regulatory and market mechanisms that work together for the least cost and long-term interest of consumers.

AEMO’s final report into the event19 recommendations for power system improvement, split into the following categories:1. Enhanced preparation (short term operation and

weather forecasting, and greater access to data)2. During the event (including stakeholder

engagement)3. Post event (System restart and managing market

suspension).

18 recommendations to be completed by end of 2017, with the final to be implemented by early 2018.

Plant connecting to the Grid need to meet higher technical standards

Actions taken • The windfarms inability to ride through a sequence of

faults in close succession has been dealt with.• AEMO has completed more detailed studies of the

dynamic performance of the South Australian system, much of it using new, more detailed power system modelling

• Revised technical standards have been proposed from this work.

Implementation of Rule changes• Following consultation with stakeholders, ESCOSA

introduced new licence conditions for generators seeking to connect in South Australia

• The new licence conditions have applied to all new connections since August 2017

• Proposed changes to the National Electricity Rules were then lodged with the AEMC and are being assessed

• This process is consistent with recommendations in the

A range of essential services are required to ensure the security of the Power Grid • Maintaining system security and resilience requires a

number of essential services from connected plant• These services have often been given little attention in the

past as they are provided by conventional plant. As the generation mix changes, the power system behaviour changes and the need for these services become evident

• System strength has been identified as the most critical currently in South Australia.

Analysis highlights system needs

Levels of system strength is required to operate a secure power system

South Australia• In November 2016 AEMO set a minimum

requirement of two large synchronous machines online in SA to manage system strength related issues.

• In July 2017, following further work AEMO introduced enhanced arrangements.o For wind generation up to 1200 MW a more

complex arrangement of synchronous plant is required to be online at all times

o A constraint limits wind output to 1,200 MW unless there is more than the minimum synchronous generation online at the time.

• AEMO intervenes in the market and directs to ensure sufficient system strength to meet lower levels of wind generation. It does not intervene to allow higher levels of wind generation.

Management of power system and supply of essential services

South Australia and NEM• The AEMC have now issued Rules to deal with

system strength and provided transitional arrangements

• AEMO is working with Electranet to determine the way forward

• A better structured approach and investment in synchronous condensers can bring down pool prices

• Providing an orderly transition can deliver a better informed market, reduce risk and reduce costs.

The electricity industry in Australia is undergoing change and disruption on an unprecedented scale • Increased customer choice and changing

customer behaviour• New technologies, new business models • Costs of renewables now below conventional

generation in some cases• Less conventional synchronous plant• More distributed energy• New role for storage

• Finkel review commissioned along with advice from AEMO and now advice from the ESB

Australia’s changing load profile

600

800

1,000

1,200

1,400

1,600

1,800

2,000

00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

Aver

age

Annu

al S

A1 O

pera

tiona

l Dem

and

as G

ener

ated

(MW

)

Time (hrs)

South Australia daily demand for grid electricity

2009 2011 2014 2016 2020 Forecast 2030 Forecast

The changing generation mix

Two-waypower gridevolutionHuge growth in customers providing energy back to the grid.

2017 2030

6.5GWh

20.0GWh

2015 2016

500

6,750

Rooftop PVs(GWh)

BatteryInstallations

Source: AEMO Source: Sunwiz

By 2050customer-ownedgenerators will supply Australia’s electricity needs

30-45%

Source: CSIRO

Managing security and reliability in a transforming system

Adequacy

Reliability and Security

Resources required (not just conventional generators but other solutions)

AEMO's actions to support the transformation

Frequency and inertia requirements

Operational changes and advanced forecasting tools

Proof of concepts

Advice on reserves and need for flexibility

Storage

AEMO is playing an active role in managing the transformation

Australian market has changed rapidly- with government policy, consumer attitudes and technology all contributing

Reaching a tipping point- where renewables are becoming cheaper than traditional resources and can be deployed more rapidly

Markets need to value and price supply reliability and security - inertia, system strength, and dispatchability all need to be considered.

AEMO’s Summer Readiness Plan

Supply availability

Fuel supply

Transmission Network availability and capacity and contingency planning

South Australian Energy Policy

SA Black System Report recommendations

Peak demand response

Training and communication