Energy policy blame-game intensifies

Energy policy blame-game intensifies

Last week, we had two hot days here in our home state of Victoria, Australia; Thursday 24 and Friday 25 January, with maximums of 42 and 44 degrees Celsius, respectively.

Wholesale power prices skyrocketed to over $14,000 per MWh on both days, up from our 2018 average of $92MWh and well over the 2015 average of $30MWh.

Naturally, this begs the question; why?

Not surpisingly, the issue is polarised.

On one side, coal and gas advocates are blaming wind and solar and highlighting the negative impact that the closure of the Hazelwood brown coal power station in 2017 has had on reliability and affordability.

On the other side, wind and solar advocates are blaming coal and gas for underperforming and continue to maintain that the closure of Hazelwood has no impact on current reliability or affordability, with the Victorian Energy Minister insisting that had Hazelwood still been around, it ‘probably’ would have been unavailable, presumably because other coal power stations experienced some heat-related issues.

Who’s correct?

The answer lies in the data.

To understand how the 24th and 25th of January played out, it helps to know what a normal day in January looks like.

Affordability

According to AEMO data, up until Wednesday, January 23, the average daily wholesale spot price for the month-to-date in our home state of Victoria was ranged from $64MWh on 6 January, to $254MWh on 22 Jan.

Source: AEMO

Then this :

Source: AEMO

That $3378MWh spike in the daily average wholesale spot price on the 24th, and $753MWh on the 25th, drove the average for the month from $120MWh up to $421MWh.

Reliability

In addition to the tremendous additional cost, we had blackouts.

We hope you weren’t one of the 200,000 that went without power for several hours on Friday 25 January, as the system failed to cope with demand.

The first ‘blackout’ on Friday 25 January occurred 90 minutes after this statement:

“Blackouts are something that will absolutely not be a feature of today, or a possibility,”

Lily D’Ambrosio, Energy Minister, Victoria

Following the blackouts the task of shifting the blame from renewables to coal and gas, started:

“Essentially most of that was as a result of failed infrastructure from our coal and gas units in particular coal.”

Lily D’Ambrosio, Energy Minister, Victoria

Were we let down by coal and gas or wind and solar?

Wind and solar advocates are claiming solar and load management ‘held’ things together. ‘Load management’ is spin for controlled blackouts.

Victorian Minister for Energy Lily D’Ambrosio said a huge generation failure from aging coal and gas generators on Friday, which left parts of more than 50 suburbs and townships powerless in the searing afternoon heat, underlined the urgent need to shift to renewables.

Greens leader Richard Di Natale took the unusual step of admitting that renewables mean we have to learn to go without, just like in World War 2, and that those who complain about not having reliable power were being unreasonable, as this is the sacrifice we have to make to save the planet.

The two messages are contradictory and expose the underlying issue; we’ve been told that we can reach 100% renewable energy and still have reliable, affordable power.

The Victorian Energy Minister is proposing more wind and solar to fix the reliability and affordability problem and the leader of the Greens is telling us to brace for war-time rationing as we replace coal and gas with wind and solar.

They can’t both be right.

Whereas, those that think renewables are the cause of our affordability and reliability woes are warning us to expect more blackouts and dire economic consequences if we don’t restore balance to the energy mix.

What does the data from the 24th and 25th tell us?

Things started going downhill on Thursday 24 January when the wholesale electricity price peaked at over $14,000MWh between 4 pm and 8 pm in our home state of Victoria, forcing the January daily average up from ~$120MWh to $3377.97MWh.

Let’s take a look at the facts for Thursday 24 January 2019, when prices skyrocketed:

  • Coal outages:
    • One unit at Yallorn was scheduled for maintenance, taking ~350MW out of the system for the day
    • Two units at Loy Yang A had faults between 2 pm and 4 pm
  • Gas outages: units also dropped out between 2 pm and 4 pm

This was the impact that coal and gas outages had on price action:

Source: AEMO data

The gas and coal outages absolutely did result in a price jump from $219MWh to $2478MWh between 2 pm and 4 pm.

The black line is average half-hourly grid demand. Keep in mind that the yellow area of the chart is rooftop solar, which is not recorded as part of grid demand, instead, reducing grid demand.

The red line is the half-hourly price per MWh.

Clearly, the price spike to $14,000MWh didn’t occur until after the unscheduled coal and gas outage.

The cause of the price spike was primarily a lack of overall capacity that resulted in a widening gap between supply and demand.

And here’s the clincher; the gap was never more than 900MW. Less than 60% of Hazelwood’s capacity.

Source: AEMO data

Drilling down on the data prior to the $14,000MWh spike, it shows demand increased by about 1000MW between 2 pm and 4 pm.

This is what the performance of each energy source looked like during that time:

Source: AEMO data

The solid lines represent output (MW) and the dotted lines represent capacity factor, or how much of the installed capacity is actually available.

Gas-fired electricity production (grey lines) fell from 93% to 82% of its capacity (2227MW to 2038MW) at around 2:40 pm. At 3:05 pm, it fell a further 100MW, resting around 75% capacity for 25 minutes before climbing back up to 87% before 4 pm.

Brown coal-fired production was averaging 75% (3540MW) at 2 pm before declining to just under 70% (3280MW). A loss of 260MW.

A combined impact of about 550MW for dispatchable fossil fuels.

Meanwhile, wind dropped from 35% (682MW) to 19% (424MW). A loss of 258MW.

Solar dropped from 60% to 40% (968MW to 650MW). A further 318MW lost.

A combined impact of about 575MW for intermittent renewables.

Hydro was ramped up from 71% to 90% (1080MW to 2150MW), adding 1070MW, making up for the loss of coal, gas, wind and solar.

But, while hydro filled the gap in lost generation, it couldn’t keep up with the growth in demand from 7800MW at 2 pm to 8600MW.

So, during the 2-4 pm period, coal and gas lost 550MW, wind and solar lost 575MW and hydro made up the difference. Unfortunately, demand grew by a further 800MW resulting in a spike of $2780MWh, confirming the problem was a lack of overall dispatchable power, which the existence of Hazelwood would have ‘probably’ covered.

By 4 pm the unscheduled coal and gas outages were over, yet the price skyrocketed, hovering between $13,700MWh and $14,500 up until 9:30 pm.

Let’s ‘zoom in’ and see what each of the power sources was doing between 3 pm and 10 pm.

Source: AEMO data

Demand grew by a further 1,000MW at a time of the day that solar fades to nothing, transferring that demand to the grid. Far from ‘holding’ things together, the diminishing solar output placed increased demand on coal, gas, wind and hydro.

The chart below shows the relative performance in terms of capacity factor and total output (MW) for each energy source at the time.

Source: AEMO data

As far as contribution to price action is concerned, the dispatchable sources; coal, gas and hydro, did their part. Brown coal, in particular, provided a very consistent base load. Hydro and gas responded to the intermittency of the wind.

Whereas the intermittent sources; wind and solar, failed to meet demand when needed.

Source: AEMO data

Wind bottomed out at 15% of its capacity at around 7:05 pm, delivering just a tad over 3% of our 8800MW.

That gap in the supply-demand curve reached its maximum of 928MW at 6:20 pm.

Which confirms, Hazelwood would have made a difference. Assuming it was properly maintained.

Let’s take a quick look at the data on Friday 25 January.

The problem was (a bit) less about price and more about the 200,000 people who suffered blackouts and the businesses who had to switch off.

Here’s a snapshot.

Source: AEMO data

Again, remember that the yellow area, solar rooftop generation, is net of the demand. So, the thing you need to look for is the gap between the top of the purple (wind) area and the black line. That’s the shortfall in system generation.

The total wholesale generation cost for the day was $153 million. Almost 10 times the daily average for January 1 through 23, but one fifth of the $709 million price tag for the previous day. The lower cost reflected the fact that the system was able to generate an extra 13,000MWh for the day, and we were lucky enough to get a cool change.

Let’s zoom in on the price spike from 10 am to 12 pm.

Source: AEMO data

How did each source perform between 10 am and 1 pm?

Source: AEMO data

Brown coal was down to 65% of capacity for the day, but provided stable supply during the period.

Similarly, gas and hydro, the other two dispatchable sources, were very stable.

Rooftop solar was at its typical peak, though utility-scale solar did experience an unfortunate dip in output between 11:30 am and 12:00 pm.

Conversely, wind capacity dived from 50% to less than 30%, removing 400MW from the grid when needed most.

Conclusion

Thursday 24 Jan:

  • Coal and gas experienced unscheduled outages that drove a jump in price from $219MWh to $2479MWh but were stable during the subsequent peak price period from 4 pm to 9:30 pm
  • Wind output dropped from 30% to between 15% and 20% of its capacity during peak demand
  • Solar followed its expected pattern, fading from 40% capacity at 4 pm to 10% at 6 pm
  • The maximum supply shortage was less than 1000MW, which would ‘probably’ have been covered by Hazelwood power station, had it still been in service

Friday 25 Jan:

  • Coal was operating at 65% capacity
  • At the point of peak demand, coal and gas were providing stable output
  • Wind capacity had lost half its capacity during the peak price period
  • The maximum supply shortage was around 1150MW, which ‘probably’ would have been covered by Hazelwood power station, had it still been in service

To have a productive discussion on energy policy we need to avoid bias and highlight the issues experienced by all energy sources.

Wind and solar advocates highlight only the positives of wind and solar, and only the negatives of coal and gas.

This is not useful and will lock us into the current pathway of decreasing reliability and affodability.

To plug the holes created by poor energy policy outcomes, we’re resorting to expensive measures:

  • Paying large electricity consumers like Alcoa to shut down
  • Forced blackouts for homes and businesses
  • Subsidising uncommercial solar/battery systems
  • Running expensive diesel generators
  • Relying heavily on hydro, which while renewable, has its own limits on the driest continent on Earth

Giant batteries have proved useful in their quick response to fluctuations in the grid, so they have a place, but in terms of value and scale, pumped hydro is the most affordable solution for ‘firming’ wind and solar.

Adding pumped hydro to wind and solar adds cost to already uncommercial technologies, further reducing affordability. So we need to balance that by ensuring dispatchable coal and gas are available.

Ageing coal and gas stations need to be maintained and old stations need to be replaced with HELE technology (for which our Coldry technology is the ideal front end brown coal drying solution, by the way).

Nuclear should be a consideration if we really want zero CO2 emissions and reliable baseload.

By subsidising wind and solar and mandating its preferential use, without corresponding mandates for ‘firm’ power, the economics of coal and gas changes. The cost of intermittency is shifted from wind and solar, where it belongs, to coal and gas, where its doesn’t belong.

Gas-fired power becomes more expensive due to demand-driven gas price increases and coal-fired power becomes more expensive because the same cost needs to be recouped over fewer MWh’s as solar hollows out daytime demand and wind takes a preferential position in the ‘bid-stack’.

The intended consequence of wind and solar subsidies is to help these pre-commercial technologies develop and mature and reach economies of scale that deliver a competitive alternative to coal, gas and nuclear power. Despite several decades and billions in subsidies, they require ongoing support, which is about to cost more as we add firming requirements to their deployment.

The unintended consequence has been market distortion, leading to under capacity of dispatchable power and lack of investment in ageing coal and gas plants, lowering their reliability.

And contrary to the claim that more wind and solar (plus storage) will solve the problem, it will simply exacerbate the need for ‘war-time’ rationing of electricity.