THE 2017 GSOO CREATES A POWERFUL CONVERGENCE P4 AEMO’S “ WEAPON” FOR BATTLING THE ELEMENTS P5 HAZELWOOD CLOSURE – C HALLENGES AND OPPORTUNITIES P6 EMBRACING AND TRULY UNDERS TANDING TEC HNOLOGY - THE KEY TO AUS TRALIA’S ENERGY FUTURE P7
Energy Update May 2017
UPDATE FROM CHIEF EXECUTIVE OFFICER AUDREY ZIBELMAN Time has flown since I started my AEMO journey on 20 March, but I would like to assure you all I have my feet firmly under the desk and am extremely enthusiastic about the challenges that lay ahead for myself, AEMO and the Australian energy industry. I would like to begin this Energy Update by thanking everyone who has welcomed me here to AEMO and Australia. The reception has been wonderfully warm and I am looking forward to working with, and getting to know you all during this journey, which I believe has the potential to be as transformative as it will be exciting. My first impression of the Australian energy industry is that it is regarded around the world as a model for the future energy economy. It is also at the forefront of new technology and is beginning to embrace the impacts of climate change and the challenges climate change presents to both the sector and society in general. While this by no means will make our efforts to transform the industry easy, it has certainly been my impression that there is an appetite for change in Australia – a new direction. So even while the path is, in fact, still evolving ahead of us, there is a real opportunity for AEMO to reshape the debate and move in the right direction to achieve our goal of ensuring a reliable, secure and affordable energy supply for all Australians.
This will require a lot of “big picture” thinking and will, of course, take time. You can read more about some of my preliminary thoughts on Page 7. At the same time we are developing this vision, we must not lose focus on our immediate priority which is ensuring the system is secure and reliable for next summer’s peak demand. AEMO’s plan is to make sure we as an industry have all the resources required, available and operating properly for next summer. By this, I mean the gas and black coal generation resources that currently exist, and will be supplemented by the diesel options South Australia has announced, and the gas peaking arrangements Prime Minister Malcolm Turnbull has negotiated with gas producers. All of those things must be in place and functioning because we recognise that if the system is not secure, everything else essentially becomes irrelevant. I have arrived at AEMO at an interesting and busy time, off the back of the South Australian black system event and then the heatwave in February that impacted the eastern and south-eastern states.
They are highly stressful and not pleasant for those involved, whether that be consumers on the receiving end of the outage or those at the authorities trying their best to get supply restored. You can read more about the report and its findings – including AEMO’s 19 recommendations – on Page 3. Amid the intense debate around energy security, AEMO released its annual Gas Statement of Opportunities (GSOO), which assesses the adequacy of gas infrastructure, reserves and resources to meet demand in eastern and southeastern Australia to 2036. You can read more about the GSOO and its insights on Page 4. In closing, I would like to congratulate and thank Karen Olesnicky on her time as acting CEO. Karen did an outstanding job during what has been a trying and challenging time for both AEMO and the broader energy industry. Thank you again and I look forward to the exciting times ahead. Audrey
Completing the final report into the South Australian black system event has been a priority of the AEMO team since the event occurred on 28 September last year. The final report was issued at a CEDA function in Adelaide in March. In my professional career I have been a part of a number of such black system events, including in New York City and Minnesota.
Update from Chief Executive Officer Audrey Zibelman
Eagerly awaited SA black system event final report released
The 2017 GSOO creates a powerful convergence
AEMO’s “weapon” for battling the elements
Hazelwood closure – challenges and opportunities
Energy Update May 2017
P7 Embracing and truly understanding technology the key to Australia’s energy future P8
The people behind AEMO
EAGERLY AWAI T E D SA BL AC K SYS TEM EV E NT FI NA L REPO RT R ELEASED On 28 March, AEMO released its much-anticipated final report into the 28 September, 2016, black system event that occurred in South Australia (SA). The “Black System South Australia 28 September 2016” report was released at a Committee for Economic Development of Australia (CEDA) lunch at the Adelaide Hilton Hotel, attended by about 300 people, and an additional 300 live streaming the event– the largest audience ever at a SA CEDA function.
Access to reliable data is particularly critical in delivering security in extreme circumstances.
AEMO chairman, Dr Tony Marxsen, outlined findings from the report while AEMO’s new CEO, Audrey Zibelman, in her first official event in her new role, took part in a panel discussion. The report was one of the most eagerly awaited reports AEMO has produced, the timing of its release coming amid intense energy policy debate being played out between the state and federal governments. This report was important not only because of the nature and seriousness of the Black System event, but also because of the broader conversation going on around Australia about energy system security and reliability. AEMO’s report into the Black System event details actions AEMO took within days of the event to reduce the likelihood of a similar event in future. The report also outlines recommendations for longer term actions that must be put in place to ensure continued energy security for all Australians. One of the key recommendations of the report is for much better access to data on grid connected equipment. The report highlights the challenge of operating a grid comprising a diversity of equipment controlled by complex software that can contain unknown features and settings. Access to reliable data is particularly critical in delivering security in extreme circumstances.
AEMO has put forward its recommendations for new wind farm standards to the Essential Services Commission of South Australia, which is currently inquiring into the license conditions for wind farms and other technologies which use inverters to connect to the power grid. The report also highlights the interdependencies which exist within the energy industry and the need for a national, holistic planning approach for the National Electricity Market.
Energy Update May 2017
TH E 2 017 G SOO C R E AT E S A POWERF UL C ONVERG E NCE With forecasts of a decline in gas production causing a potential imminent shortfall in domestic gas or a shortfall in gas for use in electricity production, the 2017 Gas Statement of Opportunities (GSOO) was extremely topical and further fuelled the ongoing discussion on Australia’s energy future.
The GSOO was important because it took the concepts we have been talking about for some time and brought them sharply into focus” AEMO’s Chief Operating Officer Mike Cleary.
The key finding of the GSOO, which is based on data provided by the gas producers, was that Australian gas production was in decline, particularly in Victorian fields. According to AEMO’s analysis, this decline would result in either a shortfall in gas for domestic, commercial and/or industrial use, or a shortfall in gas for use in gas powered generation of electricity (GPG), which could result in electricity shortfalls in Victoria, New South Wales and South Australia from the summer of 2018/19. Notwithstanding the importance of the shortfall message and the response to it, of potentially equal importance was its corollary – that the interdependencies and convergence of the gas and electricity markets mean the energy sector could no longer be considered in silos. For some time, AEMO has been pushing for both a practical and ideological shift in the way the energy market is viewed and functions in Australia. Central to this argument has been that the electricity and gas industries should no longer be viewed as separate. Rather, the industry
Energy Update May 2017
as a whole needed to be seen as containing interdependencies requiring a holistic approach to ensure such outcomes as energy security, appropriate infrastructure planning, price stability and proper utilisation of assets. The GSOO report states that energy supply shortfalls could be mitigated in the short term by an increase in coal-fired generation and renewable energy output, combined with an uptake in technologies such as battery storage, together with increased gas production and the possibility of LNG exporters redirecting a small portion of their gas production to the domestic market. “The GSOO was important because it took the concepts we have been talking about for some time and brought them sharply into focus in a very practical and powerful manner,” Mike Cleary, AEMO’s Chief Operating Officer said. AEMO welcomes the opportunity to continue to work with industry and government policy makers to maintain electricity and gas system security in a period of transition.
AEMO’S “WEAPON” F O R B AT T L I N G T H E ELEMENTS By the time Cyclone Debbie made landfall on the Queensland coast in the early afternoon of 28 March, AEMO’s National Electricity Market Real Time Operations (NEM RTO) team had been tracking its movement for days using its “abnormal condition monitoring system”, Indji Watch.
Indji Watch is an application used extensively across the energy industry during extreme events such as storms and bushfires. During Cyclone Debbie it allowed the NEM RTO team to be aware of its vital information and be alerted to the cyclone’s every move, down to a matter of metres. Indji Watch shows such activities as wind speeds, direction, temperatures and lightning strikes and is used by NEM RTO in conjunction with the Australian Bureau of Meteorology severe weather warnings and the Weatherzone Dashboard, a custom made product, to monitor weather conditions in real time. “It was a great tool to have during the Cyclone Debbie event as we were able to know exactly where the cyclone was, how fast it was moving, where it was likely to go and which power system assets were under risk,” according to Tjaart van der Walt, AEMO’s NEM RTO Senior Manager. In its early stages, Indji Watch was just used for bushfire detection, but over the years it has developed into a far more sophisticated tool.
“It gives us ‘heads up’ alerts in the control room, which, as you can imagine during the summer bushfire season or severe weather events where there is a lot of lightning, means the alerts are going off pretty much non-stop!” But the beauty of the Indji Watch application is not just its ability to monitor events and provide information about conditions and sudden shifts in those conditions. “Indji Watch actually has the transmission and distribution network lines mapped into it which means we are able to see exactly what is at risk and use it to assist with the reclassification of lines. It is extremely important to us,” said Mr van der Walt. Automation of NEM RTO processes will continue this year when the energy and market systems will be notified of lightning strikes near vulnerable lines by Indji Watch, and with controller verification, automatically reclassify credible contingencies and release market alerts.
“It can now monitor lightning strikes and severe weather events like we saw with Cyclone Debbie, down to very small distances with what are essentially real time updates. With fires, it shows us things like the position of the fire, its speed, likely direction, the prevailing winds and even the topography which might affect its movement,” said Mr van der Walt. Energy Update May 2017
Hazelwood’s closure is another important milestone in the continuum of change the industry is experiencing as we move towards a low carbon energy future. AEMO’s Chief Operating Officer Mike Cleary.
H A ZELWOOD C LO SU RE – C H A LLENGES A ND O PPORTUNIT IE S The closure of the Hazelwood Power Station in Morwell on 31 March this year heralded the end of an era for the Victorian and Australian energy industry. It also poses challenges – and opportunities – for the Australian Energy Market Operator (AEMO) in managing a secure power system now and into the future. For almost 50 years, Hazelwood has been an important feature of the Australian energy landscape. Built between 1964 and 1971, with the first units coming on line in October 1964, Hazelwood’s eight 200 megawatt units in 2016 provided 10.17 terawatt hours of power into the National Electricity Market (NEM). This equated to about 20 per cent of Victoria’s locally generated electricity supply and just over five per cent of Australia’s total supply.
Energy Update May 2017
“The removal of 1600MW of capacity following Hazelwood’s closure is not insignificant. Provided there are no major unplanned outages or failures of plant, there should be sufficient generation and capacity that could be made available through market or regulatory arrangements to cover Hazelwood’s removal,” Mike Cleary, AEMO’s Chief Operating Officer said. “AEMO is doing everything possible to maximise the supply from available gas, water and coal generation during critical periods. “Supplementing the available supply will be the diesel generation which was recently announced in South Australia, the return to service of 240 MW at Pelican Point, and the anticipated response in the gas market following the release of our 2017 Gas Statement of Opportunities, which we believe will help support additional gas-fired generation.” In the longer term, the closure of Hazelwood provides a further imperative for AEMO, the industry and policy makers to focus attention on the need to modernise the power system to continue to serve the needs of consumers in the future.
“Hazelwood’s closure is another important milestone in the continuum of change the industry is experiencing as we move towards a low carbon energy future,” Mr Cleary said. “Also, there is growing awareness and acceptance of the inherent interdependencies and convergence of the electricity and gas markets and the need to take a national, holistic approach to plan this transformation of the energy industry.” Importantly, AEMO is responsible for the secure operation of the power system, and over the coming months will work with market participants in gas and electricity markets to help maintain security and reliability of electricity supply for all Australian consumers.
EMBRACING AND T R U LY U N D E R S TA N D I N G TECHNOLOGY IS THE K E Y T O A U S T R A L I A’ S ENERGY FUTURE – AUDREY ZIBELMAN
There is an aphorism I like to use which I think encapsulates the challenges facing the Australian energy market – and that is, you are not going to find the solution by looking in the rear view mirror. The network we have today is actually “yesterday’s” network. It was designed and built in the 20th century based on the philosophies of the time which were ostensibly driven by the limitations of the prevailing technology. In those days, electricity could not be stored on a large scale. So, the most efficient way to manage and build the grid was to have large central coal and gas plants. The assumption also was that the grid was “inelastic” and didn’t respond to price or activity. This lack of storage and inelasticity made the system inefficient and expensive because it meant large, under-utilised power plant assets more or less sat around waiting for a hot day. We are already seeing massive advances in technology, while socially and politically we have the evolving imperatives of environmental sustainability and climate change, as well as cost of living pressures. It is these current trends, and the changes and advances that are yet to happen, which should and must dictate our future energy direction.
In South Australia the government has issued a tender calling for a privately run 100 megawatt battery storage facility as part of a series of policy measures designed to help address their power supply issues. It is the first of its kind in Australia. I believe there are many smaller, innovative and equally important ways the network can evolve – ways that take advantage of new technology to address the changing needs of consumers, meet demand and supply reliability standards. I’ll give you an example from New York City, which, with its population of more than 8.6 million people, bright lights and 24 hour action is probably few people’s idea of subtle and small scale innovation. In Brooklyn a short time ago, developers were knocking down four storey buildings and replacing them with tall towers. The local utility company determined there was a need for a new substation to cater for about 200 megawatts of additional electricity required for the area during peak times. Instead, the New York City government asked the utility to consider other options that didn’t involve building a substation that would take up a number of city blocks. The government asked them to consider these questions: “What if you use resources you could put in buildings and how could you incentivise consumers by driving value?” The utility company employed the services of technologists who came up with a range of solutions such as built-in battery storage, solar panels and even smart thermostats. The incentive was that consumers could shift their load away from the peak and be paid for it.
What was created was an innovative microgrid of solar and battery storage right in the middle of Brooklyn, not in the middle of nowhere. And the great thing was that it was not all about the wealthy putting solar panels on their roofs – low income households were also able to be involved. It took less than two years and we created what I call a “community of interest” around how we use our resources. This “community of interest” concept is important because in such a community, the use of energy essentially becomes not only part of urban planning but also part of the social fabric, rather than just an external commodity we “buy in” that is physically and philosophically detached from our lives. It changes both how we think and how we act. It might surprise some people here given the operational challenges experienced over the recent summer, but internationally, Australia is regarded as being at the forefront of new technology and is a model for the future energy economy. I believe we can come up with many more examples just like the Brooklyn experience. This is a strong position to find ourselves in, and it must be said, it’s one of the main reasons I chose to come to Australia and take on the job as AEMO’s CEO. There is real potential for substantial transformation of the energy sector. AEMO, as the market operator, is uniquely positioned to influence and drive this transition.
Energy Update May 2017
THE PEOPLE BEHIND AEMO… INTRODUCING G R E G S TA I B , S E N I O R A N A LY S T, ENERGY FORECASTING In this section, we take you behind the scenes at AEMO to introduce you to some of our employees. This month we spoke with Greg Staib Senior Analyst, Energy Forecasting about his role at AEMO and the national power system. Energy Update (EU): Tell us how you got to AEMO? Greg Staib (GS): After finishing my degree in Astrophysics I secured a scholarship through the CSIRO and completed a PhD (through Griffith University) focussing on Coal Seam Gas and Carbon Capture. Then, via a stint at a small consultancy company, I ended up at AGL in their energy forecasting team. Once there I got involved with the AEMO industry forecasting sessions and liked what AEMO was trying to achieve in terms of knowledge sharing and improving the state of things in Australia, so I jumped on board.
EU: What is your role at AEMO?
EU: What are your ambitions?
GS: I’m a senior analyst in the Energy Forecasting team where we do the 20 year outlooks for AEMO’s National Electricity Forecasting Report and National Gas Forecasting Report. I’ve been in the role for six months. At the moment I am looking at how the forecasting models capture the weather sensitivity, particularly climate change, which is likely to affect how often people will be switching on their air conditioners. We’re looking to estimate that behaviour in our models.
GS: One of my earliest memories was my dad explaining global warming as the reason I always have to switch the lights off when I leave a room. That was 1992! So I’ve always been pretty interested in the environment and science, and have looked for ways to work in those areas.
EU: How do you see the future of the industry evolving? GS: I think the way we will buy, sell and distribute power will be radically different within 10 years. There will be more renewables. There are many paths to get there but I know at the heart of it will be data – lots of it. Data will be used in some clever ways and hopefully these ideas are shared worldwide. EU: What do you love most about working for AEMO? GS: The people. My team members are a great bunch, very diverse and always wanting to talk shop as well as seemingly random topics on our coffee walks. I’ve never worked with a more committed group of people.
EU: Thank you for your time.
My team members are a great bunch, very diverse and always wanting to talk shop as well as seemingly random topics on our coffee walks.” AEMO’s Senior Analyst, Energy Forecasting Greg Staib
EU: Tell us a bit of what you like to do away from AEMO? GS: I really like to cook. My focus this year has been on perfecting smoking meat in my Kettle BBQ. Recently I slow cooked a beef brisket which took more than 12 hours. I had temperature probes in the oven with the data transferring and logging on my computer.
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Energy Update May 2017