DECEMBER 2014
GAS BULLETIN BOARD OPENS FOR BUSINESS P3 LNG EXPORTS DRIVE BIG CHANGE P6 AEMO WELCOMES NEW DIRECTORS P8
Energy Update December 2014
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N E W N AT I O N A L G A S MARKET BULLETIN BOARD OPEN FOR BUSINESS After a successful round of industry testing, the redeveloped National Gas Market Bulletin Board (NGMBB) went live on 11 December 2014. The NGMBB website is a single electronic communications system covering all major gas production fields, storage facilities, major demand centres and natural gas transmission pipeline systems, including the interconnected systems of South Australia, Victoria, Tasmania, New South Wales, Queensland, and the Australian Capital Territory. The NGMBB facilitates trade in natural gas and market gas services by providing transparent, accurate and readily available system and market information to gas market participants, as well as to the general public.
The new NGMBB provides enhanced functionality for stakeholders to access, present, and upload information via features including: • An interactive, information-rich map, driven by Google maps. • Upgraded reporting features including a new graph and chart tool, and advanced data search and export functionality. • Improved user functionality including new web forms to submit data, and streamlined login systems. AEMO Managing Director and Chief Executive Officer Matt Zema said the redeveloped NGMBB is timely given the immense change taking place in Australia’s interconnected gas markets. “Over the past nine months, AEMO has worked closely with gas market participants to improve the functionality of the NGMBB, with a focus on useability, availability, and reliability of gas data and information for all participants in the south east and east coast gas markets,” Mr Zema said. Benefits of the new NGMBB include enriched data quality, better functioning submission and transacting processes for facility operators, and stronger investment signals for future supply infrastructure projects.
“In improving information and transparency for gas market participants, the NGMBB should in the long term lead to efficiency benefits in upstream and downstream gas commodity markets,” Mr Zema said. AEMO Gas Bulletin Board Development Manager Antara Mascarenhas said industry consultation was a major driver of the NGMBB redevelopment. “The NGMBB is a critical tool for gas market participants. To ensure the new NGMBB meets the needs and expectations of the industry, AEMO invited gas pipeline owners and operators, facility operators, major shippers, retailers and government officials and other bulletin board users to collaborate on the project,” said Ms Mascarenhas. Consultation commenced at the NGMBB redevelopment project scoping stage with a report delivered to COAG in June 2014, right through to site development and industry testing which was completed in late November. Visit the NGMBB online.
Energy Update December 2014
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CONSUMPTION F O R E C A S T U P D AT E FOR QUEENSLAND A N D TA S M A N I A AEMO has observed some variance between forecast and actual operational consumption in specific regions in the National Electricity Market (NEM) since releasing its 2014 National Electricity Forecasting Report (NEFR) in June. Regional operational consumption variance (July to October 2014) Variance
Queensland
NEM
NSW
Qld
SA
Tas
Vic
+2.3%
+2.9%
+4.8%
+1.3%
+0.9%
-0.5%
AEMO Group Manager Forecasting Margarida Pimentel said between July and October 2014, Queensland had the highest variance, signalling the need to revise these consumption forecasts. “This variance in Queensland is primarily linked to changes in large industrial consumption, and increased residential and commercial consumption,” said Ms Pimentel. “While Tasmanian variance has remained low, AEMO has updated Tasmanian consumption and maximum demand forecasts using data for the 2014 winter as it is the only winter-peaking region in the NEM. “These forecast updates ensure the NEFR remains robust and relevant to stakeholders by providing timely reporting on emerging energy consumption trends and developments,” Ms Pimentel said.
Actual Queensland operational consumption for 2013-14 was 46,442 gigawatt-hours (GWh), 80 GWh higher than estimated in the 2014 NEFR. Compared to the 2014 NEFR, the updated medium scenario forecast results in a 2.4% increase in operational consumption for 2014-15, and a slower average annual growth rate of 3.8% between 2013-14 and 2016-17, down from 4.0%. These short-term changes are due to: • A slower decline in residential and commercial consumption. • A slower increase in large industrial load consumption. This is based on updated timing estimates of LNG production ramp up. • A slower increase in rooftop photovoltaic (PV) output driven by an additional six months of actual installed capacity data from the Clean Energy Regulator (CER), and a reduction in the Queensland feed-in tariff from 8 cents/kWh to approximately 6 cents/kWh. Tasmania Actual Tasmanian operational consumption for 2013–14 was 10,028 GWh, 70 GWh lower than estimated in the 2014 NEFR. Compared to the 2014 NEFR, the updated medium scenario forecast results in: • A 0.9% (86 GWh) decrease in operational consumption for 2014-15. • No change to the average annual decline of -0.5% for operational consumption in the short-term. These changes are due to: A faster decline in residential and commercial consumption. • Faster growth in large industrial consumption. • Faster growth in rooftop PV based on an additional six months of actual data from the CER. •
The 2014 actual winter MD of 1,656 MW in Tasmania occurred on 30 June 2014 at 8.30 am. The updated maximum demand forecasts result in a slower short-term average annual growth rate of 0.1% for winter MD, down from 0.9% in the 2014 NEFR. For more information, the NEFR Update is available on AEMO’s website.
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Energy Update December 2014
J OINT S T U D Y ID ENTI F I E S S A S Y ST E M S E CU R I TY R I SK AEMO and South Australian transmission network service provider ElectraNet have identified emerging market factors that could affect the future reliability of the South Australian electricity network. The recently-published joint study concludes that South Australia’s power system can operate securely and reliably with a very high percentage of renewable generation, as long as the Heywood Interconnector connecting South Australia and Victoria is operational. The joint study outlined how changing market factors could see less conventional synchronous generation operating in South Australia, affecting the power system’s ability to maintain the required system control in the future. Factors such as increasing gas prices, rising non-synchronous photovoltaic (PV) and wind generation in South Australia, as well as declining electricity consumption from the grid, combine to potentially displace conventional synchronous generation in the state. “South Australia leads the National Electricity Market (NEM) in renewable energy with 1,470 MW of installed wind generation and 540 MW of residential rooftop PV installations with a penetration rate of almost one in four of all rooftops,” said Rainer Korte, ElectraNet Executive Manager Asset Management. “Under favourable market and policy scenarios, at least a further 1,000 MW of wind and 500 MW of PV capacity is projected to be added in South Australia by 2020,” Mr Korte said. While these developments benefit both South Australia and the NEM, a high proportion of wind and PV generation
can present a risk to system security if the Heywood Interconnector link to Victoria is disconnected at a time when all local conventional synchronous generators are offline. This occurs as wind and PV generators, by themselves, are not able to provide the required controls to ensure system security. AEMO’s concern for South Australia’s power reliability only applies in the very unlikely event that the Heywood Interconnector becomes disconnected, and there is not at least one of Pelican Point, Torrens Island, or Northern generators online at that time. While the likelihood of this risk is low, the potential consequence is a state-wide power outage with severe economic and possible health and safety impacts. “In light of the circumstances at play, South Australia is a relevant case study for assessing the secure operation of the power system with a high concentration of non-synchronous wind and PV generation,” said AEMO Group Manager System Capability Mark Stedwell. “The risk in this scenario is that we won’t be able to maintain system security. It is a very low risk, but it has potentially severe consequences. We can’t continue to install non-synchronous generation into a power system without maintaining the technical capability to maintain system inertia, frequency, and voltage control.
“Working with ElectraNet, we have identified the emerging risk well in advance, so we have time to investigate and recommend solutions,” Mr Stedwell said. Over the next six months, AEMO will work to improve systems and processes to mitigate system risks. In the longer term, AEMO and ElectraNet will provide recommendations to energy sector policymakers, investors, and market participants to consider further enhancements to the operational processes and network infrastructure required to maintain power system security. The Renewable Energy Integration in South Australia report is available on AEMO’s website.
South Australia’s power system can operate securely and reliably with a very high percentage of renewable generation, as long as the Heywood Interconnector connecting South Australia and Victoria is operational. Energy Update December 2014
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S H O R T- T E R M INCREASE IN GAS FORECAST A S LNG E XPO RTS RAMP UP AEMO’s inaugural gas forecasts reflect the changes taking place in Australia’s gas markets over the next five years. The new National Gas Forecasting Report (NGFR) forecasts domestic gas consumption and liquefied natural gas (LNG) exports in Australia’s eastern and south-eastern gas market and will form the basis of the 2015 Gas Statement of Opportunities to be published in March.
Total annual gas consumption over the short-term outlook period (2014–2019)
It reports that, including the impact of LNG exports, total gas consumption across eastern and south-eastern Australia’s gas markets will increase at an average annual rate of 23.0% over the short term to 2019. This is despite a forecast decline in consumption from the domestic market, with average annual decreases of 5.2% over the same period. “Australia’s gas markets are experiencing immense change— we’ll see LNG exports rise to more than 1,400 PJ by 2019,” said AEMO Managing Director and Chief Executive Officer Matt Zema. “Total gas consumption is forecast to plateau over the long term to 2034, once LNG exports reach full production by the end of this decade.” Declining consumption in New South Wales, Victoria, and South Australia is driven by reduced operation from industrial and gas-powered generation plant. Tasmania also shows an overall decline linked to reductions in gas-powered generation, despite growth in its industrial, and residential and commercial sectors. On a system-wide basis, reduced operation and closures in the industrial sector drive a 3.4% average annual decline in domestic industrial gas consumption. In the short term, the largest of these closures involves oil refineries in Queensland and New South Wales. The NGFR also shows gas-powered generation declines at an average annual rate of 16.8% due to minimal growth in electricity consumption and rising gas prices. However, there is a return to positive growth beyond 2019 as existing coal-fired generation withdraws and electricity consumption increases. Despite reductions in average consumption per connection, residential and commercial consumption is projected to increase by an average 1.1% to 2019, predominantly due to population growth. “The NGFR represents the next step in the development of our forecasting reports and allows AEMO to deliver granular and insightful data, responding more rapidly to evolving and highly uncertain energy markets,” said Mr Zema. The NGFR is available on AEMO’s website together with a NGFR blog at http://australianenergymarketoperator.blogspot.com.au/. NGFR updates will be provided via AEMO’s Twitter, LinkedIn and Facebook channels.
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Energy Update December 2014
Gas consumption annual growth rates over the short-term outlook period (2014 –19) Total consumption
Industrial
Residential and commercial
Gas-powered generation
Liquefied natural gas
Queensland (including LNG)
44.2%
-5.7%
0.8%
-22.2%
154.7%
Queensland (excluding LNG)
-10.8%
-5.7%
0.8%
-22.2%
-
New South Wales
-1.8%
-2.6%
1.4%
-6.2%
-
Victoria
-1.7%
-1.6%
1.1%
-24.5%
-
South Australia
-5.7%
-0.02%
0.5%
-11.5%
-
Tasmania
-9.3%
0.3%
5.3%
-27.3%
-
Total (including LNG)
23.0%
-3.4%
1.1%
-16.8%
154.7%
Australia’s gas markets are experiencing immense change – AEMO Managing Director and CEO Matt Zema
PLANNING AHEAD: TRANSMISSION NETWORK DEVELOPMENT TRENDS This month AEMO published its annual National Transmission Network Development Plan (NTNDP). The NTNTDP considers the efficient development of the national transmission grid over a 20-year planning horizon. The NTNDP provides an independent, strategic view of the efficient development of the National Electricity Market (NEM) transmission grid over a 20-year planning horizon. It focuses on opportunities for policy makers to change current electricity pricing, planning, and regulatory frameworks. AEMO Managing Director and Chief Executive Officer Matt Zema says future transmission network development plans reflect slowing forecast maximum demand growth. “Transmission network capacity augmentation needs are reducing, and asset replacement is becoming the dominant investment type,” said Mr Zema. AEMO forecasts that over the next 20 years, transmission network service providers may invest between $9 billion and $18 billion in network infrastructure, with an estimated 75% to 85% of this expenditure expected to go towards replacing ageing assets.
• Extending the life of network assets by aligning their serviceable engineering life and regulatory life. Given changing consumption patterns, replacing ageing assets on a like-for-like basis may not always be necessary. An economic approach to asset replacement decisions would encourage whole-of-life asset management practices and may defer network asset replacement expenditure. • Rewarding network businesses for delivering services valued by customers. A shift in the regulatory framework from the current inputs-based approach towards a focus on services would promote efficient operation of existing network assets, and build flexibility into planning processes by encouraging targeted, incremental alternatives to significant investment in network infrastructure. • Facilitating competition wherever possible. Existing arrangements in Victoria allow for contestability in the provision of major transmission augmentations. Transmission network upgrades that have been subject to a competitive tender process have led to lower cost outcomes compared to the traditional model. • Broadening the range of credible solutions. Improving communication around network constraints would help remove potential barriers to entry and encourage competition in the provision of non-network alternatives to network investment.
“Investment in rooftop PV and residential energy storage technology could become economically viable for gridconnected consumers within the 20-year NTNDP planning horizon,” said Mr Zema.
• Introducing cost-reflective network tariffs at the distribution level would align network costs with revenue generation while providing consumers the choice to reduce household electricity costs. Such tariffs could incentivise the progress of complementary emerging technologies, encourage efficient operation of both distribution and transmission networks, and possibly defer costly augmentation of network capacity by shifting demand from peak times.
“Under a high penetration scenario, this technology may further defer the need for augmentation or affect the size or scope of any need for asset replacement.”
AEMO acknowledges that there are commercial realities and that there will be a period of transition in moving from an asset-focused framework to a service-focused framework.
Against a backdrop of falling maximum demand, consumers reasonably expect asset replacement investment to also fall. The 2014 NTNDP explores options for policy-makers and industry to address these expectations and facilitate efficient transmission network development in the long-term interest of consumers. These include:
The 2014 NTNDP is available on AEMO’s website.
Emerging technology, such as battery storage and rooftop photovoltaic (PV), will also impact the size and scope of transmission networks in the medium to long term.
Energy Update December 2014
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