GenInsights21: Energy market movements

GenInsights21: Core energy transition challenges

IN MID-DECEMBER 2021 the 622-page

GenInsights21 report was released. The report Incorporates 28 discrete ‘deep dive’ appendices, with GenInsights21 exploring many different aspects of the transition of Australia’s National Electricity Market (NEM) by reviewing in considerable detail what has actually been happening.

This analysis highlights numerous cases where the facts are different than what seems to be popularly believed – in some instances substantially different.

In early April the primary authors provided a 60-minute presentation to an audience of hundreds organised by the Smart Energy Council. An annotated recording can be found at: https://wattclarity.com.au/ articles/2022/04/geninsights21-the-energytransition-grappling-with-the-challenges/ Here we present some key insights. The Schism appears to be permanent

It’s clear now that the NEM is developing an ‘us and them’ schism’ – between: • ‘Anytime/Anywhere Energy’ evolving by virtue of the form of support for wind and solar generation; • Leaving the declining residual volume of energy supplied by other generation types to supply a collection of ‘Keeping the Lights on Services’.

‘Aggregate Scheduled Target’ (Appendix 15)

Because Non-Scheduled and Semi-Scheduled supply options are not required to meet their Dispatch Targets most of the time, in Appendix 15 we focused specifically on how the requirement for supply from fully Scheduled units has changed over the 23-year history of the NEM.

This analysis was simplified to look on a NEM-wide basis (ie to avoid complexities, confusions and politics about regional comparisons). The following trend of aggregate statistics was presented on p327 (see Figure 1 above). In simple terms: 1) Peak requirement for supply from these types of units remains stubbornly high, and it is becoming more uncertain and weather dependent. 2) At the same time the average, median and minimum requirements are dropping, and perhaps this drop is accelerating.

This has many implications, one being that the aggregate energy represented in this trend (ie the ‘area under the curve’) is dropping substantially, which calls into question the ongoing viability of an energy-only market as the only means for supporting capital cost.

We emphasised to readers of GenInsights21 (and is important for readers of Smart Energy to acknowledge) that this statistic is ‘fuel type’ agnostic. Although fossil fuel fired units currently supply most of this service, the challenges will remain (and will likely be more extreme) into the future as this capacity is replaced by batteries, hydro and other flexible dispatchable options.

Figure 1 Figure 1. Headline statistics – NEMwide, Aggregate Dispatch Target

for Scheduled units only (Analysis for GenInsights21)

‘Forecast Convergence’ (Appendix 16)

We then looked at the same metric (ie Aggregate Scheduled Target), but analysed how difficult this was for AEMO to predict 24 hours in advance of the point of dispatch.

Although this Appendix contains many other details, the key point for readers to understand is that the task is becoming increasingly difficult for AEMO – and, by extension, for all market participants – as highlighted in the chart presented at p365 (see Figure 2 below).

Note the significant increase in the ‘Underlying Trend’ from 2020 onwards. This challenge has several implications, including: • The challenge of dispatching this plant to keep the lights on • Economic challenges in terms of risk and uncertainty (which will only increase in difficulty with the introduction of more batteries and pumped hydro); and • Market design implications (eg in terms of how a day-ahead market would actually function, and be sustainable into the future). Taken together

Taken together with all the other factors discussed in GenInsights21 it left the authors with the clear conclusion that the major challenges to be confronted in relation to this energy transition are almost always related to the ‘Keeping the Lights on Services’ provided by these Scheduled units.

It stands to reason that this is where the major share of attention and support should be focused. Readers of Smart Energy might ponder whether the appropriate bodies involved in redesigning the market for the future are sufficiently aware of these challenges.

Further information about GenInsights21 can be found on WattClarity®: https://wattclarity.com. au/deeper-insights/generator-insights-2021/

Figure 2. NEM Cleared scheduled supply actual – predispatch forecast difference range (95%-5%)