Melbourne is in the midst of a frosty winter, with our gas operations recording the highest gas demand day ever in Victoria in early August. At AEMO, while we are battling the winter chill, our minds are already on summer, but not anticipated vacations on the beach
On 22 August, AEMO released its 2019 Electricity Statement of Opportunities (ESOO), which forecasts reliability across the National Electricity Market (NEM) for the next ten years. Unfortunately, as in previous years, AEMO’s analysis is showing that unless actions are taken, in multiple regions across the East Coast of Australia, consumers are at increased risk of load shedding across the summer months this year and in future years.
AEMO is committed to assuring that the markets we operate deliver Australian energy consumers access to reliable, secure and affordable electricity. To meet this obligation, we must deal in facts, as they are, not as we would like them to be. The ESOO analysis outlines these facts.
Due to the aging and deteriorating reliability of conventional generators, the lack of sufficient transmission interconnection to allow us to access existing and new resources, increasing temperatures during the summer months, and a reliability standard that is not sufficiently focused on assuring resource adequacy on hot days, we as an industry are imposing unnecessary and costly reliability risk on consumers.
That is why this year, in addition to our normal practices of working hard with industry and governments to prepare for the coming summer, we are also specifying the actions that we are taking and the authority we are asking for with deliberate speed, to make sure we are able to do our job well and meet our commitment to consumers. The actions we are pursuing are not particularly novel or controversial. Indeed, they were contemplated in the Finkel review that was adopted by the COAG Energy Council and we are finding they are supported across governments.
Nonetheless, we do need to move from support to action. All of these actions are straight forward and some are underway. They fall into three main areas:
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We need a reliability standard that is consistent with international norms and affords us as the system operator the ability to have sufficient resources to meet summer demand, the vast majority of the time, at the lowest cost possible
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Energy markets must be re-designed to allow for the greatest amount of participation by both demand and supply resources as soon as possible, and begin to pay more accurately for the firming capability and other services we need to keep the system intact
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The process for developing out the system through the Integrated System Plan and constructing the necessary transmission to achieve the best outcomes for consumers, as well as the markets necessary to make better use of existing and draw in new investment, must be agreed to and enacted. In particular, we cannot entertain any delay in the construction of transmission that has been identified as necessary to replace retiring power stations and that also increases reliability and reduces prices
The details behind our findings and calls to action are in the ESOO. I have found that in discussing our concerns and recommendations with industry, governments and responsible agencies, we have garnered largely unanimous understanding and support. What is critical is that we do not let this moment pass again, and move towards a bias of action and resolution with the recognition that what is at stake is the health and well-being of Australian families and businesses. They are entitled to a power system that meets their needs of affordable and reliable electricity all months of the year, this summer and in future summers as well.