THE rapid acceleration of renewable energy into the national electricity grid has led to a series of "critical" issues that need to be addressed with "absolute urgency", the federal government's Energy Security Board has said in reports published yesterday that say the electricity market needs a major overhaul rather than "a band-aid solution".
The major report, Health of the National Electricity Market 2020, proclaims a slight improvement in some of the six measures the board uses to assess the state of the grid.
But it says keeping the power supply within its "required parameters" is becoming "harder as variable renewable generation increases its presence in the NEM (National Electricity Market)".
We need more than a band-aid solution
New energy security board (ESB) papers on the grid after 2025 say demand management - including encouraging big power users to reduce or cut their demand at times of peak use - will be key to keeping the system running as operators and transmission companies deal with the unpredictability inherent in growing levels of wind and solar power.
The 2020 report said the "instantaneous" or underlying contribution of wind and solar was often about 50 per cent of total electricity consumption in the middle of hot, sunny days, while its annual contribution was about 16 per cent of total output.
It said there was no reason renewable energy could not provide up to 75 per cent of peak daily power needs, provided a series of technical challenges were overcome.
"Beyond 2025 there are no insurmountable reasons why the NEM could not operate at higher levels of penetration of renewable resources given the progress in technology worldwide," the health of the market report said.
As things stood, problems in maintaining the grid at its correct voltages and its alternating current (AC) frequency of 50 cycles per second had "increased with the growth in behind-the-meter [rooftop solar] and utility-scale weather-dependent generation along with an ageing and less reliable thermal generation fleet".
The report said there were ways to manage the issues but "efficient solutions" were complicated by "the significant pace of change".
Similar concerns were raised in earlier versions of the annual report, which began in 2017. The Australian Energy Market Operator (AEMO) outlined its own fears about grid stability in a report last month.
Yesterday's reports note that the national electricity market was designed around the era of base-load coal-fired power stations, which are designed to operate for long periods of time at more or less set outputs.
Competition between generators was based on prices set according to bids received in advance from base-load power stations.
Terminology is changing but base-load stations became known as "dispatchable" power sources: solar and wind farms became "non-dispatchable" sources.
New technology has helped wind and solar farms to manage and predict their outputs: regulators now often describe solar and wind farms as "semi-scheduled", with coal-fired stations being "scheduled" generators.
Initially, AEMO accepted everything that solar and wind farms could produce, and paid them at a rate set by bids from coal-fired stations.
Critics say this has given renewable generators an unfair market preference over coal-fired stations, and there have been calls for renewable projects to store all of their produced power in batteries, and to bid their battery power into the market in the way that the national market was designed.
Yesterday's reports confirmed that work was under way on means of "curtailing" or limiting solar and wind output to stop the grid being accidentally overloaded.
The chair of the ESB, former treasury adviser and Sydney Water CEO Kerry Schott, said progress had been made in "reliability, emissions reduction and network investment"
"But affordability for some consumers, system stability and the lack of investor confidence are critical things to face," Dr Schott said.
"We need more than a band-aid solution. Everyone agrees that energy supply and security problems are urgent priorities to address."
The first ESB market health report was published in 2017 and grid security has been regularly described as a "critical" concern.
The new report said power demand fell noticeably because of COVID-19, but concerns about "involuntary load shedding" - or blackouts - remained, particularly if unexpected peaks came at times of low renewable output.
The scheduled 2023 closure of Liddell contributed to "moderate" concerns about system reliability (a different measure than "security") but more power could be imported from Queensland and solar and wind projects with stated capacity of 900 megawatts were "under way".
The report predicted "a possibility of increased wholesale market price volatility".
"This is because higher-cost dispatchable generation or storage will be operated to fill the gap left by coal-fuelled generation at times that insufficient renewable generation is available," the report said.