More gas, interconnectors on COAG energy agenda

Federal Energy and Environment Minister Josh Frydenberg is confident state and territory leaders will agree to significant changes to the National Electricity Market (NEM) this week as South Australian energy prices are pushed to the maximum $14,000/MWh

New interconnectors between states to deal with the problems caused by the intermittent nature of of wind and solar as well as a push to boost gas supply will be on the agenda at Friday’s COAG Energy Council meeting – the first since the South Australian power crisis last month.

While changes to the NEM are expected to be incremental, at least initially, Mr Frydenberg said he had spoken to all state and territory energy ministers and there was a “real willingness to work closely together and drive reform”.

“By and large everyone is on the same page. The point about the South Australian and Tasmanian experience is they were a wake-up call about the need to prepare for the transition underway with renewables making a greater share of our energy mix,” Mr Frydenberg told The Australian Financial Review.

“Reform is always difficult in this area because of the complexities, numerous stakeholders and state and federal governments having shared responsibilities. However, I’m hopeful of some significant reforms coming out of the meeting. The NEM has to reflect realities.”

The meeting comes as ongoing repairs to the interconnector between Victoria and SA have pushed electricity prices back up to the maximum price of $14,000/MWh late last week.

The last outage on Thursday was estimated to have cost $8 million for the day with the price being shared between generators and retailers. Some estimates for the costs of frequency services during maintenance over the next month to be more than $20 million.

The latest power issues in SA have raised concerns about whether wind or solar can provide the network stability for reliable energy supply for households and business as coal exits the NEM.

The Australian Energy Market Operator (AEMO) is currently upgrading the interconnector between Victoria and SA to ensure it does not become stranded from the NEM – an event which has happened nine times since 1999.

At the moment, only synchronous generation like coal or gas can provide the 50 hertz frequency – known as frequency control ancillary services or FCAS – that the NEM requires for stable electricity supply. When wind and solar energy supply varies, the NEM needs to be topped up or scaled back to operate properly.

Normally such frequency control can cost as low as $1/MW but, in SA, it has soared this year.

AEMO has required SA to procure 35MW of FCAS from within the state to ensure it does not become an “island” if there are problems with the interconnector with Victoria.
Original article published by The Australian Financial Review.