2023 Federal budget: slight update SA and VIC named for cap scheme

Melbourne, Victoria

Further to Edge’s update on the 2023 federal budget shared last week, more information has become evident from Hon Chris Bowen’s MP office around the actual schemes to be introduced and their allocation of the budget.

There is no doubt Australia, as in much of the world, they are pinning their hopes on a Hydrogen Economy. The governments ‘modernised’ energy economy is being underpinned by a technology which yet is not to scale and is unproven, can anyone say carbon capture and storage (CCS)! Now I do not believe Hydrogen is another CCS boondoggle, but the amount being invested, and the legislation changes to allow it to occur are akin to those of its previous silver bullet government neighbour.

The budget has allocated half of the $4bn green energy package, $2bn, to the Hydrogen Fund. The idea is the investment will assist in the commerciality of these projects and allow for 1GW of capacity to be on the system by 2030. The allocation of this will come in the form of “production credits” and as was later confirmed these will be allocated via a ‘competitive process’ however details of this are scarce. The funding is likely to have come in part to keep up with our European and US counterparts who have signaled similar investment in the industry through their own budgets (the US giving a $3/KG (USD) tax rebate if it relates to H2 production.

This will be supported by the new REGO or Renewable Energy Guarantee of Origin scheme which was first floated in the papers released at the end of last year.  $38million has been allocated to the project which will be used to certify the energy and emissions from these projects.

The details around the controversial capacity scheme continues to be scarce. With ‘commercial sensitivities’ being touted as a reason for non-disclosure. However, we do expect these to be run state by state and through auctions, so we hope for more detail to be shared on this in the future, especially given SA and VIC have already been named to lead the charge on this later this year. The choice of these states is unsurprising given the high renewable penetration on those grids.

We have also seen a little more information come out around the function of the “Net Zero Authority” who received $83m on Tuesday. It is anticipated that they will be working with local state and territory governments as well as lobbyists and stakeholders to create a roadmap to net zero in those regions, focus will naturally sit in heavy mining regions such as Queensland, the Hunter Valley and Latrobe Valley. From the 1st July the executive agency will be established and they will be tasked with supporting those in heavy industry to transition into a low carbon economy, assist with policies around this and assist with investment in the regions. No small feat to say the transition is already well underway.

The South Australian island and running on renewables

On November 12th a series of storms passed through South Australia that had the potential to black out the whole state, as had previously happened in 2016. Whilst parts of South Australia did lose power, it was far less dramatic than the last weather event due to a significant amount of work that has been undertaken by AEMO to build a more secure grid since the 2016 blackouts.

In 2017 AEMO released a review of the events that had blacked out the state; the main cause was of course the extreme weather that had knocked over transmission lines as well as some wind farms not meeting protection standards. Similar to 2016, it was destructive storms that passed through South Australia and damaged the network on the 12th November. At 4:59 PM, the market was notified of a significant power system event due to the tripping of multiple transmission lines. Both elements on the Tailem Bend – Southeast 275kV transmission line had tripped. Some transmission towers were damaged and had fallen over, resulting in the South Australian grid being disconnected from the NEM. On Saturday at 6:03 PM, AEMO notified the market that South Australia had been reconnected to the NEM after the 275kV transmission line at Tailem Bend was returned to service.

During events like this AEMO invokes its power to manage system security; however, this time, it went a step further and constrained off-rooftop PV to maintain a secure level of Distributed PV (DPV) generation. AEMO switched off as many rooftop PV installations as possible during the middle of the day, a rare occurrence known as “islanding” of the state grid to maintain stability, designed to keep the DPV below the secure threshold. PV generation is not as easily controlled as other sources. At times South Australia can meet all domestic demand for power via rooftop solar and sends surplus to Victoria but this cannot be managed in an islanded state, therefore requiring the curtailment of the rooftop PV allowing AEMO to manage scheduled and semi-scheduled generation assets to maintain system security.

Smart metering is required to enable the shutting down of rooftop PV systems, however not all South Australian PV systems can be controlled remotely as they have older inverters. This resulted in only 50% of systems being curtailed. Over time as more rooftop PV systems are installed using smart inverters, there will be more control of their output. Currently, AEMO can control 100MW of PV generation, but during the recent event, it also used voltage control to trip off a further 300MW of rooftop PV out of approximately 1,000MW of installed capacity.

The South Australian network has now been re-synchronised to the NEM, and electricity is flowing between South Australia and the other states of the NEM as before. While South Australia was isolated from the NEM for a week, South Australia was powered by wind and solar for up to two-thirds of its electricity demand, with gas providing the difference. System stability is a delicate balance between the supply of electricity, the types of generators providing the electricity and the electricity demand from end users. This time, part of the solution was to encourage end users to consume more electricity, enabling a higher generation level. Before the curtailment, South Australia was supplied by over two-thirds of its demand via renewable generation.

While high levels of renewable generation are good for keeping electricity costs down, the savings can be eroded by high-frequency control costs and the need for a more expensive gas-fired generation to fill the gap when the sun is not shining, and the wind is not blowing.

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Battery Storage in SA is Not That Simple

Recent involuntary load shedding across South Australia, Victoria and New South Wales has led to a discussion on the current operation of the National Electricity Market.

On 9 March 2017 Atlassian co-founder Mike Cannon-Brookes tweeted that Tesla’s battery division could solve South Australia’s power problems in 100 days. This would occur by building ten 100 megawatt hour battery farms which Tesla confirmed that they would be able to provide in the requested 100 days. Since then, other battery providers have offered to provide quotes for a similar product. Since the tweets started, Mike Cannon-Brookes has received several offers to help with funding and on Friday 10 March asked Tesla for seven days to sort out politics and funding.

Battery storage has come a long way over the last four years and is widely considered a potential solution to integrating renewable generation into the grid. The capacity of the proposed solution would be more than sufficient to meet the supply shortages seen to date in South Australia. During the last brown out in, 100 MW for one hour would have prevented involuntary load shedding.

The problem in the short term is how to integrate the batteries into the market. Batteries work on direct current while most of the market works on alternative current. This means that the batteries would need to include an inverter. It is not certain that the current prices quoted would include this. The quote also doesn’t include local costs such as connection to the grid and installation. There are other potential issues with integration of batteries in the market. It is uncertain how a utility scale battery would register and comply with strict frequency standards.

The proposal has sparked renewed debate on the role that technology can play in solving the issues we are facing in the current energy market.

Heatwave conditions force load shedding in SA

A severe heatwave in South Australia yesterday culminated in increased usage that pushed demand beyond the capabilities of the generators. This led to outages in the network as the market operator commenced load shedding.

Demand was the highest it had been for three years with the maximum five-minute demand set at 3077.47MW at 6:15 p.m. market time. This is despite a continued uptake of residential solar photovoltaic (PV) systems.

There were some interesting announcements leading into the period. The Australian Energy Market Operator (AEMO) was aware this was an unusual event and published a market notice at 3:15 p.m. (market time) to be aware that temperatures would be high across SA, NSW and QLD.

There were concerns surrounding reserves for SA most of the day. AEMO operates with three Lack-of-Reserve (LOR) levels.

LOR1: If the largest unit fails there will be a LOR2 condition

LOR2: If the largest unit fails, there will be a loss of power

LOR3: There is an actual loss of power. There is no solution in which all demand can be met

There were several LOR1 conditions during the day but AEMO didn’t respond. More interestingly was a LOR2 warning at 5:13 p.m. (market time) stating that AEMO was aware of an actual LOR2 condition forecast until 7:00 p.m. (market time). Required contingency was 200 MW but there was only 114 MW available. AEMO decided not to intervene but wanted to seek a market response. As we now know, the LOR2 turned into an LOR3 as wind generation reduced.

Figure 1: SA Generation and Demand 08/02/2017


The orange area represents the available generation for the state with the grey and yellow being the maximum support from the interconnector. The blue line is SA (five-minute) demand. The heat didn’t dissipate as the day wore on. Electricity demand continued to rise with the addition of domestic air conditioners as residents were returning home. The drop in the orange availability represents the reduction in wind. As wind kept reducing in capacity, there was insufficient power in the state to meet demand and there were rolling brown-outs.

Figure 2: SA wind generation and spot prices 08/02/2017


The 30-minute wind generation data shows the drop in availability. Wind generation is affected during hot weather as there isn’t enough energy in warm wind.

There are wide reports that additional power stations were available but didn’t run. Torrens Island A and Pelican Point each had a unit which was not available. It is unlikely there was enough gas going to the power stations to start another unit.

It is very questionable what market response AEMO was expecting at 5:13 p.m. since all available generators were on (except one unit at Pelican Point and one at Torrens Island A). From the outside, it looks like they were hoping LOR2 would not become LOR3.

With temperatures forecast at similar levels today, more outages can be expected. With the political backlash, it is unlikely there would be an appetite to curtail residential customers again. This could mean that AEMO and the Government may prefer to take the risk with business and commercial customers instead.

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