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IFN AiE Presentation May16 web
- 1. Renewable Energy inthe NEM Presentation to the Australian Institute of Energy May 16, 2016
- 2. Agenda Arial Bold28pt 2 • Global Renewable Energy Market • Renewables in Australia • South Australia • NSW • Progress towards meeting the LRET • Future Energy/Climate policy options • Conclusion Presenter: Jonathan Upson Senior Development & Government Affairs Manager Agenda
- 3. 3 Location: New SouthWales Status: Operational January 2010 Installed Capacity: 140.7MW Turbine: 67 Suzlon 2.1MW S88 Location: Western Australia Status: Operational January 2006 Installed Capacity: 89.1MW Turbine: 54 NEG Micon NM82 Location: South Australia Status: Operational March 2005 Installed Capacity: 80.5MW Turbine: 46 Vestas V66 Location: South Australia Status: Operational September 2008 Installed Capacity: 159.0MW Turbine: 53 Vestas V90 Location: South Australia Status: Operational June 2010 Installed Capacity: 39.0MW Turbine: 13 Vestas V90 Location: New South Wales Status: Operational October 2011 Installed Capacity: 48.3MW Turbine: Suzlon 2.1MW S88 Infigen - Australia’s leading wind energy business ALINTA LAKE BONNEY 2 LAKE BONNEY 1 LAKE BONNEY 3 WOODLAWN CAPITAL
- 4. 4 Infigen Energy’s NSWInvestment • Operational – $374 Million Capital Wind Farm near Bungendore, NSW – $115 Million Woodlawn Wind Farm, near the Capital Wind Farm – Capital East Solar PV Demo/Energy Storage Facility • Planning Approved – 70-100 MW Capital II Wind Farm – 100 MW Bodangora Wind Farm – 120 MW Flyers Creek Wind Farm – 37 MW Capital Solar PV Project – 40 MW Manildra Solar PV Project
- 5. Wind Energy was#1 for new build worldwide in 2015 5 More wind energy capacity was installed in 2015 than any other electricity generation technology
- 6. Renewable technologies madeup over 60% of electricity capacity additions worldwide in 2015 6 Renewable Energy Investments: Major Milestones Reached New World Record Set United Nations Environment Programme, Bloomberg New Energy Finance March 14, 2016
- 7. Is there anotherindustry in the world with such a high and sustained rate of growth? 7 Global Wind Energy Outlook 2015 Global Wind Energy Council April 2016
- 8. Renewable energy isapproaching 40% of SA’s electricity generation 8South Australian Historical Market Information Report AEMO August 2015 Wind Solar PV Coal Gas Interconnector
- 9. Emissions have declinedby 22% in the past four years 9South Australian Historical Market Information Report AEMO August 2015
- 10. Electricity emissions risingsignificantly after declining 16% in five years 10cedex Pitt & Sherry November 2015
- 11. Wind was thedominant source of SA electricity for ten days last year 11 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% SA Generation by Fuel Type as % of SA Demand - 04/05/2015 to 13/05/2015 Wind % Gas % Brown Coal % Infigen graph of AEMO data
- 12. 12 Wind generation isvery predictable NEM wind generation is forecast with 97-98% accuracy one hour ahead of time 12 1-NMAE (%) Data from Figure 64, 100% Renewables Study – Draft Modelling Outcomes, AMEO April 2013 NMAE: Normalised Mean Absolute Error
- 13. AEMO Data: Windenergy lowers wholesale prices in SA 13 2014 South Australian Electricity Market Economic Trends AEMO, September 2014
- 14. Simplified Wholesale ElectricityMarket Bid Stack 14 Electricity Demand 4,000 Electricty Volume (MW) GAS (CCGT) - $60/MWh 2,500 2,000 1,500 1,000 500 6am 8am 10am Noon 2pm 4pm 6pm 8pm 10pm GAS (OCGT) - $150/MWh WIND - $5/MWh COAL - $35/MWh Average Electricity Price = ~ $70/MWh
- 15. Same Bid Stackwith A Bit More Wind Generation More expensive generation not needed 15 Electricity Demand 4,000 Electricty Volume GAS (CCGT) - $60/MWh (MW) 2,500 2,000 1,500 1,000 500 6am 8am 10am Noon 2pm 4pm 6pm 8pm 10pm GAS (OCGT) - $150/MWh WIND - $5/MWh COAL - $35/MWh Average Electricity Price = ~ $45/MWh
- 16. Inverse relationship ofwind generation to pool prices clearly demonstrated earlier this month 16 Infigen graph of AEMO data
- 17. Six independent electricitymarket modelling studies have shown the LRET does not raise electricity prices • ACIL Allen’s modelling for the Warburton Review confirmed the earlier results from SKM (Jacobs), Schneider Electric, ROAM, IES, and Bloomberg • All six studies generated similar results; reducing the LRET causes: – Retail prices to decrease by a small amount in the short term – Followed by retail prices increasing by a larger amount in the medium - long term • The AiGroup, representing over 60,000 businesses, recognised this in their RET Review submission, and in a more recent media release – “Across the board, analysis of the RET has concluded that large reductions in the target would leave energy users worse off.” 17
- 18. Causes of SouthAustralia’s high wholesale electricity prices • Lack of effective competition in generation • Over 95% of dispatchable generation relies on increasingly expensive gas – Rising, volatile gas prices resulting from LNG exports • SA is interconnected to only one State – NSW and Victoria are connected to multiple States which is beneficial • SA has the highest peak to average load ratio of any State – Resulting in ‘additional’ peaking plants and power lines that are rarely used 18
- 19. 19 There is significantcompetition in the Australian Wind Energy Market Australian Wind Farm Owners (operating MW)1 Ecogeneration and company websites (2015). Infigen Energy 14% China State Power Investment 10% Trustpower 9% Shenhua/ Hydro Tas 8% Acciona 6% Malakoff 5% Morrison 5% UBS IIF/REST 5% Meridian 5% Goldwind/Jingeng 4% InfrastructureCapital Group 4% Energy Infrastructure Investments 3% AGL 3% Wind Prospects 3% Mitsui 3% 20 Others 13%
- 20. South Australian thermalgeneration market is not very competitive 20 Generation capacity and retail offtake data from State of the Energy Market 2015 AER December, 2015
- 21. EUAA recognises alack of competition in SA 21
- 22. Queensland – anotherless than competitive electricity market • Queensland had the highest wholesale electricity prices in the NEM for FY15 – $52.18 (vs $39.38 for SA) • Similar situation to SA---two dominant generators (Stanwell and CS Energy) – These state owned generators own almost 2/3 of the State’s generation capacity • AER states “generators including Stanwell, CS Energy and Callide periodically rebid large volumes of capacity from low to very high prices late in a trading interval.” – Ernst & Young estimated late re-bidding added $7-8/MWh to Queensland price cap contracts in the six months up to March 2015 (AER) • Queensland had the highest prices in FY15, but they have negligible wind generation – Wind farms did not cause Queensland to have the highest wholesale prices last FY 22 Source for AER statements: State of the Energy Market 2015 AER December, 2015
- 23. Expensive peaking plantgeneration in SA has declined as wind energy penetration increased 23 Peaking Capacity, CO2-e Emissions and Pricing in the South Australian Electricity Grid with High Wind Penetration 2005-2013 Dr David Osmond, Luke Osborne Windlab Systems May 2014
- 24. SA was muchmore reliant on interconnectors before wind farms 24 Plotted from AEMO data -500 0 500 1000 1500 2000 2500 3000 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Wind Capacity (MW) Net Interconnector Imports (GWh)
- 25. SA Electricity SystemReliability • “…about 95 per cent of reliability issues in the NEM originate in the distribution network sector.”1 – Only 5% of outages are caused by issues in the high voltage transmission network or electricity generation plants • While AEMO continues to evaluate potential future SA electricity market issues, – “AEMO has not identified any system security challenges that cannot be managed through existing processes and procedures” in conjunction with the closure of the Norther Power Station2 25 1 State of the Energy Market 2015 AER December 2015 2 Update to Renewable Energy Integration in South Australia AEMO and Electranet February 2016
- 26. Frequency Control &Ancillary Services (FCAS) • The FCAS market procures services to maintain electricity network frequency at 50Hz – Normal FCAS charges for all of SA are typically less than $35/hour • FCAS can be ‘imported’ via interconnectors; therefore, provision of FCAS is a non-issue when the Heywood interconnector is operational • Likewise, system inertia (which reduces the rate of frequency change) can be supplied over an interconnector – Historically, the Heywood interconnector has tripped about once every two years • For several weeks in Q4 of last year, SA FCAS charges exceeded $25 Million during scheduled outages of one circuit of the Heywood interconnector – These charges were shared roughly 50/50 between electricity customers and SA generators • The Australian Energy Regulator in their report1 made it clear the two primary causes for the excessive FCAS prices were: – AEMO implemented changes to established FCAS protocols with little warning to market participants and customers – Late rebidding of capacity from low to very high prices by two market participants 26 1 Report into Market ancillary service prices above $5000 South Australia, 11, 12 and 25 October 2015 AER December 2015
- 27. Power outage inSA on November 1st • Line two of the Heywood interconnector was off-line for scheduled work as part of the interconnector upgrade • Line one of the interconnector “tripped when an automated test signal was unexpectedly interpreted by the new relay as a trip signal.” • AEMO makes it clear in their report that there was no relationship between the power outage and wind farms in SA • There were delays reconnecting SA to the NEM caused by difficulties stabilising the SA electricity network frequency at 50Hz – However, AEMO also makes it clear in their report that these difficulties were caused by issues with thermal generators---not wind farms 27 Source: Load Shedding in South Australia on Sunday 1 November 2015 AEMO February 2016
- 28. 28 Installed Wind EnergyCapacity by State Clean Energy Report 2014.,CEC June 2015 NSW currently ranks 4th for wind farm investment and jobs NSW NSWNSW
- 29. NSW forecast toachieve the largest share of renewable investment over the next decade 29 RET Review Modelling ACIL Allen August 2014
- 30. Renewables in NSW •NSW has 660 MW of wind energy installed today – Two large wind farms committed to be built in the New England region of NSW – Goldwind’s 175 MW White Rock and CWP’s 260MW Sapphire wind farm • NSW is leading the country with 175MW of installed large-scale solar projects – Together, wind and large scale solar make up about 5% of NSW’s generation • In 2014, about 11% of NSW’s electricity came from renewable sources – NSW REAP calls for 20% of electricity to come from renewables by 2020 • In order to meet the bi-partisan 33TWh LRET target, the CEC estimates that about 6000MW of new generation capacity worth $10 Billion and creating 6500 jobs are required by 2020 – NSW should capture about half of these new jobs and investment 30
- 31. Retailers have only4 options to meet their legislated LRET obligations 1. Build large-scale renewable developments they own (as AGL has largely done) 2. Purchase, and then build, developments from other companies 3. Negotiate Power Purchase Agreements (PPAs) with developers enabling them to finance and build projects 4. Purchase LGCs from the spot market – The Clean Energy Regulator, and energy analysts, have made it clear that this is not a viable option for the three large retailers The first three options have a 18-24 month lead time
- 32. Clean Energy Regulator’sRET Annual Statement 32
- 33. Clean Energy Regulator’sview 33
- 34. Renewables penetration byState in 2014 34Clean Energy Report 2015 CEC June 2015
- 35. Can the restof the NEM accommodate SA’s market share of renewables? • South Australia accommodates 40% variable RE market share today without significant issues • Current LRET target of 33TWh (~23% RE) can also be achieved without significant technical issues or economic impact for customers • Other States will not approach SA’s variable RE market share for at least 10 years without very significant changes to current policies • In less than 10 years, higher levels of renewables will be facilitated by – Solar Thermal which will be more cost competitive – ‘Baseload’ renewables automatically providing FCAS and inertia – Large-scale battery storage which will almost certainly be cost competitive – Other technologies will also contribute 35
- 36. Facilitating the energytransformation/modernisation • There are significant disincentives for older, more polluting generators exiting the market – First mover disadvantage – Significant redundancy/remediation costs – Lose ability to realise higher prices/payouts which they hope might occur • Several proposals on the table to ‘encourage’ high emitting power stations past their use-by-date to close – Brown Coal generator paid to close from levy on remaining coal generators (Frank Jotzo, ANU) – Change Safeguard mechanism to reduce electricity emissions (Grattan) – Emissions Intensity Scheme (AEMC) – Regulatory Closure (based on age?, emissions?) • It is more important that effective bi-partisan action is taken that will survive the next election(s) than which mechanism is selected 36
- 37. Preliminary CCA modellingof electricity abatement options 37 Report urging carbon tax on power withheld Peter Hannam www.smh.com.au May 6, 2016
- 38. LRET found tobe the most efficient wind energy support scheme in the world 38 International support for onshore wind Frontier Economics (UK) June 2013. PPP: purchasing power parity
- 39. In summary 39 Consumer PriceIndex and Retail Electricity Prices
- 40. Conclusion • It’s clearthere is serious momentum to decarbonise electricity generation around the world • South Australia is not an experiment that has gone wrong – Renewables apply downward pressure on wholesale electricity prices – There is no threat to the security of supply today (AEMO) – Electricity emissions have declined dramatically • There are no technical issues, or significant economic impacts of, achieving the LRET target of 33TWh in 2020 • Higher levels of renewables penetration will be facilitated by new technologies (solar thermal, batteries, etc.) – Modernisation of Australia’s electricity generation fleet will occur 40
- 41.