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A new report by the Australian Energy Market Operator (AEMO) has found managing energy usage will be critical for energy security this summer.

 

The 2017 Electricity Statement of Opportunities (ESOO) confirms the need for additional investments and new approaches to ensure AEMO has a reliable portfolio of dispatchable energy resources capable of responding quickly and effectively to the dynamic needs of the power system.

 

Australia’s energy system is undergoing unprecedented transformation. Evidence of these radical transformations can be seen in the portfolio of supply resources in the National Electricity Market (NEM) over the last decade. Since 2014, new supply resources entering the NEM have been predominantly renewables.

 

AEMO’s ESOO modelling shows reserves have reduced to the extent that there is a heightened risk of significant unserved energy (USE) over the next 10 years, compared with recent levels.

 

Targeted actions, such as the pursuit of 1000 megawatts (MW) of strategic reserves across Victoria and South Australia, as well as through an innovative program of demand response with ARENA, are necessary to provide additional firming capability to reduce risks of supply interruptions.

 

Managing Director and Chief Executive Officer, Audrey Zibelman, said, “As the independent market and system operator, AEMO’s primary role is to maintain system balance.

 

“It is the physics of the power system that define the requirements for balance, and it’s our role to ensure that the resource is able to meet the demands of the system at a time and at a location where it is necessary.

 

“The power system does not have the reserves it once had, and therefore to balance peak summer demand in real time, targeted actions to provide additional firming capability are necessary to reduce heightened risks to supply.”

 

AEMO is indifferent to what fuels or technology resources are utilised. Firming capability can be dispatched to maintain balance on the power grid, and can include generation on the grid, storage, demand resources behind the meter, flexible demand, or flexible network capability.

 

“The challenges and transformation we are seeing are similar to those faced by other countries around the world. In the European, Asian and United States markets, it is increasingly recognised that changes in market design to retain and incentivise appropriate levels of investment in system security and reliability are required,” Ms Zibelman said.

 

“Affordable, secure energy for all Australians remains our goal, and AEMO is committed to continually reviewing global practices working with the Commonwealth and states, and through appropriate consultative processes to produce considered recommendations that can be adopted by the Energy Security Board and the COAG Energy Council.”

 

The Energy Efficiency Council’s Head of Policy, Rob Murray-Leach, welcomed AEMO’s Electricity Statement of Opportunities report.

 

“There is a genuine risk of power shortages this summer. We don’t have time to build enough extra generation before then, which makes energy efficiency essential,”  Mr Murray-Leach said.

 

“The Energy Market Operator made it crystal clear – we need to catch up with the rest of the world and use energy efficiency to keep electricity secure and affordable.”

 

AEMO’s new report makes a number of vital points:

  • There are genuine risks of power shortages in Victoria and South Australia in 2017-18

 

  • The risks of power shortages will be much worse in Victoria and South Australia if we don’t improve our energy efficiency and demand rises faster than expected

 

  • Demand response will be critical to keep the lights on

 

Under AEMO’s new ‘demand response program (part of the Reliability and Reserve Trader (RERT) scheme), energy users will be paid to voluntarily reduce their energy use during emergencies (when demand for electricity exceeds supply). This will allow the system operator to keep power flowing to all homes and businesses.

 

AEMO reports that Australia is a long way behind the rest of the world in adopting demand response. Every energy market faces emergencies, such as storms or generators malfunctioning. The cost of having extra generation sitting idle for more than 99 per cent of the year is incredibly expensive.

 

“We’re delighted that AEMO has followed the rest of the world and introduced a demand response program. This reform is long overdue – the dinosaurs in the energy market who got us into this mess resisted it for years,” Mr Murray-Leach said.

 

“We’re looking forward to working closely with AEMO to turn Australia into a global leader in affordable, reliable electricity.”

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