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New report released on the stability of the South Australian electricity system

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AGL Energy
19 February 2016

A new report has been released today investigating the stability and security of the South Australian electricity system, taking into account market changes such as the high penetration of renewable energy generation sources, and the planned closure of a number of thermal power stations in the state.

The report, titled Update to Renewable Energy Integration in South Australia, has been jointly released by the Australian Energy Market Operator (AEMO) and ElectraNet, the South Australian electricity transmission provider.  It finds that under normal operating conditions, the South Australian power system can continue to operate reliably, however, the stability of electricity supply is increasingly dependent upon the Heywood Interconnector between South Australia and Victoria.  It also highlights that increasing intermittent electricity generation from wind and solar, along with the withdrawal of 'synchronous' thermal generation is making the system more susceptible to rapid changes in frequency in the event that the interconnector is not available and South Australia becomes separated from the rest of the National Electricity Market (NEM).  There may be a need for critical system support services, such as frequency control, which have historically been provided by large conventional generators to be delivered by other sources.  Click here to read more about the report.

Research completed by AGL economists has shown that the interaction of energy-only markets and renewable energy targets may give rise to unsustainable market outcomes. AGL supports government policies that effectively incentivise the development of new renewable and low emissions electricity projects, complementary policies to ensure that older emissions intensive power stations exit the market in an orderly fashion, and for market settings in the NEM to support the orderly decarbonisation of the electricity sector over time.

As more intermittent renewable generation enters the market, wholesale prices are likely to become volatile, with very low prices for much of the year and a handful of extreme pricing events.  Energy-only markets do not place a value on reliable capacity so there may be merit in policy makers assessing whether a new fit-for-purpose market design is necessary to incentivise reliable capacity to be available at times of low renewable energy output.