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Maximising solar to support Australia’s evolving grid, part 1

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Kurt Winter
01 November 2021

Australia has fallen in love with rooftop solar PV, leading the world in its uptake, with investment reaching almost eight times the worldwide average in 2020.

Many Australians are taking advantage of our abundant natural sunshine, installing solar systems on their homes to take control of their energy consumption and reduce their energy bills.

As the Australian Energy Regulator highlights in its State of the energy market report 2021, rooftop solar uptake is driving down consumption and electricity bills in most places. It’s also contributing enormously to the mix of generation in the electricity grid.

Last month a record maximum of 40% of electricity used by consumers (underlying demand1) in the mainland National Electricity Market (NEM), was met by solar PV. Demand supplied from the NEM (Operational demand2) also reached a new minimum record of 12,936 MW on 17 October.

In some parts of the NEM, solar PV has contributed even more. AEMO reports that South Australia achieved periods with up to 78% of underlying demand met by distributed PV and is the first gigawatt-scale power system in the world to approach periods with 100% of underlying demand being supplied by distributed energy resources (DER).

As well as helping to reduce emissions, solar PV is delivering savings to consumers across the board. While solar PV owners can save on their electricity bills, the broader customer base benefits too, as an abundance of renewable energy places downward pressure on wholesale energy prices.

With this rapid growth, there has been much discussion recently about how we maintain precise supply-demand balance and ensure the whole electricity system operates securely.  This story looks at some of the challenges associated with that issue.

 

Supporting electricity system security

As solar PV generation increasingly meets overall demand, it places downward pressure on the minimum operational demand for large-scale centralised generation units in the NEM. The supply-demand balance of the NEM currently relies on the dispatchability of centralised units (particularly coal, gas and hydro that can be dispatched on demand) to supply essential system security services (such as system strength, inertia, frequency control, voltage control and reactive power management, and ramping management).

AEMO’s analysis suggests that minimum operational demand is extremely sensitive to the ongoing uptake of solar PV, weather conditions, and local economic activity.  That is because when consumers meet their energy needs with their own DER assets (such as solar PV), demand for energy from the grid is reduced.

The reduction of operational demand has implications for the operation of central generation assets, that would otherwise provide system security services. By reducing operational demand these system security services are displaced.

While the wholesale energy market provides pricing signals on the value of energy every five minutes in a particular settlement period (including negative prices), this equation does not fully account for the security of the electricity system, that is also managed through active performance and visibility requirements to support network and market operations.

In the current market arrangements, it is cheaper to run some central generation because of the high cost that would be entailed in ensuring systems security if these services are not provided.

AEMO estimates that based on the physical assets currently available in the NEM, a minimum of approximately 4-6 GW of operational demand is required in the NEM to support minimum generation levels of units providing the required essential services. And based on AEMO’s forecasting, demand could fall to this threshold in 2025, or 2024 in some scenarios.

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AEMO 2021 Electricity Statement of Opportunities (August 2021)

While investment in assets that can provide these essential services could reduce that estimate, there are still important implications for the way in which uncontrolled solar PV will need to interact with the grid to support continued system security, by making it possible to gain visibility of solar PV and actively manage it through enhanced visibility and active management.

It is important to note that most solar PV systems installed today are ‘uncontrolled’ – which means that although they have the hardware to be controlled remotely, there is no requirement for them to be.

Remotely managing solar PV could play a valuable role in mitigating an overabundance of generation into the NEM and ensuring that essential system services are provided by central generation assets to maintain overall system security.

State subsidy schemes are turning their attention to this challenge – looking at ways to effectively manage these assets so that solar generated energy can continue to feed into the NEM, whilst maintaining the security and reliability of the system.

From a technical standpoint, smart solar PV could also be ramped up and down to accommodate other resources and support the stability of the grid. This generation flexibility could be utilised to respond at the transmission level, to support whole of system security.

AGL’s Virtual Power Plant (VPP) provides a real-life example of how, with the right incentives, customers’ DER can be coordinated to support power system operations and electricity markets.

Whose role should it be to manage solar assets?

Policymakers are only beginning to grapple with the issue of minimum operational demand, as seen in the South Australian Government Smarter Homes reforms and the Energy Security Board’s Post-2025 Market Design Project.

In developing an approach to actively managing customers’ solar PV, we believe it is critical that their participation is value accretive, rewarding the generation flexibility that they provide to the electricity system at least equal to the actual generation itself.

A question that arises is, if the consumer’s flexibility is to be valued as a service to the network and the grid, who is best placed to manage a consumer’s solar assets to support ongoing grid security, and should a solution be mandated through their grid connection or mediated through the competitive retail market?

In the next instalment we will delve further into the options available to manage this issue.

Kurt was recently engaged by the Energy Security Board (ESB) as the retail representative on the DER Maturity Plan Pilot Steering Cohort, that spearheaded industry co-design on the issue of minimum operational demand as part of the ESB’s broader Post-2025 Market Design Project.

1 Underlying demand means all the electricity used by consumers, which can be sourced from the grid but also, increasingly, from other sources including consumers’ rooftop photovoltaic (PV) and battery storage.
2 Operational Demand in a region is demand that is met by local scheduled generating units, semi-scheduled generating units, and non-scheduled intermittent generating units of aggregate capacity ≥ 30 MW, and by generation imports to the region. It excludes the demand met by non-scheduled non-intermittent generating units, non-scheduled intermittent generating units of aggregate capacity < 30 MW, exempt generation (e.g. rooftop solar, gas tri-generation, very small wind farms, etc), and demand of local scheduled loads.