Future of the Australian Electricity Market

[Bushmiller]

I have started this thread as one to which general comments on the state of play in the electricity market can be added. This is partly because any time an associated electricity thread arises we almost inevitably gravitate towards electricity generation and in doing so tend to hijack the original thread. The latest example of this was in Glider's thread on electric vehicles.

Towards the end of that discussion a question was asked by Chris Parks on whether a media article was hype or reality:

Media hype??? Electricty market: Coal plants in peril as prices plunge

So perhaps I can start by giving my interpretation on that. The answer is both yes and no. The coal fired plants are already having to adapt to the increasing emergence of renewable power. Solar power has "stolen" the daytime demand. That in itself is a little fudged as there is some guarantee in place for the solar installations on prices and consequently it is not just market driven. The thermal plants can only reasonably make a sustainable income during what I have taken to calling the "sunless" times of the day. This implies that a station which relied on operating at high load for the majority of the day can no longer do so.

Back to the question, Are they in Peril? They are approaching this point but probably more slowly than the article implies. The oldest stations will be the first to be impacted severely, but all thermal stations are affected to some degree. Eventually of cours the stations will be in peril to the point where they will close as they are no longer viable. There is another issue in that the last seven coal fired stations were all built in Queensland. Theoretically, they are the newest and most efficient and would be the last to be shut down, but they are all in the same geographical location and while the Eastern Seaboard has a grid that is interconnected there are issues transporting power over these distances.

For the moment the thermal stations are required to control frequency (maintaining 50Hz) and solar power is unable to do this: Another reason why thermal stations cannot be immediately stopped.

Regards
Paul

[woodPixel]

It would behoove Coal plants to think that their futures are secure.

Tech seems to be going nuts right now.... it probably wont last, but its certainly going for the fat underbelly of the coal-dinosaur.

This from today... and I wasn't even looking!

Cyprus, Greece and Israel on Monday signed an initial agreement to build the world's longest and deepest underwater power cable that will traverse the Mediterranean seabed at a cost of about $900 million and link their electricity grids. The project, called the Euro-Asia interconnector, will provide a back-up power source in times of emergency, said Israeli Energy Minister Yuval Steinitz, who was in Nicosia to sign a memorandum of understanding with his counterparts. Cypriot Energy Minister Natasa Pilides said it marked "a decisive step towards ending the island's energy isolation, and consequently, our dependence on heavy fuels."

The cable will have a capacity of 1,000-2,000 megawatts (MW) and is expected to be completed by 2024, according to Israel's energy ministry. With a length of about 1,500 km and a maximum depth of 2,700 meters, it will be the longest and deepest subsea electricity cable to have ever been constructed, it said. Calling the project a "2,000 mega-watt highway," Pilides said the first stage is expected to be operational within 2025. It will cover three sections of the Mediterranean: some 310 kilometers between Israel and Cyprus, about 900 kilometers between Cyprus and Crete, and about 310 additional kilometers between Crete and mainland Greece. Greek power grid operator IPTO has started construction of the Crete-mainland part, seen concluding by 2023. The Greek operator and Eurasia have been working closely to make sure the two cables link to each other efficiently, an IPTO official said. The European Union has recognized the cable as a "Project of Common Interest", categorizing it as a project it is willing to partly finance.

and even this

Elon Musk is getting into the Texas power market, with previously unrevealed construction of a gigantic battery connected to an ailing electric grid that nearly collapsed last month. The move marks Tesla's first major foray into the epicenter of the U.S. energy economy. A Tesla subsidiary registered as Gambit Energy Storage LLC is quietly building a more than 100 megawatt energy storage project in Angleton, Texas, a town roughly 40 miles south of Houston. A battery that size could power about 20,000 homes on a hot summer day. Workers at the site kept equipment under cover and discouraged onlookers, but a Tesla logo could be seen on a worker's hard hat and public documents helped confirm the company's role. Property records on file with Brazoria County show Gambit shares the same address as a Tesla facility near the company's auto plant in Fremont, California. A filing with the U.S. Securities and Exchange Commission lists Gambit as a Tesla subsidiary. According to a document on the city of Angleton's website, the installation will use lithium iron phosphate batteries that are expected to last 10 to 20 years. The document says that it will generate around $1 million in property tax revenue for the city and the site will be unmanned but remotely monitored.

[Chris Parks]

Australia to Singapore interconnector driven by solar.

Australia to fast-track world's largest solar-battery project with grid link to Singapore | Recharge

[Bushmiller]

Australia already has a DC connector between Tasmania and Victoria. The primary purpose was to ensure continuity of supply if the Hydro stations dried up. Unfortunately greed and the competitive market allowed the Tasmanian suppliers to export too much power to Victoria and when the submarine link damaged and was out of service for nearly a year Tasmania was in the mire (my euphemism does not really describe how serious the problem was: It was deep).

The link to Singapore does not yet have approval at the Asian end from reading the article Chris highlighted. 4500Km under sea is a lot of of enormous cable to get your money back on.

The Tesla battery scheduled for Texas is the same size as the battery installed in SA. Interesting to note that Texas has the largest electricity consumption of all the US states. I think it would be a little like attaching half a dozen cordless tool batteries to Tasmania. Having said that, we have to start somewhere: I don't think we should place too much store in what is another Tesla marketing exercise. 100MW for one hour: Phew!

Regards
Paul

[Bushmiller]

How do the electrical generators price their power? Well, we have to remember that it is a competitive market and successive state governments said collectively that it would be good, because competition is good.

Careful what you wish for.

Traditionally power stations were situated within the load centres. So in Sydney there was Pyrmont for example and in Brisbane we had Tennyson. Various Powerhouse buildings were of course once power stations and now function as museums or theatres. However, people did not really want power stations belching smoke all over their clean washing and generally being an eyesore and in addition the cost of carting their fuel, which was coal, became increasingly expensive. So over time the installations were moved out towards the country and closer to the coal sources.

The other main requirement was water for cooling. For a long time stations were situated near the coast and used sea water for cooling. Lake MacQuarie was a good example of this. Eraring and Vales Point are still there and Wangi once was. The cost of their fuel is high because it has to be transported some distance. The most economical stations sit on top of an associated coal mine. Please be patient for a while longer as I am leading up to why some stations will close before others.

In my introductory sentence I questioned the price structure. The market is competitive and owners of stations wish to make a profit. The price the market will stand is moderated by the price at which your competitors are prepared to offer their product. Simple economics there: Supply and demand. Let us take a completely hypothetical station. I am thinking coal fired, but it need not be restricted to that. To make a profit we need to sell our electricity at a minimum of $75/MWhr. Our fuel supply costs $60 per tonne and we use half a tonne to generate one MW. This means we will still supply electricity down to a market price of $30/MWhr, because at least we are getting some revenue. Once the price goes below the cost of our fuel we are losing money and need to shut down. (I have rounded figures for simplicity)

The analogy we use is that if you own a truck, even if it sits in the yard it costs money (lease costs, driver wage etc).These are the fixed costs. Any money you get for a job lessens your loss while ever it is more than your fuel cost. Long term this is unsustainable, but short term it may tide you over until profitable jobs come along.

If the price goes below $30/MWhr we start to run back our supply and ideally we we stop generation completely, but for various reasons a coal fired station may not do this. Primarily because the costs associated with restarting are too high. Consequently the station wears the loss for a limited period in the hope it will recoup those losses at a later point in the day (or the week or the month etc..). At some point this method of operation is no longer viable so you can see that the stations with high fuel costs will be the first to go.

Equally you can see that the gas turbines (they still produce CO2 and can in no way be considered clean, green or otherwise environmentally friendly), which have the capability to shut down quickly have an advantage and in that regard are more flexible. However, their fuel cost is high, which is their disadvantage and will often preclude them from entering the market unless prices are high. Likewise, when the price goes negative, which it does, the solar can just switch off: Easy. The problem for them now is that this is the only time they can generate. A problem that they very likely never anticipated.

The sequence of power stations shutting down will be those with high fuel costs and then the less efficient stations. The stations that have formulated a transition plan towards renewable dominance will also be better placed and that plan may have many facets. The ostriches are doomed from the outset.

Regards
Paul

[Beardy]

Bushmiller it is refreshing to get the no nonsense state of play rather than the marketing hype and dribble from those with hidden agendas

I appreciate your informative posts

[Bushmiller]

This is a snapshot of the grid and spot prices from yesterday at 1125hrs yesterday:

Spot market 9 March. 1125hrs..PNG

Do bear in mind this was just a snapshot that represented a five minute segment, but interesting to note that the two states with the most solar power , QLD and SA, were at $0 and $-190.

In QLD the thermal generators would have begun to reduce their load as fast as they are capable of and Solar station would have been considering switch off their panels. The SA situation was more severe. You may be asking how anybody can sustain negative prices. The reason is that this is not the whole story. The MWs are almost a true value, but I think the rooftop solar may not be included. The spot price is only for surplus power above the contracts. Contracts provide a reliable income source for the generators and a reasonable price for the consumers to insulate them from ridiculously high price spikes. In practice a generator's contracts may be around 50% of their capacity. They are usually reluctant to contract more than this as if they are unable honour the contract, they themselves have to purchase from the spot market. possibly at very high prices.

The prices in the other states I would guess are covering the cost of the fuel but are a long way short of profitability.

Regards
Paul

[Bushmiller]

I received an email today from the Greens party announcing that the Yallourn Station in Victoria is closing down early. This was topical as Chris Parks had prompted this thread with his link questioning whether stations having to close was reality or media hype.

Initially the thoughts that went through my mind were that Victorian stations burn brown coal and are arguably very dirty in terms of pollution so it sort of made sense. The ancient Hazelwood station was shut down a while ago being one of the dirtiest stations of all time. However I read on and while it is true that it is shutting down, it will not be until 2028! This is the type of media hype that I believe borders on unconscionable. The article initially implied that this would be happening this year: Or perhaps in my innocent and all trusting mind I read that into it.

When reading such articles I think it is increasingly important to note where the information is coming from and the likelihood of an agenda or other vested interest. Very important to to see if something is proposed or actually happening and, as in the case of Yallourn, the timeline.

Some information on Yallourn, which interestingly states it's coal supply was due to run out in 2028!.

Yallourn Power Station - Wikipedia

Regards
Paul

Edit: One of my colleagues worked at Yallourn many years ago and he felt they had ample supplies of coal: More likely it is their current coal lease that expires in 2028.

[NCArcher]

I did the majority of my apprenticeship at the Yallourn power stations. Stations A and B were decommissioned long before I got there. I decommissioned C and D. And E was decommissioned while I was working at Loy Yang. I worked at W for a couple of years as a first and second year apprentice.
Paul I don't think the power stations have a coal lease as such. The coal mines only provide coal for the power stations and are owned by the same people. The power stations and mines used to be government owned but were sold off 20 odd years ago. Yallourn W is the only power station left taking coal from the Yallourn mine.
Incidently, I was born in the Yallourn open cut mine. There used to be a town called Yallourn that was constructed to house the workers who were building the power stations. When the mine needed to expand to access different areas of coal, the town was demolished and became part of the open cut mine. In my first six months as an apprentice we were sent into the now abandoned town to strip electrical equipment from the buildings before they were flattened. I've still got some signs from the theatre. We removed all the projection equipment and sent it to a university for whatever film making course they were teaching. That was a very long time ago.

[Lappa]

Thanks for this thread Bushmiller. Just a question.
Maybe I’m reading it wrong but I can’t see $-190 for SA? I see $190. Does the fact that it’s in brackets mean it’s a negative figure?

[Bohdan]

The brackets around the value is the accountant's way of designating a negative value.

[woodPixel]

Thanks for this thread Bushmiller. Just a question.
Maybe I’m reading it wrong but I can’t see $-190 for SA? I see $190. Does the fact that it’s in brackets mean it’s a negative figure?

Brackets are an accounting function indicating a negative number.

[Bushmiller]

Thanks for this thread Bushmiller. Just a question.
Maybe I’m reading it wrong but I can’t see $-190 for SA? I see $190. Does the fact that it’s in brackets mean it’s a negative figure?

Hi Lappa

Yes that is exactly right. We used to provide these graphics with a "minus" sign, but I think the accountants got to the traders and said you must place the negative figures in brackets.

That "snapshot" updates every five minutes with revised information.

Regards
Paul

[Bushmiller]

I did the majority of my apprenticeship at the Yallourn power stations. Stations A and B were decommissioned long before I got there. I decommissioned C and D. And E was decommissioned while I was working at Loy Yang. I worked at W for a couple of years as a first and second year apprentice.
Paul I don't think the power stations have a coal lease as such. The coal mines only provide coal for the power stations and are owned by the same people. The power stations and mines used to be government owned but were sold off 20 odd years ago. Yallourn W is the only power station left taking coal from the Yallourn mine.
Incidently, I was born in the Yallourn open cut mine. There used to be a town called Yallourn that was constructed to house the workers who were building the power stations. When the mine needed to expand to access different areas of coal, the town was demolished and became part of the open cut mine. In my first six months as an apprentice we were sent into the now abandoned town to strip electrical equipment from the buildings before they were flattened. I've still got some signs from the theatre. We removed all the projection equipment and sent it to a university for whatever film making course they were teaching. That was a very long time ago.

Tony

Thanks for that piece of personal insight. The coal leases are not really my area of expertise. I was basing my assumption on the situation for our power station, which means I may have things around the wrong way. Millmerran power station owns the land on which it sits and a huge tract around the station, which includes our coal mine. Like Yallourn, the coal is only used for the power station. However, in Australia you only own the land to about 600mm down in the ground (I think that is right, but if I have the depth wrong the principle is right) unless you are fortunate enough to have an original title without it having changed hands. I know of one instance of this down in the Muswellbrook area.

Otherwise you have to apply for a lease as you do not automatically own the mineral rights. I suspect that at Yallourn, they will not apply to continue a new lease. It will lapse. Consequently, the Wikipedia reference is slightly misleading. Later on the information clarifies that a section will become exhausted and significant infrastructure has to be altered to allow access to a new section. This combination of falling prices and increased cost of accessing coal presumeably is the reason for hastening the demise bringing the closure date forward from 2032 to 2028.

It should be noted that up to 1480MW of replacement power will need to be sourced. To explain this, if that were to be replaced by solar, I suggest that at least four times that amount of solar PV would be needed: 1480MW for the immediate sunlight hour direct replacement and another 4440MW for when the sun does not shine during the "sunless" hours and times of cloud cover. Also, and this is even more of a contentious issue, we need the facility to store that energy for release at night. It represents a lot of pumped hydro, batteries or Hydrogen storage. We certainly don't have that yet. Pit this against the Tesla battery (100MW for one hour or the proposed 300MW battery at Liddell). It is a pittance. To store that amount of energy for sixteen hours you would need upwards of 25,000 Tesla sized batteries.

That is a lot in renewable terms and work needs to commence right now! And we are only talking about a single station.

Regards
Paul

[russ57]

Most interesting discussion. Just a couple of observations I'd like to contribute.
-at the moment I see the primary use of batteries is as frequency stability (because they can start feeding the grid in milliseconds, which is better than spinning reserves in some cases, giving time to bring up gas/coal /hydro. But as noted the actual storage capacity is minuscule.
- We ("society") really need a concerted effort to develop storage at scale to complement renewables. Or completely reengineer the grid to have local storage everywhere - a battery in every suburb.

Or just discover practical fusion.. Free energy everywhere

-My current electricity retailer passes on wholesale prices, complete with app which shows the current price in 5min intervals. Fascinating to watch the variation. Currently 20c, forecast to reach 21 later then drop in 19 overnight, which is unusual as overnight is usually 18 or less. Cool sunny days may see prices drop to 10 or lower, and I have seen negative. It can also peak quite high, in which case the plan is to switch stuff off... Mild summer meant that didn't happen.

Theoretically, everyone managing load should help manage peak demand.

-Ncarcher, sounds like you could have been in the valley when I was growing up. Also born in Yallourn but lived in Morwell. Father and brother were both SECV, as was half the town. Brother retired /redundanted from loy yang b last year. Instrument maker then unit operator. He doesn't like agl...



Russ