Last week’s Victorian heatwave shows Australia’s electricity market is in need of additional infrastructure investment, even as commentators refer to the ‘gold-plating’ of poles and wires in the network, according to new analysis by carbon and clean-energy firm RepuTex.
When Victoria recorded its hottest November day on record on Thursday, 29 November, Victoria’s wholesale electricity price spiked in the late afternoon from less than A$100/MW in the morning to nearly A$10,000/MW by 4.30pm.
At 5pm the same day, across the border in South Australia, dispatch electricity prices were actually negative even though the two markets are ordinarily linked under the National Electricity Market (NEM).
While it was hot on November 29 across southeastern Australia, there was enough wind blowing to provide some relief. Wind energy output during the day supplied as much as 10 per cent of South Australia’s and Victoria’s total power needs. However, the strong winds were choked off in the late afternoon by a high-pressure weather system that formed over South Australia.
The drop in wind speeds that came with the change in weather reduced the amount of electricity generated from onshore wind farms in Victoria at the same time as demand from air conditioning units began to peak. The result was astronomically high electricity prices in Victoria.
‘It is not uncommon to observe high energy prices when the temperature rises to extreme levels, but last Thursday’s peak price of nearly $10,000 per megawatt hour was extraordinarily high when compared to similar heat waves in 2012,’ said RepuTex’s associate director Bret Harper.
Historically, open-cycle gas plants have been used to meet sudden increases in demand, as these units are able to ramp up production relatively quickly. On 29 November, the gas plants best placed to meet Victoria’s demand were located in South Australia but were not able to respond because of a lack of connectivity with Victoria.
‘These types of gas plants are not economically viable until the wholesale power price reaches around $150 per megawatt hour. But in South Australia on November 29 dispatch prices were largely below this level – and actually negative at a crucial period, and so the state’s gas plants ramped down to minimal output at the same time,’ Mr Harper continued.
‘The problem is an insufficient grid interconnection between the two markets, which allowed this enormous market divergence between South Australia and Victoria to develop.’
The Heywood interconnector joins one South Australian and one Victorian substation. Historically this interconnector has been used to import power into South Australia; however, over the past few years, with the addition of significant amounts of wind power to the South Australian grid, the interconnector is also being used to export power from South Australia.
The interconnector’s current transmission capacity, however, does not allow Victoria to make the most of South Australian wind output during times of high penetration of wind in South Australia.
‘Remedying this situation would have a positive impact in terms of mitigating against price spikes within both states’ markets and lead to lower emissions by allowing for Victoria to make better use of South Australia’s clean wind generation capacity,’ said Mr Harper.