03 November 2015
by Ben Potter

COAG Energy Council monitors 'colossal experiment' in SA power market

State energy ministers are monitoring instability in South Australia's renewable energy-dependent electricity market, which experts fear could spread to other states as their share of wind and solar power increases.

Heavy industrial users of electricity in South Australia have been hit with huge rises in wholesale electricity prices in recent months as some coal-fired generators have withdrawn from the market and the Heywood interconnector with Victoria's brown coal generators has been out of action while it's capacity is upgraded.

Australian Energy Market Operator (AEMO) chief executive Matt Zema warned last week the problem would get worse as the share of renewables increased and more coal generators withdrew. Energy experts said the problem could spread to other states as they followed in South Australia's footsteps.

"The COAG (Council of Australian Governments) Energy Council is aware of these issues and is being kept informed by the Australian Energy Market Operator," federal Energy Minister Josh Frydenberg said in an email. COAG brings together state and federal ministers.

"The upgrade to the Heywood interconnector between South Australia and Victoria is an important part of minimising risks of disruption for South Australia consumers," Mr Frydenberg added.

But Grattan Institute energy program director Tony Wood said South Australia's instability wouldn't be solved by boosting the capacity of the state's interconnector with Victoria.

An interconnector is a high voltage transmission line that reduces the risk of outages by spreading the load over generators in two or more markets.

Mr Wood said Victoria would follow the same path of expanding the share of intermittent wind and solar generation, and faces pressure to close coal-fired power stations to reduce emissions in the next few years.

"South Australia is connected to Victoria on the basis that Victoria can supply all their needs – and suddenly Victoria doesn't look all that stable. If Victoria goes that way you are not going to have that capacity," Mr Wood said.

"What we seem to be doing – not blindly but with a high degree of naivety – is marching into the future and using South Australia as a colossal experiment."

Mr Wood said one solution to stabilise the state's market – a Generation IV small modular nuclear power station touted by South Australian Liberal Senator Dean Edwards as a new source of continuous power – wasn't even on the drawing board yet.

But he said the technology was something that needed to be discussed as the electricity market sought more reliable zero emissions generation technologies.

South Australia's electricity market has been subject to sudden price surges to the $1380 megawatt/hour maximum as coal-fired power stations have been closed down and the share of wind and solar energy has increased at a greater rate than in other states.

Mr Zema said last week that AEMO had had to intervene in the National Electricity Market to prevent blackouts in South Australia while the Heywood interconnector was upgraded.

He said the problem would become more acute as the share of renewables continued to increase and SA became more dependent on the interconnector.

Mr Wood said there was a period last month in which South Australia's wind and solar power went from supplying 140 per cent of the state's demand to zero in a few days, and policymakers should be taking Mr Zema's warning more seriously.

"Matt's put his hand up and said, 'look, it looks to us like South Australia is becoming and will become even more dependent on the interconnector with Victoria, but all the states in an interconnected to system are doing their own thing as well, so before it gets much more serious now's the time to be having that serious discussion'."

Mr Wood said energy department officials, AEMO and the Australian Energy Markets Corporation "need to get their heads together and give us some advice as to whether this is a problem, and if it is what are the range of solutions that need to be considered".