Ross Greenwood speaks to AEMO CEO Audrey Zilberman who says there needs to be a change to the power grid in order to avoid blackouts in the summertime.
Ross Greenwood: One of the things that we have told you time and again in Australia is we don’t have enough power at the right time because of a whole range of reasons, including a lack of a National Energy Guarantee because of a lack of investment in power generation, because the power generation that we have invested in sometimes doesn’t produce enough power of the right type at the right time.
I want to take you all the way back to last year. It was a Friday, January 25. In Victoria, it was 40 degrees. As a result, the energy grid in Victoria did not cope. Effectively, there was what’s called politely low jetting. Our member there in the Victorian, the Victorian energy minister tried to somehow claim that it was, well, not black as- well, I got to tell you, for the 200,000 customers who had what’s politely called an interruption to their power supply.
Well, it was pretty dark. It wasn’t sort of brown, it was very much the pails out. The fact of the matter is we were told, “Well, this should not have happened and should not happen again.” I’m sorry to tell you today however, it is highly likely to happen again. A million Victorian households this summer are at risk of being without power if, say, for example, some of the plants that are there right now do not come back online and perform at the optimum.
Second thing is don’t think if you’re in New South Wales, you’ll escape this because once all Liddell power station is closed in 2023, ’24 suggests if things go bad, up to 770,000 people or homes in that state could face the risk of a blackout on a day of extreme heat. This comes out of what’s called the Electricity Statement of Opportunities and that’s an annual report that is put out by the Australian energy market operator which, of course, operates Australia’s east coast energy grid. Now, its chief executive is Audrey Zibelman who joins me now on the program. Audrey, it’s always great to have you on the program.
Interview with: Audrey Zilberman, CEO, AEMO
Audrey Zilberman: Thank you, Ross. How are you?
Ross Greenwood: Good. You sobered me up significantly in the reading of this report. It shocks me that you and I have been talking about these for three and four years now. The problems have been well-known. The problems are still there as we’ve had them and I don’t even get the sense that necessarily, things are getting better. I get the sense that maybe things are becoming just a little bit more desperate. Is that a reasonable way to put it or not?
Audrey Zilberman: I think what you’re hearing and what the report says is that the situation is getting tight. We do have a concern with the fact that we have these older power plants and that their reliability, particularly the older units that we see in Victoria is getting less dependable. Therefore, we do need to make sure we have the resources available to us during the periods of time we need them and that, in particular, is during the summer period.
Ross Greenwood: Let’s go to Victorian stuff because right now, you’ve got two power stations, two big power stations, Loy Yang A2 which is 500 megawatts and Mortlake which is 250, 260 megawatts, give or take, that are offline. Now, this is because of significant maintenance because they are aging power stations. They’re due to come back on in December but you, actually, in your analysis put in there a chance that they might not. This is part of the reason why you are suggesting that there are risks of power shedding, of load shedding this summer which, of course, causes those blackouts the people do not want.
Audrey Zilberman: One of the things that we’re looking at, Ross, is that for us, summers obviously have always been hot but they’re getting hotter in Australia and we need to make sure we have that power available. Unfortunately, even though these plants want to and then plan to come back in December and they’re taking all the actions they need to to get there, the fact is that sometimes, there are unknown unknowns that occur that could delay their recovery, their ability to come back until January or February which has us under high alert.
In order to make sure that we’re not putting a position that we don’t have sufficient power, we needed to make a decision today because of the time it takes to get the backup resources in. That really goes back to the heart of our comments. We really think that the standard around what kind of resources that we need to have in the system in order to make sure that we don’t get into these emergencies needs to be changed and that we very much need to focus on the summer months because that’s when we need the most power, and it doesn’t make sense, and an industry is important as the electric industry for an organization like AEMO to have to react.
Rather, we would like to have the resources in advance. We think that’s safer and frankly, it’s less expensive because whenever you’re acting in an emergency, you’re going to end up paying more than if you can act in a much more prudent manner.
Ross Greenwood: Just explain to me how much in hindsight, whether you reveal this number or not, how much did you pay Alcoa’s aluminium smelter in Portland last year to power down because it’s one of those very high energy users and on these emergency dies as it was on the 25th of January, you basically paid them to stop using power for a period of time. What sort of money are we talking about that you’ve had to pay to these industrial users?
Audrey Zilberman: Well, I wouldn’t be able to tell you what we paid for any particular user. Across the summer, we paid about $32 million for emergency reserves which ends up being about- I think it was about $6 per customer or lower, it was about $4 or $5 per customer across all of Victoria. For a reserve product, it’s not a bad idea, but the fact that we need it every year, frankly, what we want to do is make sure we have enough dispatchable power. The other thing is- and this is really important, it’s not by the AEMO sitting on its hands. For the summer, we’re already going out there and signing up so that we have the backup resources already.
The point we wanted to stress in this is there are other things that we need to do. One is to get the standard fixed. The other is to get the transmission built because if we can get the transmission built, we have excess energy in other parts of the country that we can bring into Victoria and that’ll be a cheaper resource. We want to make sure that also, that we get the markets right because what we’re not doing right now in the way we designed our markets is paying various resources providers for the ability to what we call firming service. The ability to say that they’ll be there on a certain time and that they agreed to get there.
Until we get the markets designed to bring in the type of resources that we’d need to complement the renewables that we’re getting in, we’re going to continue to struggle. Our goal is to say, “If we do this in a sort of a planned way that we’re thoughtful about it, the outcome is that we’re going to be able to make it less expensive for customers then what we have to do now, which is very reactive.”
Ross Greenwood: Okay, a couple of things are going to happen. There’s going to be a second-best link put in another interconnector between Tasmania and Victoria. There are also upgraded interconnectors between Victoria and New South Wales and then Queensland and New South Wales. Does this sort of help, if you like, that ability to take pressure off some of these coal-fired power stations that are either unreliable or coming offline in the future?
Audrey Zilberman: Those interconnectors are going to be important. The other one is we’re doing a building in Western Victoria that makes sure that we have a lot of energy from renewables as being bottled up that we can’t get to this region. We need to do that plus the interconnector between New South Wales and South Australia, which will also help us to get resources in. All of these things put and our efforts to use rooftop solar better are all going to increase the reliability and reduce and help make the prices moderate. That way, we want to get them in.
Ross Greenwood: Hang on. Audrey, can you explain something to me, because I’ve heard the stories that too much rooftop solar tends to, well, not work as well in the overall energy grid as people would imagine or like, mainly because it’s coming in at the wrong frequency. You can explain this to me better than I probably can. Just explain why is it that too much rooftop solar is not always a good thing for the energy grid.
Audrey Zilberman: Certainly. In order for us to manage, to put the energy system to work, we need to keep the system at a certain voltage rate. One of the things that we get concerned about is when we have too much with rooftop solar, the voltage just gets too high and we actually have problems on the system. One of the things we want to do is start introducing how do we use storage and other resources so that when the sun is shining and we actually have not enough usage of energy, we can store it and then use it later in the day when we really need it. It’s those types of activities we just want to get on with.
Ross Greenwood: So true. I want to go to one other aspect of this, and this is the political aspect that invariably does come into this. This is the federal member for Hinkler, a Liberal National Party member called Keith Pitt of Queensland, a proud Queenslander from Bundaberg. He’s told this to Sky News today.
Keith Pitt: If the states don’t want to play ball, we should bust up the national electricity market. It is my view. We have been at this now for nearly six years I’ve been in Parliament. It really isn’t a federal issue. It is a state issue and they should take responsibility for their own networks. What the name has allowed is for states to run rampant on, well, I think are some really dumb policies.
Ross Greenwood: There you go. That is his view. What would happen, say, for example, if he got his way and if Queensland came out of the national energy grid?
Audrey Zilberman: From my experience in power systems and– Before I was here in Australia, I ran a power system across 13 states in United States and before that, I ran a power system across eight states in the Midwest of the United States. My actual experiences, the more you interconnect these power systems, because people use energy at different times across the year, there’s geographic diversity that you can take advantage, and then just weather diversity. Even in a place like Australia, we can have cold weather down in Melbourne while we have hot weather in Queensland.
What happens is because the power system electrons really don’t understand state borders, you actually make the whole system more efficient and cheaper. I would think that for any particular region, when I compare in fact, what we’re able to do in NM compared to what we’re trying to do in WA, you can actually get great efficiencies because it’s a bigger pool. I understand the frustration but at the same time, it doesn’t bear out for me on my experience and I’ve seen just how costs have been able to go down when we make better use of this electricity.
Ross Greenwood: That’s true and I must admit that the one thing that you really do need now is more electrons in that system, especially on the hottest days of summer and especially as the fleet of the coal-fired power stations age and become less efficient as well. Always great with her time here on Money News. Audrey Zibelman is the chief executive of the Australian Energy Market Operator that operates that east coast grid and in particular, with those warnings about potential blackouts in the worst-case scenario in, first, Victoria, maybe even this year and eventually, also in New South Wales. Audrey, many thanks for your time.
Audrey Zilberman: Thank you.
Image source: 2GB