Victorian Energy Minister Lily D’Ambrosio’s assurances that offshore wind would provide a backstop to the energy market are undermined by the real-world experience of capacity markets around the world.
Evidence published by the Energy Security Board this week shows that operators of capacity mechanisms in the UK, Ireland and US routinely impose severely diminished reliability ratings on wind and solar generators
Based on the figures presented by the ESB, Victoria’s ambitious future offshore wind power capacity could be “derated” to as low as 6.3 per cent – which is what the UK market asserts – and no more than 33 per cent, as per California’s example.
By contrast, coal and gas generators receive ratings of between 79 per cent and 100 per cent – underscoring their reliability.
“Wind and solar on the other hand may make only a minimal contribution,” wrote experts in the ESB’s report, which also questioned the reliability of hydropower.
“Storage and hydro can also receive a wide range of derating factors dependent on the level of storage and their controllability during the compliance periods e.g. run of river hydro may not be dispatchable.”
The report’s evidence adds pressure on Ms D’Ambrosio to support a solution for the East Coast energy market, also known as the National Energy Market (NEM).
Amid rocketing prices and an unprecedented regulatory suspension of the NEM last week, federal, state and territory energy ministers agreed to press ahead with designing a mechanism that would see energy users pay generators to maintain spare capacity.
But opposition from Victoria and the ACT – which both have bold renewable energy targets – to backing fossil fuel energy generators threatens to derail the process and leave the NEM vulnerable to future shocks. Any new system requires approval by both jurisdictions, plus the Commonwealth, South Australia, Tasmania, NSW and Queensland.
Ms D’Ambrosio, whose government faces a state election in November, hit back this week at warnings Victoria faces blackouts during so-called “renewables droughts” in winter months.
She said the state’s new offshore wind projects “will blow any shortfall out of the water”.
“We will bring online at least 2 gigawatts of offshore wind by 2032, enough to power 1.5 million homes, with the potential to support an enormous 13GW of capacity by 2050 – five times the state’s current renewable energy generation,” she said.
Danny Price, managing director of Frontier Economics, said Victoria’s position was unfeasible.
“It’s nonsense to think that you can reliably supply a modern economy with wind and solar,” he said. “The sheer volume and cost of batteries is breathtaking. It’s tens and tens of billions of dollars for Victoria.”
Mr Price noted that the Victorian government has adopted a populist stance in the past and blocked the market regulator’s decision to dispatch power to NSW during previous crises.
“If she doesn’t want to keep coal, that’s fine, but she can’t also then ask for the other states to back her up when things go bad,” Mr Price said.
Ms D’Ambrosia’s forecast wind capacity figures assume that power will always be available in full and at the right times. Overseas capacity markets demonstrate the complexity of trying to factor in renewable sources.
The California Independent System Operator (CAISO) assigns wind power a derating factor of 8 per cent to 33 per cent, implying the energy source is reliable on one in 12 days and no more than one in three days.
On the other side of the US, the PJM – one of the world’s largest integrated wholesale energy markets taking in 13 states and the District of Columbia – assigns wind a derating factor of just 15 per cent.
In the UK, the figure is even lower, at 6.3 per cent, while in Western Australia it ranges from 7 per cent to 28 per cent.
Energy experts continue to debate the “derating factors” of renewable energy because there is considerable disagreement over how to measure their reliability.
Part of the problem is that many of the world’s existing capacity markets were designed in an era when all the dominant sources of power generation – chiefly coal, gas, nuclear and some hydro – were available 100 per cent of the time.
“In power systems with coal and gas, and a bit of renewables, we basically have to keep about 25 per cent capacity in reserve to make up for all the things that go wrong,” Mr Price said. “And things do go wrong, even in a very good power system.”
“In a system that is mostly renewable, you’re approaching having to have close to a 100 per cent reserve margin.”
|Wind Watch relies entirely
on User Funding