The economics of transmission constraints on wind farms: some evidence from South Australia

The impacts of transmission congestion and network investment on the development of the Australian wind energy industry have received growing attention from wind farm developers as well as relevant policy stakeholders such as the Australian Energy Market Commission (AEMC). There are many potential wind farm sites across the country with excellent wind regimes yet only limited transmission capacity. At least one wind farm in South Australia has spent a period following construction where its output was curtailed by transmission constraints (NEMMCO, 2009). Current market rules do not guarantee dispatch to an existing wind farm as more wind generation connects to the same transmission. Given the expense of transmission network extension and augmentation, there are interesting questions of what economic impacts such constraints might have for wind farm operators. This paper examines this issue in the context of the South Australian region of the Australian National Electricity Market (NEM). The State currently hosts almost half of total Australian wind generation capacity and has significant transmission capacity limitations for further development. Half hour wholesale electricity spot prices were used along with generation data from nine South Australian wind farms over the 2008-9 and 2009-10 financial years to assess the potential impact that transmission constraints might have had on wind farm revenue. Results showed that a number of the wind farms would have suffered only very limited revenue reductions from having significantly greater wind farm capacity than the rating of their transmission connection to the NEM. Importantly, some wind farms could be limited to a maximum power output of half their rated capacity and still achieve higher capacity factors then other already existing unconstrained wind farms. The key reasons for this are that wind farms do not generate at rated capacity for a great deal of the time over the year, periods of high wind generation appear to be associated with lower wholesale prices and there is significant variance between the wind farms capacity factors. Our findings suggest that there may be circumstances where wind farm developers might benefit from installing more wind turbines than the capacity of their transmission connection.Integration, market price, NEM, South Australia, Wind, Environmental Economics and Policy, Farm Management, Resource /Energy Economics and Policy,

Renewable energy integration into the Australian National Electricity Market: Characterising the energy value of wind and solar generation

This paper examines how key characteristics of the underlying wind and solar resources may impact on their energy value within the Australian National Electricity Market(NEM). Analysis has been performed for wind generation using half hour NEM data for South Australia over the 2008-9 financial year. The potential integration of large scale solar generation has been modelled using direct normal solar radiant energy measurements from the Bureau of Meteorology for six sites across the NEM. For wind energy, the level and variability of actual wind farm outputs in South Australia is analysed. High levels of wind generation in that State have been found to have a strong secondary effect on spot prices. Wind generation's low operating costs will see it displacing higher operating cost fossil-fuel plant at times of high wind. At the same time, the increased variability of wind may impose additional challenges and costs on conventional plant which will also be reflected in wholesale spot market prices. It is shown that this is proving particularly important during high wind penetration periods, which are contributing to an increased frequency of low or even negative prices. The solar resource in South Australia is shown to be highly variable; however, as seen with wind power, geographical dispersion of generators can significantly reduce power variability, even with as few as six sites. The correlation of the solar resource with spot prices also appears to be superior to wind generation. Modelling using the Adelaide solar resource showed that, for electricity sold into the spot market, two-axis tracking solar generators would achieve an average price that is over twice that received by wind generators over the year 2008-9 analysed. Of course, significant solar generation deployment might drive similar price impacts as seen with wind generation, thereby reducing this advantage. Considering the potential implications of both major wind and solar generation within South Australia, the solar and wind resources within the State appear, on average, to be non-correlated for the magnitude, and the change in magnitude, across half an hour. The analysis shows that solar and wind resources within the NEM have key characteristics that can markedly impact on their energy value within the wholesale electricity market. High levels of renewable electricity are already affecting spot prices, highlighting the need for low bidding renewable generators to attain power purchase contracts and for developers to consider this effect when choosing a site location for renewable generators. Other generators within the NEM may also be significantly impacted by major renewable energy deployment. The long-term success of renewable generation will likely depend on maximising the energy value that it contributes to the electricity industry.Energy value, Integration, NEM, Solar, Variability, Wind, Environmental Economics and Policy, Resource /Energy Economics and Policy,

Reliability-cost trade-offs for electricity industry planning with high variable renewable energy penetrations in emerging economies: A case study of Indonesia�s Java-Bali grid

Electricity industries in emerging economies face particular challenges in delivering affordable, environmentally sustainable, and secure power given growing demand and limited financial resources. While supply reliability is often poor and emission reductions given lower priority, solar and wind are now amongst our cheapest supply options but highly variable. Our study seeks to demonstrate the potential value of trading-off reliability standards against higher renewables and lower industry costs in future generation planning. We use an open-source, evolutionary programming-based, capacity expansion planning tool, NEMO, to solve least cost generation mixes for Indonesia�s Java-Bali grid in 2030. We explicitly test the cost and emission impacts of reliability targets of 0.005%�5% unserved energy (USE), modelled as both a hard optimization constraint and a penalty price on USE in the cost function. Our results highlight that lower reliability targets can increase solar and wind penetrations, reducing CO2 emissions while reducing industry costs. Both methods of incorporating reliability delivered similar outcomes but pricing USE had some advantages for optimization over hard constraint setting. While the impacts of lower reliability on consumers requires careful consideration, our study highlights the potential cost and emission implications of arguably unrealistic reliability targets in generation planning for emerging economies

Clustering based assessment of cost, security and environmental tradeoffs with possible future electricity generation portfolios

The electricity sector has a key role to play in the sustainable energy transition. The falling costs of wind and solar PV have added to both the opportunities yet also challenges of balancing sometimes competing industry objectives of costs, security, and environmental impacts. This paper presents novel techniques for assessing possible future industry generation portfolios in three ways: (1) incorporating explicit metrics for energy trilemma objectives into modelling, (2) using the optimization process of evolutionary programming to map the solution space of �high performing�, near least-cost, portfolio solutions, and (3) applying boundary min�max cases and clustering to categorize these varied portfolios to better facilitate planning and policy making. We use an open-source evolutionary programming tool, National Electricity Market Optimiser, to assess possible future generation portfolios for Indonesia�s Java-Bali interconnected power system. Our findings highlight the wide range of possible portfolios that might potentially deliver similar total industry costs, and their different security and environmental implications. In particular, additional solar photovoltaic deployment appears a low-risk opportunity to reduce costs and emissions compared to more fossil-fuel oriented mixes. Our novel techniques may be useful for the energy modelling community seeking to better understand and communicate complex, uncertain, and multi-dimensional choices for electricity industry planning

Impact of high solar and wind penetrations and different reliability targets on dynamic operating reserves in electricity generation expansion planning

Wind and solar are increasingly cost-competitive as well as environmentally less harmful alternatives to the fossil-fuel generation that dominates most electricity industries. However, their highly variable and somewhat unpredictable output still requires high levels of dispatchable plants to ensure demand can be met at times of low renewables availability. While this capacity overhead has associated costs, it does offer potentially useful outcomes for dynamic operating reserves. We present a method for assessing these potential outcomes in electricity industry planning. We use an evolutionary programming-based capacity expansion model, NEMO, that solves least-cost generation mixes through full operational dispatch of candidate solutions, using high-temporal resolution demand and wind and solar profiles, over a year or more. We apply our method through a case study of the Java-Bali grid, considering future scenarios both with and without variable renewables, and under different carbon pricing scenarios, reliability targets, and minimum operating reserves requirements. Our study suggests that not only might high renewable penetrations reduce industry costs and emissions, their inclusion provides significantly higher operating reserves over most of the year, hence the ability to cover unexpected plant failures and other disruptions. Lower reliability targets reduce this capacity overhang but still see improved operating reserves

Impact of High Variable Renewable Penetrations on Dynamic Operating Reserves in Future Indonesian Electricity Industry Scenarios

This paper investigates the impact of high variable renewable energy (VRE) penetrations on dynamic operating reserves, focusing on the future of Indonesia’s Java-Bali grid. We use an open source evolutionary programming-based techno-economic optimization model, National Electricity Market Optimizer (NEMO), to first assesses possible least cost generation mixes both with and without VRE, and under different carbon pricing scenarios and reserves requirements. While low cost generation, major deployment of wind and solar still requires high levels of conventional dispatchable plant, typically thermal and hydro, and while there are costs associated with this overhead, it does have interesting implications for operating reserves. Our study explores this issue and shows that not only might wind and solar reduce overall industry costs for Java-Bali in 2030, the resulting generation mix would have significantly higher reserves, and hence ability to cover unexpected plant failures and other interruptions, over most of the periods with considerably high demand

Solar pre-cooling with different tariff structures and household time of use patterns

This paper presents a clustering-based solar pre-cooling (SPC) analysis to evaluate the SPC potential of Australian housing stock. 450 households with solar PV systems and Air Conditioning (AC) are clustered into different groups based on their net electricity demand profiles excluding any AC operation. Then, the AC excluded net demand profile of each household is combined with nine different building types, creating nine virtual building envelopes for each household. Solar pre-cooling is simulated for all the virtual buildings and the results are compared with a baseline scenario in terms of maximum demand reduction, minimum demand mitigation, and cost savings, considering three different tariff structures. The results show that regardless of the energy efficiency and construction materials of a building, the SPC potential varies significantly based on the AC excluded net demand profile of the household. SPC offers high minimum demand mitigation while maximum demand reduction is not considerable. The cost savings highly depends on the tariff structure, and the Feed-in Tariff (FiT)

Electricity market design for facilitating the integration of wind energy: Experience and prospects with the Australian National Electricity Market

Australia has been an early and enthusiastic adopter of both electricity industry restructuring and market-based environmental regulation. The Australian National Electricity Market (NEM) was established in 1999 and Australia also implemented one of the world's first renewable energy target schemes in 2001. With significant recent growth in wind generation, Australia provides an interesting case for assessing different approaches to facilitating wind integration into the electricity industry. Wind project developers in Australia must assess both potential energy market and Tradeable Green Certificate income streams when making investments. Wind-farm energy income depends on the match of its uncertain time varying output with the regional half hourly market price; a price that exhibits daily, weekly and seasonal patterns and considerable uncertainty. Such price signals assist in driving investments that maximize project value to the electricity industry as a whole, including integration costs and benefits for other participants. Recent NEM rule changes will formally integrate wind generation in the market's scheduling processes while a centralized wind forecasting system has also been introduced. This paper outlines experience to date with wind integration in the NEM, describes the evolution of market rules in response and assesses their possible implications for facilitating high future wind penetrations.Wind integration electricity market