Integrating renewable energy in the NEM: Economic issues · PV solar energy PV can be installed at...

Renewable energy and the National Electricity Market: Issues & Challenges© CEEM, 23 November 2005

Integrating renewable energy in the NEM: Economic issues

2Integrating renewable energy in the NEM: Economic issues © CEEM 2005

OutlineGeneration mix conceptsCost estimates for electricity generation optionsWind energy cost & benefit issuesPV energy cost & benefit issuesCommercial viability of renewable energy in the NEM


EnergyAustralia - Summer 2000/01 Profiles - Peak and Average Days

0

1000

2000

3000

4000

5000

2:00 4:00 6:00 8:00 10:00 12:00 14:00 16:00 18:00 20:00 22:00

MW

23 Jan 2001

Avg Workday

Avg NonWorkday

Air conditioning usage

0

2000

4000

6000

8000

10000

12000

14000

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

07 to 13 March 2004 27 to 02 August 2003NSW summer & winter peak demand


2003 Load duration curves for NEM states(NEMMCO SOO documents, 2004)

0

10

20

30

40

50

60

70

80

90

100

0 10 20 30 40 50 60 70 80 90Percentage of time

New South Wales Victoria Queensland South Australia Tasmania


‘Optimal’ resource mix (generation & demand)‘peak duty’ option

‘base duty’ option

‘intermediate duty’ option(voluntary)

demandreduction

envelope of cheapest available options

breakevenpoints

C1 C2 C3

$/kW/yr

Capacityfactor

10


Capacityfactor0 1

MW

Load duration curve & resource mix(ideal case: no uncertainty in demand or unit availability & no load growth)

base duty resources

C3C2

intermediate duty resources

C1

peak duty resourcesdemand reduction

load duration curve


Direct costs for some renewable energy & fossil fuel power stations

012345678

Bio Hydro SolarHW

Wind Fossil

RangeMin

C/kWh

(network location & controllability also matter)

Source: Australian Greenhouse Office 2001


PMSEIC cost estimatesPMSEIC Beyond Kyoto Report, 2002

(PMSEIC, 2002b)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

Conventional Coal Gas combined cycle Zero emissions coal Renewables

$/M

Wh

(Source: Roam Consulting – unpublished data 2002)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00


$/M

Wh

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00


$/M

Wh

(Source: Roam Consulting – unpublished data 2002)

Wind

Photovoltaics

Hot Dry Rocks

Biomass

Not available in large scalefor ~20 years &

may prove to be optimistic


Wind farm indicative connection costs to 330kV (Transgrid, 2002)

15028.32004

18017.71002

65012.9201

2,50012.751

Conn.cost$/kW

Conn. cost $MTotal wind MW

Wind farm number

Important to capture economies of scale of grid connection


Wind resource & network issues in South Australia

Map: ESIPC, 2002

Good wind resources along entire coastline including:

• Eyre Peninsula• Yorke Peninsula• Fleurieu Peninsula• Kangaroo Island• South-East

Sites available for up to 2000MW


Eyre Peninsula Backbone network upgrade to support 500MW wind

(Meritec, 2002)

Estimated cost of 275kV backbone upgrade: $140M or $280/MW assuming equally shared by 500MW of wind.

Wind may not have to pay full cost of backbone upgrade.


NEMMCO concerns about wind energy (NEMMCO, 2003)

Frequency control in normal operation:– Frequency regulating service costs ~5 $/MWH

Security control - largest single contingency– Will wind farms ride-through disturbances?– Are wind farm dynamic models adequate?

Interconnection flow fluctuations:– Exceeding flow limit may cause high spot price

Forecast errors due to wind resource uncertainty:– Five minute dispatch forecast (spot price)– Pre-dispatch & longer term (PASA & SOO) forecasts


Wind farms in the NEM spot marketWind farms will operate as “price takers”:– Generate whenever wind is blowing

NEM spot market prices are volatile with a “rectangular” price distribution:– Prices are usually low, sometimes high– Timing of high prices not easily predicted

Value of wind energy in the spot market:– Will depend on how regularly wind farms are producing

when spot prices are highWind farms may have to pay ancillary service costs


Western Power’s proposed wind penalty charge (c/kWh) (Western Power, 2002)


Indicative impact of wind on SA NEM spot price duration curve (www.esipc.sa.gov.au)


Price-demand plots for NEMregionsNSW (top) & SA (bottom)Jan-Mar 2004

($/MWH vs MW)(NECA, 04Q1 Stats, 2004)


Smoothed NEM Regional Ref Prices (RRPs) since market inception (AER, 05Q2 Stats, 2005)


Annual average RRP flat contract prices (AER, 05Q2 Stats, 2005)


Premium at50 $/MWH strike price (above) & installed peaking capacity(below)by NEM region(AER, 05Q2 Stats, 2005)


Wind farms marginal at $70/MWH(PWC, 2002)


Forward prices for wind energyWind farms may have to accept a lower price than “flat contract” due to uncertainty in production: – Daily– Seasonal, – Annual

(Giebel (2000) Riso National Lab, Denmark)


Prediction of REC Prices (A$/MWH) (ORER, 2003)

0

510

15

2025

30

3540

45

5055

60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Year

RE

C p

rice

average price


REC requirement to 2020 is almost metThe Federal Govt. has rejected key review finding of a higher target to 2020BCSE estimates only approx. 700-800MW of new (post Jan04) projects required to meet existing target, and……project commitments > 500MW in 2004 leaves < 300MW new projects required

(BCSE, 2005)


PV solar energy

PV can be installed at point of end-useOffers potential to:– Displace investment in remote generation,

transmission & distribution– Provide local network voltage & reliability support

However, value will depend strongly on relationship between PV output & demand:– Storage may improve correlation but at additional cost


Relationship between PV output & commercial load in NSW (Watt et al, 2005)


PV output & NEMprices in NSW & SA(Watt et al, 2005)


ConclusionsStochastic renewable energy:– Brings new challenges for electricity industry

restructuring (technical, market design, regulation)Wind energy:– The first significant form of “intermittent generation”– Not yet cost-competitive on electricity price alone

PV solar energy:– Technically sound– May not correlate well enough with peak demand to

defer network investment– Not cost-effective at this time

Integrating renewable energy in the NEM: Economic issues · PV solar energy PV can be installed at...

Documents

Transcript of Integrating renewable energy in the NEM: Economic issues · PV solar energy PV can be installed at...