Wind Farms in a Gross Pool Market: Australian National Electricity Market

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Wind Farms in a Gross Pool MarketAustralian
National Electricity Market
Perspectives from AbroadSustainable Energy
Ireland, Dublin 13 June

• Hugh Outhred
• School of Electrical Engineering and
  Telecommunications
• The University of New South Wales
• Sydney, Australia
• Tel [phone] Fax [phone]
  Email h.outhred_at_unsw.edu.au
• www.sergo.ee.unsw.edu.au

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Outline

• Scope design of the Australian NEM
• Managing supply-demand balance
• Ancillary service, spot derivative markets
• Renewable energy certificate trading
• Network connection issues
• Conclusions

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Electricity industry structure in SE Australia
Financial instrument REC (emission) trading
Tx networkpricing
Tx networkpricing
Networkaccess
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Key NEM features

• NEM covers all participating states
• A multi-region pool with intra-regional loss
  factors
• Ancillary services, spot market projections
• Auctions of inter-regional settlement residues
• Operated by NEMMCO (owned by states)
• Compulsory participants in NEM
• All generators dispatchable links gt 30 MW
• Network service providers retailers
• Contestable consumers may buy from NEM

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Region boundaries inter-connectors

• Regions boundaries selected so that
• Transmission constraints are rare within a region
• Frequently-occurring constraints are placed on
  region boundaries
• Region boundaries to be reset as required
• Whenever a constraint occurs gt 50 hours/year
• Unregulated inter-connectors are allowed
• If dispatchable so that it can bid like a
  generator
• Directlink the first (operating since July
  2000)
• 180 MW DC link between NSW Queensland regions

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Scope of the NEM

• Queensland
• New South Wales ACT
• Victoria
• South Australia
• Tasmania (on connection to the mainland)

NEM regions are indicated, and theirboundaries
need not be on state borders(e.g. two regions in
NSW)
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NEM regional spot market model(Based on NEMMCO,
1997)
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Supply-demand balance in the electricity industry
Generator input power
Load electrical power
Thermal Power stations
Industrial
Hydrogenerators
Commercial
Wind farms
Residential

• Frequency is a measure of supply-demand balance
• always varying due to fluctuations in power flows
• Wind farms will make frequency more variable
• Does this matter if so, who should pay for
  additional control action?

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Managing supply-demand balance in Australian NEM
increasing uncertainty
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NEMMCO processes for managing supply-demand
balance
Power system reliability security standards
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Bidding dispatch(source NEMMCO)
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Dispatch, Pre-dispatch, PASA SOO
SOO (10 yr)
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PASA reserve trader
(long term expected USE lt 0.002)

• Energyconstraints
• Demandforecasts
• Networkcapacity

PASA
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Spot market offers bids

• Generators, retailers consumers
• Price-quantity curve (sell/buy) for each half
  hour
• 10 daily prices, quantities changeable until
  dispatch
• Demand forecasts bid in at 10000/MWH (VoLL)
• Dispatchable links between regions
• Flow offer curve based on price difference
• Bids offers ranked to give dispatch stack
• Considering loss factors inter-tie constraints
• 5 minute prices set by economic dispatch
• Half-hourly averages are calculated in real time

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NEM Pre-dispatch, Dispatch AGC
Bid Database
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Modelling regulated interconnectors
intra-region location

• Regulated interconnector between 2 regions
• Modelled by a linearised marginal loss function
• A dynamic network loss factor that depends on
  flow
• Flow limits (security or thermal criteria)
• Locational effects within regions
• Modelled by static network loss factors (LFs)
• Annual average of estimated half-hour marginal
  losses for each generator node group of
  consumer nodes
• Intra-regional constraints not modelled but a
  constrained-on generator cannot set price

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Financial instrument trading in support of NEM

• Trading in swap cap contracts
• Bilateral trading
• Over-the-counter instruments
• Exchange-traded CFDs (swaps)
• Inter-regional hedges
• Specialised form of financial instrument
• to manage regional price difference risks
• funded by interconnector settlement residues
• NEMMCO inter-regional settlement residue
  auctions
• Commenced in 1999

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Monthly average NEM Regional Ref Prices (RRPs)
since market inception (NECA, 03Q1 Stats, 2003)
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Cumulative spot prices(7-day moving sum) (NECA,
2003)
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Ave, Max Min RRP in SA region (truncated at 300
/MWH) (NECA, 03Q1 Stats, 2003)
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Histogram of RRPs, Jan-Mar 03 (NECA, 03Q1 Stats,
2003)
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Cumulative duration curve, SA RRP, Jan-Mar 03
(NECA, 03Q1 Stats, 2003)
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Spot price as a function of demand SA,02 Q4
(NECA, 03Q1 Stats, 2003)
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Key derivative markets

• Forward contracts (futures)
• Expected spot price for a defined load shape
  period (eg flat annual demand)
• Either OTC or exchange traded
• Call options
• Renewable energy certificates
• Available to qualifying generators
• Increasing to 9,500 GWH pa at 2010 then constant
  to 2020

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Flat forward contract prices, 1999-2006 (NECA,
02Q4 Statistics, 2003)
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Premium (/MWH) for all spot prices above strike
price for year to 4/02 (Reliability Panel, 2002)
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Renewable Energy Certificate Prices - forecast to
2020 (A/MWH) (ORER, 2003)
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NEC Grid connection process(NEC, Chapter 5, p 9)
Network service provider
Code participant
Connection does notguarantee market accessunder
all conditions
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National Electricity Code (NEC) connection
requirements for generators

• Reactive power voltage control capability
• Quality of electricity injected into network
• Protection requirements
• Remote control arrangements
• Excitation system requirements
• Loading rates
• Ride-through to avoid cascading outages
• Loss of largest generator 175ms network fault

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NEC categories of generators

• Either market, non-market or exempt
• Market implies sell to NEM
• Can then also sell ancillary services
• Non-market or exempt implies sell to retailer
• Either scheduled or non scheduled
• Scheduled implies centrally dispatched
• Must then participate in the NEM processes of
  bidding, pre-dispatch PASA
• Default category for generation projects gt 30 MW
• Not appropriate for intermittent generation, eg
  wind

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Future directions for NEM COAG Energy Market
Review (2002) Recommendations

• Create a National Energy Regulator
• Improve control of generator market power
• Improve operation of derivative markets
• Give NEMMCO a NEM-wide planning function
• Increase number of NEM regions aim for full
  nodal pricing
• Phase in interval metering retail competition
  for all end-users
• Enhance competition and network scope for gas
• Replace existing climate cahnge policies by
  emission trading

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Key web sites

• COAG Energy market review
• www.energymarketreview.org
• National Electricity Market Management Company
• www.nemmco.com.au
• National Electricity Code Administrator
• www.neca.com.au
• Electricity Supply Association of Australia
• www.esaa.com.au
• University of New South Wales - Sustainable
  energy research group
• www.sergo.ee.unsw.edu.au