Daniel Westerman’s ‘Big Hairy Audacious Goal’ (BHAG) announced on 14th July 2021 – 100% instantaneous by 2025 NEM-wide


I’ve posted this post today (Sunday 26th September), but back-dated this article back to 14th July 2021 (i.e. the date of Daniel Westerman’s keynote address to CEDA).

2021-07-14-AEMO-Westerman-CEDA-Address

 

(A)  Daniel Westerman’s CEDA address

Whilst it still exists on the AEMO’s website (they tend to revamp it from time-to-time) you can find the text of the speech here.

Because we’ll be referring back to it from time to time in future, I’ve taken the step of copying it in here for ease of our future reference:

Distinguished guests, ladies and gentlemen,

Let me begin by acknowledging that I’m on the lands of the Wurundjeri people of the Kulin nation.

I’d like to acknowledge them as traditional owners and pay my respects to elders past, present and emerging, and to all First Nations people with us today.

After two months now leading AEMO, I can say that life has been anything but routine for our staff who manage the day-to-day operations of Australia’s energy systems and markets.

A power station in Queensland failed catastrophically (WattClarity articles here), floods threatened one of Victoria’s biggest power stations (WattClarity articles here), and damaging storms cut people’s electricity supply across Melbourne and Gippsland.

So, it’s fair to say we’ve been pretty busy in the AEMO control rooms as we keep the energy system in balance across the nation in real time.

And that’s where I want to take you today, inside the nerve centre of Australia’s electricity and gas systems.

From there, we can see how Australia is leading the world in many aspects of the energy transition.

I’ve recently returned home to Australia, after seven years in the UK and US, with one of the world’s largest publicly listed utilities, National Grid.

National Grid is, of course, the system operator in the UK, but the company’s operations span 3,500 MW of generation assets, transmission and distribution for both gas and electricity, and retail
services for 7 million customers.

My experience has covered both regulated and commercial businesses across both the UK and the US, where the state-based energy policy environment is similar to Australia’s.

And everything I’ve learned in my career in engineering and business tells me that this energy transition, globally and in Australia, is a kaleidoscope of technical, economic, political and societal
challenges
. For all of us.

Solving these challenges promises many great things to come. But there is a catch.

The challenges are too big for any one person or organisation to solve. Not just our elected leaders, not just businesses, not just consumers. And not just AEMO.

In order to maximise the benefits of this energy transition for the whole of society, all of us need to play our role and work collaboratively, together, and learn from one another.

So, in that spirit, let me take you inside our control rooms, because it’s from there we can see Australia’s energy system transforming.

First, we’ll see how Australia is leading parts of the world’s energy transition, and what learnings we can take from here and abroad to solve some the issues we are confronting.

Second, we’ll look at Australia’s integrated energy network, and the strength in diversity it brings.

And third, we’ll consider a new era of prosperity for Australia that low-cost, sustainable energy can unlock.

And before we finish, I’d like to share some examples of the challenges that AEMO is confronting, and how building social licence and acting collaboratively with all stakeholders can maximise the
benefits of the energy transition.

After all, AEMO’s role is to ensure safe, reliable and affordable energy today, and enable the energy transition for the benefit of all Australians.

So let’s begin.

—————————————–

[1. Leading and learning]

We have four control rooms dotted around Australia.

Inside these facilities we can see that the way Australia generates electricity is changing, from the traditional spinning thermal generators, to electricity sourced from the sun and wind, and injected
into the grid by electronic inverters.

The contrasts between the two technologies could not be more stark: from analogue to digital, few to many, centralised to decentralised, one-way to two-way, emissions to no emissions, and from fuel
cost, to fuel that comes for free.

It’s probably no surprise, then, that in Australia more than 90 cents in every dollar invested in generation since 2012 has been in wind and solar.

Per capita, Australia is leading the world in installing renewable generation. Per capita, we’re installing this at double the rate of our nearest rival, Germany, and about 10 times the world average.

We have seen a one-thousand per cent increase in the number of large-scale solar farms in the last three years, and the number of windfarms has doubled in that same period.

We’re connecting them as fast as we can, 121 new projects in four years, turning regional centres previously renown for growing oranges or whale watching, into 21st century hubs of technology that
power our nation.

We’ve said that the pace of change is actually “well ahead” of our own planning scenarios, and that an additional 55 GW of projects currently being proposed across the East Coast of Australia – that’s
almost as much generation capacity as exists today.

And there is no greater symbol of Australia’s energy transition than the popularity of rooftop solar.

Solar systems are now fitted to over 2.5 million Aussie homes, the fastest growing part of the generation mix.

It is a stunning democratisation of power.

It’s a transformation: turning historically passive electricity consumers into active generators.

And a capital transfer, too. Power infrastructure investment decisions that were once the preserve of our nation’s boardrooms are now being made around the kitchen tables in our towns and suburbs.

As more renewable generation capacity comes online to replace retiring thermal generators, the variability in weather means that the power system needs to change.

It needs to accommodate periods of either very high, or very low instantaneous penetration of renewables – and sudden changes from one to the other.

And by ‘instantaneous’, I mean at any single moment in time. Real time. ‘Control room’ time.

Across the whole East Coast National Electricity Market, there are already points in time when renewable energy contributes to more than half of all electricity supply.

That puts us at the front of the pack for renewables penetration for any large grid in the world.

But the pace of change in Australia continues to accelerate.

So, the goal that I’m setting for us, Australia’s independent system operator, is to harness the talents, capabilities, experience and know-how across the industry, to engineer grids that are
capable of running at 100% instantaneous penetration of renewable energy.

And do this by 2025!

So, that’s a grid able to manage 100 per cent renewables penetration – at any moment in any day – by 2025.

That’s not decades away. It’s just a few years’ time.

This is unchartered territory for a large, independent grid anywhere in the world.

And this must be our goal not because of personal ambition, politics or ideology, but because we know this is where we’re headed!

A combination of technical innovation, economics, government policies and consumer choice, is driving this energy transition faster than it ever has before.

From our control rooms, AEMO can see instantaneous wind and solar penetrations increasing year on year, from 38% in 2018, to 52% last year. In WA, we’ve reached 65%.

And in South Australia, we’ve already passed a world-first milestone of 100% instantaneous renewable penetration.

Let’s make that real. On October 11 last year, we saw for the first time, ever, that renewable energy, from South Australia’s rooftop and large scale solar systems, was able to supply the equivalent all of
the state’s energy needs, at noon for an hour. 
(This was noted on 11th October 2020 on WattClarity … but it was also the same day we wrote about how ‘Some are waking up to the shortcomings of current methods of support for ‘Anytime/Anywhere Energy’.)

That’s a stunning phenomenon: running a whole state with power that is zero fuel cost, and zero emissions.

But to be able to do this reliably, at any point in time – for both the east and west coast grids – is a difficult engineering challenge.

And that’s because when inverter-based solar and wind generation reaches high penetration levels, it displaces traditional spinning generators, which have been needed for critical system stability attributes. (These are some of the characteristics we were thinking about when we coined the term ‘Keeping the Lights on Services’ in the GRC2018.)

These attributes include frequency control and inertia – a term our industry uses to mean resilience against disturbances – to keep electricity ‘on spec’ at the right voltage and frequency.

As solar and wind power floods in, it pushes down the cost of power generation to zero – and sometimes into negative prices (which are growing in prevalence)  – which means spinning thermal generators don’t get the market signal to stay in the mix, and they disconnect.

And for the sake of power system security right now, that’s when our control room staff sometimes need to step in.

With our existing tool kit, it’s getting harder for us to manage the stability of the power system as the penetration of solar and wind, even at today’s levels, pushes the system to its limits.

To give you an idea, in 2016, our control room staff issued just six manual interventions to maintain a secure grid.

Last year, we made 321 manual interventions…pretty much one every day, and it’s been the same so far this year.

I mentioned the popularity of rooftop solar, and while the benefits of these systems are felt by many, they also bring their own challenges.

The large volume of home-generated electrons are now being exported further up the system, into the higher voltage networks, which can put some of the system’s self-protection mechanisms at risk.

In the middle of mild, sunny days, they create periods of very low demand on the transmission system, and this causes risks to grid stability as I’ve just mentioned.

It’s like trying to ride a bike really, really slowly.

But I want to acknowledge that curtailment of these systems is a controversial issue, however rarely it might occur.

Households’ energy production needs to be consumer centric, in the same way energy consumption has been.

And it’s incumbent on all of us in the industry to improve how we engage, communicate and reward consumers.

So I’m pleased to note that a collaborative effort is underway with rule makers, governments, industry and consumer groups to develop a tiered arrangement that would see rooftop solar constrained only as a last resort, and long after a range of steps with the ‘big-end-of-town’ had been taken to re-balance supply and demand.

Given South Australia’s high penetration of renewables, a strong and collaborative partnership with South Australian Power Networks and the State Government has delivered a suite of extra management capabilities to support the secure operation of the South Australian network.  (see ‘Operational management of low demand in South Australia’ from 22nd Oct 2020 – and here for some new Market Notice frameworks, for instance)

And we’re now beginning to partner with distribution companies in other states to help them to develop similar capabilities.

Now despite Australia leading the world in many aspects of our energy transition, there’s actually still a lot we can learn and apply to our own back yard.

For example, the Deeside power station in the UK, which was mothballed in 2018, has just commenced operations to provide system security services, like the stabilising effect of inertia and reactive power, to help keep the electricity system stable.

It’s not economic to generate power there, so the steam generators and turbine will remain mothballed. But spinning the rotors to provide inertia is saving consumers millions of dollars each year.

For me, that’s a great use of the technology that otherwise would just sit there.

And there are many examples of innovation just like this.

Battery storage and pumped hydro are another component of our energy system that are invaluable, as large parts of our thermal generation fleet retire over the coming decades. Along with gas firming plants, AEMO’s considers these as ‘dispatchable capacity’.

Our Integrated System Plan calls for six to 19 gigawatts of new dispatchable capacity to be built in the next two decades.

And Australia is actually leading the way on grid-scale battery storage. The Hornsdale battery in South Australia was the largest lithium-ion battery in the world, at 150MW.

And Victoria right now is building one twice the size: the Victorian Big Battery in Geelong. These huge batteries are extremely helpful in stabilising the grid by providing a wide range of ancillary services.

Hydro electricity has been a nation-building feature of this country’s energy system for more than half a century. Australia is so lucky to have this resource.

In the UK, the Dinorwig hydro power station, or ‘the electric mountain’ as it’s nicknamed, can produce 1800 megawatts almost instantaneously, and has been providing critical stability services to the grid for years.

Australia’s Snowy 2.0 pumped hydro project is bigger, and being engineered with enough storage to run three million homes for a week.

—————————————–

[2. Strength in Diversity]

Now let me talk about the strength in diversity that an integrated network provides.

Geographic and energy diversity provide essential resilience against shocks in the power system.

And as I mentioned at the start, among the most recent unexpected incidents was the one involving the Callide power station in Queensland on the 25th of May.

As the incident unfolded, over 400,000 homes and many large businesses lost power.

But incidents like these in our industry are a powerful demonstration of unified effort, from all involved, to get customers back on power as soon as possible.

Within a few hours, the number of offline customers was down to 20,000. And the worst of it was over by the evening, when the power system had returned to a secure and stable state.

It showed what can be done by our industry when we act with united purpose and an urgent call to arms: the generators, networks, retailers, governments, and us, Australia’s independent system operator.

If all of us in can harness that sort of resolve and cooperation in an emergency, united by a common commitment to energy consumers, imagine what can be achieved over the coming years to navigate this energy transition in the best interest of all Australians.

I believe that this event also underscores the need for Australia to invest in a more interconnected grid, to improve resilience, connect diverse sources of energy, and deliver more reliable, lower-cost energy for consumers.

Greater interconnection creates a ‘portfolio effect’. You wouldn’t aim to have just one stock in your superannuation fund, most financial advisors will tell you to diversify, to protect against risk.

The UK is a great example. They aim to harness 40 gigawatts of cheap, clean offshore wind from the North Sea, which is being dubbed as the ‘Saudi Arabia of Wind’.

To ensure resilience though, Great Britain is adding to the six interconnectors that already connect the island to surrounding countries, with another two more interconnectors in the next two years, to bring total interconnection to nearly nine gigawatts.

In the Australian context, developments like Project Energy Connect will enable electricity from sunshine or wind in South Australia, to be carried across Australia to provide diversification, resilience and cheap clean energy to our populated east coast.

At a household level, integrating our home energy and storage actively into the grid, will also help manage this transition.

The world knows now that sharing resources creates value. From ride sharing, like Uber, to property sharing, like AirBnB.

Well, we can do the same with our home solar systems, by storing energy in local batteries and sharing this with our communities, provided the right market incentives and regulations are in place.

Aggregating rooftop solar and local batteries into virtual power plants can be financially beneficial for homeowners, and can also provide important grid services.

I’ve been part of many success stories across the United States, where aggregated rooftop solar and batteries contribute directly to grid services like capacity, frequency-response and demand management, to programs where solar and storage have been installed on community housing, and helped alleviate the need to replace retiring thermal generators.

There is huge potential in these types of aggregation and two-sided markets, but they take time to develop.

And gas will continue to play an important role in our integrated network.

In Australia, gas seems to have become the most debated piece of the energy jigsaw. I don’t think it needs to be.

Gas firming is currently invaluable, since it can be called on for short periods or long.

It’s incredibly flexible, but might not be used very often.

The prospect that the recently announced gas-fired power station at Kurri Kurri, might only be needed for 2 per cent of the time seemed to draw quite a lot of attention.

But the conclusion to make is not that firming plants like these aren’t required.

The point is even at 2 per cent of the time, dispatchable generation like this unlocks many multiples of low-cost renewable generation capacity into the market, by providing the security for when the sun isn’t shining, the wind isn’t blowing, and other storage can’t bridge the gap.

—————————————–

[3. New era of prosperity]

So, having looked at how Australia is leading the energy transition and, then, the strengths of an interconnected network – let’s turn to a third chapter, and contemplate the new era of prosperity that plentiful, cheap, renewable electricity could deliver for Australia.

The cheaper electricity becomes – and remember we are seeing solar and wind drive the price through the floor – the more society will continue to become electrified.

Australia has nearly 20 million registered vehicles and sometime soon – as we are seeing in countries all over the world – millions of motorists will make the switch to rechargeable EVs.

And how we manage the those charging cycles will have a profound effect on the grid.

Cheap decarbonised electricity also makes the prospect of a hydrogen economy much more likely.

Just as Australia has led the world in creating an LNG export industry, Australia is in the box seat to make green hydrogen the next export hero.

Australia has proximity to energy-hungry customers, an abundance of sunshine and wind, and importantly, the know-how to create a gas export industry on a world scale.

For our international energy customers, Australia has a proven record for reliability, security, political stability and quality assurance.

And that is something that few of our potential competitors can boast.

Cheap decarbonised energy also provides economic stimulus in our domestic economy.

It can be the stimulus for the industries of tomorrow – powering the economic growth needed to demolish debt accumulated from the Covid pandemic.

The avalanche of low-cost and low-carbon electricity generation in coming decades has the potential to replicate the stimulatory impact of government programs like JobKeeper creating jobs, relieving household stress and boosting the locally provided services that make up 60 per cent of the Australian economy.

But the energy transition also comes with hard realities that need to be discussed.

While the east and west coast grids are great assets for the nation, they now require augmentation to make the most of the energy transition.

AEMO’s Integrated System plan provides an actionable, least-regret pathway forward.

I’m pleased to see that projects like the Western Victorian Transmission Project are progressing.

This is a transmission line connecting Bulgana, just north of Ararat, to Sydenham in Melbourne’s north-west over a distance of nearly 200km.

It’s the first major greenfield transmission project in the NEM in three decades, and is designed to enable more low cost, renewable power to connect into the grid.

But as with any new infrastructure development nowadays, it has met with opposition from parts of our community.

This opposition is an understandable reaction from those being asked to shoulder the burden of construction and hosting, while the benefits are accrued by the wider community including those located hundreds of kilometres away.

But this nexus lies at the heart of our society’s ability to transition to a low-cost and low-carbon energy future.

So, it’s in all our interests, especially in making energy affordable, not to dismiss the concerns of these communities – because they are truly held.

The solution…I believe…is to create the critical social and community licence for this infrastructure, by working with communities, early on and collaboratively, to listen to and address their concerns.

And to support a smooth energy transition that truly delivers for all Australians, AEMO itself needs to transform too.

It’s essential we open ourselves up to all of our stakeholders, from the big end of town to the homeowner – to understand their needs in successfully navigating the energy transition.

I’m committing us to greater openness, transparency and accountability for the interactions we have with all our stakeholders as we go about our work.

This energy transition is a shared task.

It calls for a paradigm shift in collaboration and cooperation. And we will play our role.

Under my leadership, AEMO will work closely and collaboratively with governments, industry and communities to design the affordable, reliable energy system that Australia needs.

An energy system that’s capable of handling 100% renewable energy, at any moment of the day, by 2025.

Thank you.

 

Any emphasis (and links) added in the speech was added by us.

For those who are not familiar with Jim Collins’ writing – and in particular his ‘Built to Last’ book – you might find this general explainer posted here of what a ‘Big Hairy Audacious Goal’ (BHAG) is of some use.  It seems to me that Daniel Westerman’s rallying cry is certainly one of those!

 

(B)  A couple quick points

Worth noting a couple quick points here…

(B1)  AEMO does not set (renewables, or carbon reduction) targets

In simple terms, the AEMO has two main roles – keeping the lights on, and operating the market according to the current NEM rules.  It does not have responsibility for establishing what our carbon reduction targets should be … or what government  support should be in place for different types of plant (though it did have a role in the ESB’s Final Advice to Energy Ministers).

It certainly seems reasonable, though (indeed necessary) that AEMO should be getting it’s head around questions like:

(a)  As the pace of deployment of wind and solar (both small and large) continue apace, what are the future implications of this?

(b)  How would we continue to fulfil our role of ‘keeping the lights on’ if the situation were to arise in future where the volume of supply possible from wind and solar generation would meet or exceed 100% of the underlying demand across the NEM at that point in time.

Much better that AEMO understands the implications of what looks to be coming down the tracks at us, before we get there!  Thankfully the situation is improved somewhat since this this prognosis in July 2017 … but concerns still remain.

(B2)  AEMO is talking about instantaneous periods, not averages

There was some confusion in the immediate aftermath of the event … so worth highlighting that this near-term objective is understanding what would need to be in place for the grid to copy with 100% (or even just ‘near 100%) instantaneous penetration of:

(a)  renewables (which might include some Scheduled supply – from hydro, and some Non-Scheduled, but still synchronous, supply from biomass); and/or

(b)  intermittent (and either Semi-Scheduled and Non-Scheduled) renewables; and/or

(c)  non-synchronous generation (i.e. which might include supply from batteries).

(B3)  The challenge AEMO speaks about is NEM-wide

Worth also noting that the underlying technical (and commercial) challenges are actually based on a NEM-wide basis (i.e. for an entire grid) and that state-based percentages are ‘Vanity Metrics’ (same for subsets of contiguous grids internationally) that are divorced from the fundamental technical and commercial challenges, at least to a large extent.

So much better to ‘confront the brutal facts’ (another Jim Collins’ statement) and focus on the area of real challenge, rather than get distracted by (feel-good, but much less useful) regionalised percentages!

(B4)  Just because you’ve set a goal does not mean you’ll get there…

…. but you do give yourself a better chance (having set a BHAG and working towards it) of achieving some useful milestones along the way.

Unfortunately, too many simplistic readers/listeners of the speech seem to have adopted an ‘as Daniel said it, so it will come to pass’ mindset.

 

(C)  Coverage of the ‘supporting 100% by 2025’ goal

When talking about ‘New record for NEM-wide wind production on Tuesday 20th July 2021’ on the day and then again with ‘NEM-wide minimum demand (in winter) drops lower on Sunday 15th August 2021 … and Renewables Share in VIC higher’ two days later we referenced Daniel Westerman’s speech at CEDA.

It’s certainly inspired us to have a detailed think about what we can do, via GenInsights21, to explore some of the building blocks that need to put in place in order for the NEM to be able to supply anything close to 100% of Underlying Demand on an instantaneous basis by any of these three combinations:

(a)  renewables (which might include some Scheduled supply – from hydro, and some Non-Scheduled, but still synchronous, supply from biomass); and/or

(b)  intermittent (and either Semi-Scheduled and Non-Scheduled) renewables; and/or

(c)  non-synchronous generation (i.e. which might include supply from batteries).

—————-

At some point we might come back to this article to add in a more extensive catalogue of external references to this landmark address.

About the Author

Paul McArdle
One of three founders of Global-Roam back in 2000, Paul has been CEO of the company since that time. As an author on WattClarity, Paul's focus has been to help make the electricity market more understandable.

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