Future Trends in Power Systems A Short Course in honour of Professor David Hill Monday 12 October 2009, University of

Non-Network Options and Demand Side Response for Network Support – TransGrid’s Experience

Dr Ashok Manglick Group Manager/Strategic Projects, TransGrid Outline  TNSPs and DSR  TransGrid’s Approach to Demand Response . Regulatory Framework for TNSPs . The Planning process  Case Study: Acquisition of 350MW of network support for summer 2008/09  Future projects  Questions and Discussion TransGrid’s Network Queensland

New South Wales

energyAustralia

Country

500 kV 500 @ 330 330 kV 220 kV 132 kV A.C.T. T1 Distributor Boundary Power Station ACTEW/ Major Snowy AGL Substation Scale

0 100 km TRANSGRID’S CUSTOMERS Other TNSPs Large Industrials Snowy

Delta energyAustralia

Macquarie Integral TransGrid Energy Generation

Country Energy

Eraring Energy ACTEW/AGL

Generation Transmission Distribution Consumers Authorities DSR for TNSPs

Eliciting demand side response in terms of reducing peak electricity demand, changing energy usage to other forms of energy sources and/or installing embedded generation to meet part customer peak electricity demand. Common DSR/DSM Practices

 Load control- shift load to off peak  Embedded generation  Interruptible loads  Industrial co-generation  Power factor correction  Shift to alternative energy sources – wind, gas etc. TransGrid’s Demand Side Initiatives

. Exploring & contracting Non-Network Options, where prudent and efficient . International Participation: IEA and CIGRE (via C6 Australian Panel) . State wide Demand Management Participation . Working with all NSW Distributors on Innovation in Demand Management Exploring Non-Network Options

For major network augmentations TransGrid publishes:

. Annual Planning Report . “Needs Statement” for each constraint describing the nature of constraints . Request For Proposals or similar calls seeking market input for non-network options to defer (or eliminate) proposed network augmentation Non-Network Alternatives Requests 2000-2009

 Western Area of NSW  Mid-North Coast of NSW  NSW Central Coast  South West of NSW  Far North Coast  West & Central West NSW  Newcastle-Sydney-Wollongong (N-S-W) area  Inner Sydney Metro Area – work in progress Regulatory Framework for TNSPs

. The AER regulatory regime . The AER Revenue Cap Decision . The National Electricity Rules TNSP’s Obligations in the NER

 Applying Regulatory test which requires TNSPs to treat non- network alternatives on equal footing with network proposals

 Efficiency  Must be economically more efficient than other options (Reg. Test)

 Prudence  TransGrid has obligations to maintain supply reliability to its customers. Non-network alternatives must deliver same level of reliability as network alternatives  Also, non-network alternatives must be feasible (must have a proponent or a likely proponent, able to deliver when required) Funding from Pass Through

. A Network (Grid) Support Event is a material change in the cost (if any) of network support. Can apply for pass-through of the cost . Pass-Through Event must be prudent, efficient & have a financial impact on TransGrid during the Regulatory Control Period. . Pass-Through amount must be material. Funding from Deferral of Capex

. The non-network network support alternative must be cost-effective when compared with the most cost- effective network alternative . Cost of implementing non-network alternative must be less than the benefit from capex deferral related to the proposed network alternative . The Board expects a robust commercial analysis (as different from economic analysis) justifying non- network option including risk management. The Planning Process

. Integration of non-network alternatives in planning process

. Seeking and evaluating non-network alternatives as part of the capex decision making process Joint Connection Load & Network Asset Operational Risk Planning Enquiries & Generation Adequacy Condition issue Assessment with DNSPs Applications Scenarios ND&RA ND&RA ND&RA ND&RA NS, NPO NPO All

Identification of needs ND&RA Outline Plans ND&RA Detailed Planning and Options Development The Planning process ND&RA

Decision to examine non -

network alternatives ND&RA

Project Scoping Reports Non-network alternatives for network alternatives including DSM and generation ND&RA (Request for Proposals if required) ND&RA

Technical and commercial evaluation of non -network Feasibility Study alternatives ND&RA CPD

ND NP G3 004 Annual Planning Option Assessment ND&RA Report ND&RA

Sign off to start Regulatory Project Definition Consultation Report <$10m ND&RA ND&RA Decision Gate 1

DSM/Generation Regulatory Consultation negotiations Application Notice ND&RA ND&RA

Regulatory Consultation Project Definition

Final Report ND&RA Report >$10m ND&RA

Funding approval for Decision Gate 2 contracted DSM /Generation Funding approval for Network Support Construction ND&RA CPD, NS, NPO

Sign Non -network Agreement(s) Identify network needs (outside scope of this procedure )

Publish needs document (e.g XX MW Non-network alternatives: required at ‘y’ location on grid in YYYY

Review responses The process

NO STOP Pursue non -network option ?

YES

Prepare and publish EOI or RFP

Analyse & evaluate responses to EOI or RFP (technical & commercial)

Option fails Undertake Regulatory Test STOP (ND NP G2 003 NER ‘Planning Consultation Process’ for details )

Option passes

Detailed negotiations with proponents and execution of NSA

Implement

Review on completion of NSA term Case study:

Non-network alternatives to defer a 500kV transmission project upgrade

Power transfers to and Network Supplying from Queensland the NSW northern load Newcastle/Sydney/ Wollongong Area Hunter Valley Power Stations Newcastle

Central Coast Power Stations Western Power Stations Sydney SydneyWollongong Wollongong

Southern load area

Snowy Power Stations

Power transfers to and from Victoria Power flow to and from north Line rating limitation Hunter Valley power Bayswater Liddell stations

Newcastle and Tomago

Overall System Voltage control limitation Limitations Western Central power Coast stations power stations

Mt Piper Wallerawang

Multiple lines

Greater Sydney

Marulan South west South Coast Dapto

330

500 kV construction operating at 330 kV 500kV Western System Upgrade: Non-network Options

. Needs Statement (350 MW for summer 2008/9): issued October 2005

. RFP issued August 2006, closed Sep. 2006

. Classified in portfolios the most cost effective offers, totalling 350 MW (effective) 500kV Western System Upgrade: Non-network Options (2)

. Cost components: availability and despatch payments; . Total cost of recommended portfolio : $21.9M; availability & despatch about equal. . Recommendations approved by the Board: June 2007 . Pass-through approved by the AER, May 2008 500kV Western System Upgrade: Non-network Options (3)

Operating procedures & processes . Notification & dispatch procedures . Communication protocols . Performance verification & payment processes Major issues with AER

. Materiality

. Efficiency

. Reasonableness Major issues for TNSPs

. Risk of not being able to meet reliability obligations due to lower reliability of non-network alternatives and uncertain availability

. Financial risks & funding

. Operational risks o Embedded generator o Large industrial load o Aggregator Future DSR Projects

 Sydney Metropolitan Development  Deferral by one or two years

 DM Innovation 2009-2014 Sydney inner metropolitan area system development

 TransGrid & Energy joint planning & development in the Sydney Inner Metropolitan;

 Complex project – transmission lines (overhead and underground) and associated substation works

 Need to identify deferrable portions of the project (e.g. Land acquisition generally cannot be deferred) TransGrid/EnergyAustralia Sydney Supply Area where DM needs to be implemented to defer projects by one year, or two (subject to availability of DM capacity) Innovation Demand Management 2009-2014

 The AER has approved DM Innovation allowance to DNSPs in NSW & ACT

 TransGrid received approval for DM innovation projects for the 2009-2014 regulatory control period

 TransGrid proposes to work with the DNSPs and has signed MOUs with them

 Implement lessons learnt from the DMPP and

 Other new initiatives in partnership with distributors in NSW & ACT Questions & Discussion