South Australian Fuel and Technology Report

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South Australian Fuel and Technology Report SOUTH AUSTRALIAN FUEL AND TECHNOLOGY REPORT SOUTH AUSTRALIAN ADVISORY FUNCTIONS Published: March 2017 SOUTH AUSTRALIAN FUEL AND TECHNOLOGY REPORT IMPORTANT NOTICE Purpose The purpose of this publication is to provide information about fuel, resources, and power generation technology related to the energy industry in South Australia. AEMO publishes this South Australian Fuel and Technology Report in accordance with its additional advisory functions under section 50B of the National Electricity Law. This publication is based on information available to AEMO as at 28 February 2017, although AEMO has endeavoured to incorporate more recent information where practical. Disclaimer This publication includes information provided or developed by third parties. AEMO has made every effort to ensure the quality of the information in this publication but cannot guarantee that information, forecasts and assumptions are accurate, complete or appropriate for your circumstances. This publication does not include all of the information that an investor, participant or potential participant in the South Australian electricity market might require, and does not amount to a recommendation of any investment. Anyone proposing to use the information in this publication (including information and reports from third parties) should independently verify and check its accuracy, completeness and suitability for purpose, and obtain independent and specific advice from appropriate experts. Accordingly, to the maximum extent permitted by law, AEMO and its officers, employees and consultants involved in the preparation of this publication: make no representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of the information in this publication; and are not liable (whether by reason of negligence or otherwise) for any statements, opinions, information or other matters contained in or derived from this publication, or any omissions from it, or in respect of a person’s use of the information in this publication. Acknowledgement AEMO acknowledges the support, co-operation and contribution of all participants in providing data and information used in this publication. Copyright © 2017 Australian Energy Market Operator Limited. The material in this publication may be used in accordance with the copyright permissions on AEMO’s website. Material sourced from third party publications may be subject to copyright, disclaimers and other restrictions. Australian Energy Market Operator Ltd ABN 94 072 010 327 www.aemo.com.au [email protected] NEW SOUTH WALES QUEENSLAND SOUTH AUSTRALIA VICTORIA AUSTRALIAN CAPITAL TERRITORY TASMANIA WESTERN AUSTRALIA SOUTH AUSTRALIAN FUEL AND TECHNOLOGY REPORT EXECUTIVE SUMMARY The electricity generation mix in South Australia has changed in the past year, notably through the end of coal-fired generation and the increase to the Heywood Interconnector capability, and now relies on three key resources: wind, solar and gas. Renewable generators now represent approximately 43% of South Australia’s local installed capacity (2,297 megawatts (MW)), with gas-fuelled and liquid-fuelled thermal generators providing the other 57% share (2,987 MW). Energy supplied by Northern Power Station in the 2015−16 financial year is now largely being provided from Victoria via the Heywood and Murraylink interconnectors. Following South Australia’s Black System event on 28 September 2016, imports from Victoria are reduced when the inertia of the South Australian power system is low. This helps protect the system against high rates of change of frequency (RoCoF) associated with the non-credible loss of Heywood Interconnector, which could occur as a consequence of multiple contingencies in Victoria or South Australia. By limiting imports, more gas-powered generation (GPG) within South Australia is dispatched to provide the minimal level of thermal generation required to maintain security of electricity supply. This increased dependence on GPG to maintain system security in South Australia comes at a time when gas production is in decline and gas prices are rising. The 2017 Gas Statement of Opportunities (GSOO) projects that GPG will be constrained from 2018–19 in South Australia, Victoria, and New South Wales unless gas production increases, or new gas supplies are developed. Resources for power generation Natural gas in South Australia is sourced from Queensland, Victoria, and the Cooper and Eromanga basins. The cost of production is increasing, as the geological challenges of gas extraction are compromising gas well deliverability. South Australia’s superior access to high mean wind speed sites has contributed to the region having the highest penetration of wind generation nationally to date. Since 2011–12, 392 MW of onshore wind farms has been developed, with a total of 1,595 MW now installed in the region. Sunlight is an abundant natural resource in South Australia. Overall South Australian rooftop photovoltaic (PV) generation increased by 131% from 294 MW in 2011–12 to 679 MW in 2015–16. There is development interest in a diverse mix of resources and technologies for future generation in South Australia, including wind, large-scale solar PV and solar thermal, bioenergy, pumped hydro storage, gas, carbon capture and storage, and grid-scale storage. The technology frontier – comparative costs of new generation AEMO has conducted a comparative cost assessment of different generation technologies for South Australia, based on a levelised cost of electricity (LCOE) calculation, summarised in Table 1. Natural gas-fuelled combined cycle gas turbines (CCGTs) remain the lowest cost new generation regardless of mode of operation (continuous or more peaking), but new entrant costs are higher than the current wholesale electricity price in South Australia. Using constant generation at nearly fully capacity (83% capacity factor), and gas prices of between $6.80 a gigajoule (GJ) and $8.50/GJ, AEMO estimates a CCGT would require an average electricity price of around $83 a megawatt hour (MWh) to cover its investment and operating costs. This is 34% higher than South Australia’s time-weighted average price ($61.81/MWh) in 2015–16. At capacity factors below 8%, natural gas-fuelled open cycle gas turbine (OCGTs) have lower LCOE than CCGTs making OCGTs suitable to support electric power peaking load. For renewable generation technologies, wind remains the cheapest resource, with an LCOE of around $85/MWh (assuming a capacity factor of 42%). The LCOE for large-scale solar PV technologies, such as solar PV with dual-axis tracking, has dropped noticeably in the last two © AEMO 2017 3 SOUTH AUSTRALIAN FUEL AND TECHNOLOGY REPORT years from $3,869/kW in 2015 to $2,810/kW in 2017, largely driven by substantial falls in capital cost. This reduction has been due to mass production, increase of market competition, and optimised system configurations. The LCOE for the cheapest renewable generation technology is now similar to the LCOE for thermal generation, although the value of the two generation sources is not directly comparable, due to the intermittent nature of wind generation. Minimum LCOEs of natural gas, wind, and solar PV technologies Technology Minimum LCOE Assumed maximum capacity ($/MWh) factor (%) Combined cycle gas turbine (CCGT) 83 83 Wind 85 42 Solar PV (single-axis tracking (SAT)) 90 28 Solar PV (fixed flat PV (FFP)) 96 22 Solar PV (dual-axis tracking (DAT)) 98 32 Open cycle gas turbine (OCGT)* 218 10 * The calculated minimum LCOE of OCGT is more than twice the value of CCGT mainly due to lower plant efficiency and lower assumed maximum capacity factor. Technology developments and projects As at 28 February 2017, South Australia had: 102.4 MW committed and up to 3,109.4 MW publicly announced wind projects, in addition to 1,595 MW existing capacity. Up to 945 MW of large-scale solar projects publicly announced in the region. Four publicly announced projects for CCGT, OCGT, biomass, and diesel-fuelled technologies with up to 823.8 MW of total capacity. Up to 200 MW publicly announced pumped hydro storage project. The high level of non-synchronous generation exposes South Australia to a high RoCoF associated with the non-credible loss of the Heywood Interconnector, which could occur as a consequence of multiple contingencies in Victoria or South Australia. Following South Australia’s Black System event on 28 September 2016, additional RoCoF constraint equations have been implemented in the National Electricity Market (NEM) Dispatch Engine (NEMDE) to reduce imports from Victoria when the inertia of the South Australian power system is low. Potential solutions to existing and future challenges related to the penetration level of non-synchronous generation include the installation of synchronous condensers, storage, RoCoF protection devices, and new interconnectors.1 The 2016 Heywood Interconnector upgrade increased the maximum transfer capability in both directions from 460 MW to 650 MW. AEMO has forecast that additional interconnection for South Australia with eastern States may provide positive net market benefits.2 ElectraNet is currently investigating the development of interconnector and non-network solutions as part of its Energy Transformation Regulatory Investment Test for Transmission (RIT-T).3 1 AEMO. Future Power System Security Program Progress Report. Published: August 2016. Available at: http://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Security-and-reliability/FPSSP-Reports-and-Analysis.
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