Energy Transformation Strategy

Currently, there is no single entity responsible for planning the power system that delivers electricity to households and businesses in the south west of the State. The Australian Energy Market Operator (AEMO) forecasts our generation needs, while Western Power is responsible for planning the development of its network.

This system has served us well-enough in the past. However, managing our power system through the transition to renewable and distributed electricity sources requires stronger coordination to provide clear information for investors and planners, and to guide the development of the power system of the future.

In response to these challenges, the Government is developing a Whole of System Plan, bringing together the important aspects of power system planning under a single umbrella.

The Whole of System Plan for the south west will:

• identify the best options for investment in our power system, to maintain security and reliability at the lowest sustainable cost;
• assist in the transition to a lower-emissions power system by guiding the efficient integration of renewable generation and identifying opportunities for energy storage, which will play an increasing role in meeting our essential electricity needs; and
• provide guidance to regulators and industry regarding efficient power system investment, and to policy–makers on the future needs of the power system.

Led by the Energy Transformation Taskforce, the initial Whole of System Plan will leverage recent modelling of the generation mix in the south west of the State undertaken by the former Public Utilities Office. The plan will be developed in close collaboration with Western Power and AEMO, and in consultation with stakeholders.

The initial Whole of System Plan will be delivered to Government by mid–2020.

Modelling Scenarios

The Energy Transformation Taskforce has engaged with stakeholders on the four modelling scenarios proposed for the initial Whole of System Plan. The scenarios were presented at the Industry Forum on 12 July 2019 and interested parties were also invited to provide feedback on the proposed modelling scenarios via email or in a one-on-one meeting with the project team. 

Overall, feedback has been positive, and the four modelling scenarios have been endorsed by the Energy Transformation Taskforce for use in the Whole of System Plan. A summary of all stakeholder views, and how the Taskforce proposes to accommodate this feedback, is provided in the Information Paper below. 

• Whole of System Plan Modelling Scenarios Information Paper (PDF)
• Whole of System Plan Industry Forum Presentation (PDF)
• Whole of System Plan Assumptions Book (PDF) 

Modelling Methodology and Assumptions

The Whole of System Plan modelling inputs have been developed and tested via more than 70 meetings with energy sector stakeholders. This includes one-on-one meetings with industry participants, investors and advocacy groups.

Stakeholders have provided feedback on the modelling scenarios and the various inputs and assumptions. In many cases, stakeholders have shared critical data such as operating costs, expected returns and plant characteristics. This information will help improve the quality of the WOSP modelling inputs and therefore the robustness of modelling outputs. As some of this information is confidential, it has not been included in the Information Paper or Assumptions Workbook below.

An overview of the methodology and input assumptions that will be used to model the four WOSP scenarios is provided in the Information Paper below.

• Whole of System Plan Modelling Methodology and Assumptions Information Paper (PDF)

Next Steps

Modelling work has commenced and will continue over the coming months. The Energy Transformation Implementation Unit anticipates sharing a modelling update with the Market Advisory Committee in early 2020.

The arrangements by which generators gain access to Western Power’s network in the South West Interconnected System (SWIS) are critically important, as they determine the ability of the generator to participate in the Wholesale Electricity Market and provide electricity to households and businesses in the south west.

Current network access arrangements do not make the best use of available transmission capacity and the existing investment in the network, resulting in barriers to entry for new generators. The arrangements have also led to an outcome where generators have different rights to access the network, creating inefficiencies in the dispatch of generators in the Wholesale Electricity Market.

The proposal to adopt a framework of constrained access aims to improve generator access to the Western Power network by providing more equitable access for generators and optimising grid use. This will help remove barriers to investment and facilitate access to the Wholesale Electricity Market for new low-cost and cleaner generation technologies. By facilitating more efficient use of available network capacity, the reforms will also provide a greater return on the investment in new and existing network infrastructure that is ultimately paid for by electricity consumers in the south west.

Project Elements

Constrained access will be implemented primarily by the application of security constrained economic dispatch in the Wholesale Electricity Market. This will require:

• Measures to transition existing network access arrangements to operate and be consistent with a constrained network access model, and appropriately managing the issues that arise from this transition.
• A new process for allocating reserve capacity credits under the Reserve Capacity Mechanism to ensure it is consistent with a constrained network access environment.
• New arrangements for the dispatch of generators in the Wholesale Electricity Market and market systems to incorporate security constrained economic dispatch principles. This will be progressed under the Delivering the Future Power System work stream.

Changes to facilitate the reforms will be progressed largely through amendments to the Wholesale Electricity Market Rules and the Electricity Networks Access Code 2004, developed by the Energy Transformation Taskforce, in consultation with industry stakeholders.

Consultation

Consultation papers released by the former Public Utilities Office on the implementation of constrained access and submissions received in response are available here.

In the face of the rapid transformation being experienced in the electricity sector, the market systems, standards, obligations and frameworks that underpin the operation of the power system in the South West Interconnected System (SWIS) are under increasing pressure.

Unless we modernise the way the power system is regulated and managed, energy will not be dispatched at the least sustainable cost, the power system will be limited in its ability to accommodate growing levels of renewable generation and other new technologies (such as battery storage) while maintaining security and reliability, and signals for investment in the power system — at the right time and place — will be inadequate.

Some elements contributing to the Delivering the Future Power System work stream were progressed by the former Public Utilities Office, such as improvements to pricing and demand–side participation under the Reserve Capacity Mechanism, clarification regarding how energy storage can currently participate in the Wholesale Electricity Market, and foundational features of an improved spot market.

The Taskforce will build upon this work to deliver the Government’s Energy Transformation Strategy.

The Delivering the Future Power System work stream has two major elements: Power System Security and Reliability and Future Market Operations.

Power System Security and Reliability

This project stream focuses on ensuring that the regulatory frameworks, obligations placed on market participants, and tools available to the Australian Energy Market Operator (AEMO) are there to ensure that power system security and reliability is maintained – despite generation mix and customer demand changes.

New Essential System Services Framework: The way Essential System Services (often referred to as Ancillary Services) are currently designed and used will not meet the future need of the power system, which will be characterised by rapid fluctuations from intermittent generation and low daytime system load. New Essential System Services and effective means for their supply will be designed around the current and future needs of the power system.

Generator Performance Standards: Alongside the design of new Essential System Services, new Generator Performance Standards will be designed and implemented — in a staged fashion — to help maintain power system security and reliability as well as improve equity in how different technologies and new and legacy generators are treated.

Regulatory Architecture and Governance: The way in which regulatory frameworks and energy technologies have evolved has resulted in gaps, duplication, and inconsistency between the instruments which govern power system security and reliability. Roles and responsibilities between AEMO, Western Power and market participants will be clarified, and change management and governance arrangements will be improved.

Reliability Standards: Various reliability targets apply to different elements of planning and operating the South West Interconnected System. Consideration will be given to the creation of common reliability standards, their governance, and how standards are reflected throughout the regulatory framework.

Future Market Operations

This project stream focusses on major improvements to the design and operation of the Wholesale Electricity Market (WEM) to ensure that electricity is dispatched at the lowest sustainable cost and the operation of the market efficiently reflects and facilitates improvements to the way Western Power’s network is accessed.

Security Constrained Economic Dispatch: The dispatch of generators around network constraints in the WEM is currently managed through manual systems and processes. With the complexity of managing the power system increasing, this is leading to inefficiencies in the market. Dispatch is also not currently co–optimised across energy and Essential System Services markets, resulting in increased costs for customers. Coupled with other improvements to the market, a ‘security-constrained’ market design with co–optimised dispatch across energy and any Essential System Services markets will automatically factor in network and security constraints when determining dispatch, ensuring that the dispatch outcomes are the lowest cost available while maintaining system security.

Synergy Facility Bidding: Synergy currently bids its generation into the market as a portfolio, rather than individual facilities, and is dispatched on that basis. The adoption of a security–constrained market design requires individual facility bidding and dispatch to ensure the system operator can manage when network and security limitations are reached at various locations on the network. Synergy will be required to participate on an individual facility basis to enable the proper functioning of the new security constrained market. An appropriate approach to facility bidding for Synergy will be developed, balancing the need for improved price transparency and better constraint management with the costs of implementation.

Reserve Capacity Mechanism under Constrained Access: The implementation of a framework for constrained access of Western Power’s network will require changes to the way capacity credits are assigned under the Reserve Capacity Mechanism to ensure that the contractual obligations of facilities to provide capacity is reflected and locational signals are provided to new facilities. This element of the Future Power System is being managed as part of the Improving Access to the SWIS work stream, in conjunction with this Future Market Operations work stream.

Controls for efficient market outcomes: Throughout the Delivering the Future Power System work stream, consideration will be given to the extent to which market design changes confer market power on individual or groups of market participants which can potentially be exploited to affect market outcomes. Scenarios where controls for efficient market outcomes may be required include rules for rebidding after gate closure, definition of short run marginal cost and situations where a market participant may have market power.

Taskforce decisions

Following consultation, the Energy Transformation Taskforce will make decisions on elements of market and regulatory design. These decisions will form the basis for draft market rules and regulations.

Taskforce decisions, information papers and consultation drafts of rules and regulations will be published in the Publications section of the Energy Transformation website as they are completed.

Distributed energy resources, or ‘DER’, are smaller–scale devices that can either use, generate, or store electricity and form a part of the local distribution system, which serves homes and businesses. DER can include renewable generation, energy storage, electric vehicles, and controlled appliances, such as air conditioners and pool pumps.

In Western Australia, more than 25% of households now have a solar PV system. With around 1,000 megawatts of solar PV installed in our main grid in the south west of the State, solar PV is now the biggest source of generation in the system — three times the size of the largest traditional generator, the 340 megawatt Collie Power Station.

DER create an exciting opportunity to reduce electricity costs and lower emissions from the energy sector. However, they can also present a risk to system security if not properly managed. Over the coming five years, continued uncoordinated uptake of rooftop solar PV systems will see daytime demand for traditional thermal generation fall to levels at which the stability of our main power system in the south west of the state is likely to be compromised.

In some parts of the State, new solar PV installations are already being restricted, as our network operators find solutions to local grid stability issues. To avoid this, a new policy framework is urgently needed to coordinate the efficient integration of DER into our power system.

Distributed Energy Resources Roadmap

In response to these challenges, the Energy Transformation Taskforce will develop a DER Roadmap to ensure we can integrate growing levels of DER into the State’s electricity systems in a safe and secure way and to make sure customers can continue to benefit from solar PV and other new technologies.

The Roadmap will guide changes to policies, regulations, technical requirements and customer protections to support the integration of DER over the short, medium and longer term. The Roadmap will also provide guidance on how DER can be integrated with the operation of the power system and Wholesale Electricity Market in the south west.

Connection Requirements

In parallel with the development of the DER Roadmap, the Taskforce will revise the network connection requirements and performance standards for distributed energy technologies.

Improving Visibility

The Taskforce will also improve the visibility of DER on the power grid to enable the system operator to better manage their effect on system security.

Consultation

On 30 July, the Energy Transformation Implementation Unit held the first DER Roadmap – Industry Workshop. 

The DER Roadmap aims to deliver an action-oriented plan that identifies the policy, regulatory, customer protection and technical requirements to support high levels of DER whilst ensuring safe, secure and affordable electricity in the short, medium and long term. 

The Workshop asked industry, Government, consumer and other interested stakeholders to understand the key issues for consideration in the DER Roadmap, and to prioritise further work. 

• DER Roadmap Workshop Presentation (PDF)