❓ Dr. Honey questions the Minister for Energy about increasing reliance on supplementary reserve capacity to avoid blackouts, impacting WA's productivity. The Minister defends the approach, highlighting demand-side management's benefits and criticising past policies.
AnsweredQoN 560Legislative Assembly
QuestionView source ↗
ENERGY SUPPLY
560. Dr D.J. HONEY to the Minister for Energy:
The Minister for Energy is looking
very relaxed over there.
Mr W.J. Johnston : I am!
Dr
D.J. HONEY : I refer to reports
that the Australian Energy Market Operator is seeking that 326 megawatts of supplementary
reserve capacity to address looming shortfalls in energy supply to be available
from the 1 December 2023 to 1 April 2024 in order to avoid brownouts and
blackouts during summer. That is almost double the amount of 174 megawatts of
reserve capacity that was asked for last summer. This is the third time in
recent history that AEMO has needed to tender for reserve capacity.
(1) Does the minister think this is
now the norm?
(2) How will this
impact WA's productivity, given large energy-using businesses are being
asked to sacrifice production to maintain household electricity supplies?
Mr P.J. Rundle : Good
question!
560. Dr D.J. HONEY to the Minister for Energy:
The Minister for Energy is looking
very relaxed over there.
Mr W.J. Johnston : I am!
Dr
D.J. HONEY : I refer to reports
that the Australian Energy Market Operator is seeking that 326 megawatts of supplementary
reserve capacity to address looming shortfalls in energy supply to be available
from the 1 December 2023 to 1 April 2024 in order to avoid brownouts and
blackouts during summer. That is almost double the amount of 174 megawatts of
reserve capacity that was asked for last summer. This is the third time in
recent history that AEMO has needed to tender for reserve capacity.
(1) Does the minister think this is
now the norm?
(2) How will this
impact WA's productivity, given large energy-using businesses are being
asked to sacrifice production to maintain household electricity supplies?
Mr P.J. Rundle : Good
question!
AnswerView source ↗
It is an interesting question, and I
am very pleased to receive it.
(1)–(2) I
want to explain a few things. The first is that this has been reported as a crisis.
I make it clear that that is not the case. The Australian Energy Market Operator
has three tools available to it to purchase reserve capacity and supplementary
reserve capacity is one of those tools. It has been commented upon in the media
that this is only the third time in 20 years that it has been needed, and that
is true, but that is because, generally speaking, the AEMO predictions of
future demand come true. On this occasion, AEMO's reserve capacity
cycled three years ago underestimated load growth and so AEMO is using the
tools the government has given it to go to market and seek the supplementary
reserve capacity.
Also, the planning margin has
changed. The government has engaged on this. AEMO has always operated at what
is called n – 2, which is the total expected demand plus the two
largest units. Therefore, that way, if we are at peak and the two largest power
stations break down, we would not have to have a market response. AEMO has now
moved to n – 3, which means that if three plants were to break down at
peak, it would not require a market response. AEMO did that because the coal
plants are unreliable. For those people who say that we need more coal, such as
Paul Murray writing in The West Australian , I make the point that we
changed the planning criteria because of the challenge of managing the old coal
plant as it gets towards the end of its life, which is one of the reasons we
are doing a phased planned retirement.
The
next thing is that I think the member's question referred to
demand-side management. I want to remind the member that demand-side
management is actually an essential part of a modern electricity system. Members will remember that in the last sitting
week I showed them a chart of peak demand—it goes up and down.
We have to build a pyramid of generation and the last block on that pyramid is
the most expensive. Therefore, if we do not need that last block of a power
station, it will be the cheapest way going forward. Remember there is actually
a peak. There is a minute of time that is the highest demand. If we can shave
off that peak, we do not have to build the power station that would then be
used on all the other days of the year. We are talking about two hours in a single
day, and we have to have enough power from power stations to get through that
peak. It is much cheaper to engage with industry and have industry choose— it is not made to do it—to use a flexible
response to ensure that that last block of the pyramid is not needed .
That means that it is cheaper for everybody, including industry. Not only that,
industry is paid to do it because it is part of the reserve capacity mechanism.
I do not understand this war against
demand-side management. It is a feature of every modern electricity system in the world. I know that the former
government under Mike Nahan fought hard to drive demand- side management
out of the system. At the time, I said that that was the wrong call. Mike Nahan
made some correct calls, but that one was wrong, and I do not apologise for
using common sense to save money. Let me make it clear: demand-side management
means that in Western Australia electricity costs are lower and carbon
pollution is lower than they would be if members opposite were in government.
The SPEAKER : A supplementary,
which I note will be the last question.
am very pleased to receive it.
(1)–(2) I
want to explain a few things. The first is that this has been reported as a crisis.
I make it clear that that is not the case. The Australian Energy Market Operator
has three tools available to it to purchase reserve capacity and supplementary
reserve capacity is one of those tools. It has been commented upon in the media
that this is only the third time in 20 years that it has been needed, and that
is true, but that is because, generally speaking, the AEMO predictions of
future demand come true. On this occasion, AEMO's reserve capacity
cycled three years ago underestimated load growth and so AEMO is using the
tools the government has given it to go to market and seek the supplementary
reserve capacity.
Also, the planning margin has
changed. The government has engaged on this. AEMO has always operated at what
is called n – 2, which is the total expected demand plus the two
largest units. Therefore, that way, if we are at peak and the two largest power
stations break down, we would not have to have a market response. AEMO has now
moved to n – 3, which means that if three plants were to break down at
peak, it would not require a market response. AEMO did that because the coal
plants are unreliable. For those people who say that we need more coal, such as
Paul Murray writing in The West Australian , I make the point that we
changed the planning criteria because of the challenge of managing the old coal
plant as it gets towards the end of its life, which is one of the reasons we
are doing a phased planned retirement.
The
next thing is that I think the member's question referred to
demand-side management. I want to remind the member that demand-side
management is actually an essential part of a modern electricity system. Members will remember that in the last sitting
week I showed them a chart of peak demand—it goes up and down.
We have to build a pyramid of generation and the last block on that pyramid is
the most expensive. Therefore, if we do not need that last block of a power
station, it will be the cheapest way going forward. Remember there is actually
a peak. There is a minute of time that is the highest demand. If we can shave
off that peak, we do not have to build the power station that would then be
used on all the other days of the year. We are talking about two hours in a single
day, and we have to have enough power from power stations to get through that
peak. It is much cheaper to engage with industry and have industry choose— it is not made to do it—to use a flexible
response to ensure that that last block of the pyramid is not needed .
That means that it is cheaper for everybody, including industry. Not only that,
industry is paid to do it because it is part of the reserve capacity mechanism.
I do not understand this war against
demand-side management. It is a feature of every modern electricity system in the world. I know that the former
government under Mike Nahan fought hard to drive demand- side management
out of the system. At the time, I said that that was the wrong call. Mike Nahan
made some correct calls, but that one was wrong, and I do not apologise for
using common sense to save money. Let me make it clear: demand-side management
means that in Western Australia electricity costs are lower and carbon
pollution is lower than they would be if members opposite were in government.
The SPEAKER : A supplementary,
which I note will be the last question.
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