SLIDE 1

SYSTEM RESTART ANCILLARY SERVICES

17 December 2012

TARYN MARONEY

SLIDE 2

PRESENTATION OBJECTIVES

• Provide an overview of black start • Briefly explain the current system restart ancillary

services (SRAS) arrangements • Explain why AEMO is reviewing the SRAS arrangements • Provide a summary of the options AEMO will consult on

and the proposed timeline • Provide an opportunity for stakeholder feedback

SLIDE 3

WHAT IS BLACK START?

• Black start service supplies electricity for power system restoration to generation in the unlikely event that a significant part or the entire grid loses power

• A black start generator is a generator that is capable of being started without an outside electrical power supply, that is, from the national grid

• AEMO procures SRAS in accordance with the NER and consulted on procedures

SLIDE 4

WHY IS BLACK START NEEDED?

• Black start capability is procured as a “public good” to ensure it is available if it is ever needed

• Where a significant part of the NEM experiences a system black condition, this could have a significant impact on our economy, public health and safety

• It is a control mechanism – intended to reduce the consequence of a black system condition

• SRAS payments are like an “insurance policy” paid to facilitate the restoration of generation and load

• The service level: o should take into account that this type event is unlikely to occur o required is a subjective judgement, as is the acceptability of the

cost

SLIDE 5

WHY IS BLACK START NEEDED?

Political and societal • Economic and

political costs • Reputational

damage, including AEMO

• Health and safety

Economic • Lost production and

perishables • Health and safety

Non-credible contingency

events • Protection failures • Natural disasters

• Terrorism • Cyber attack

Black system (whole or partial)

SLIDE 6

RESTORATION PROCESS

• It is likely that system shutdown will be unique, therefore the restoration plan is a path-based strategy to energise transmission to start up supply to significant generators

• The plan describes individual actions for TNSPs, Market Participants and AEMO – effectiveness is their responsibility

• It works in conjunction with existing emergency procedures • The objective is to re-establish a reliable integrated power

system by restoring the national grid with the available equipment

• The first priority is to restore auxiliary supply to restart significant generation which is used to restore load, sensitive loads indicated by the jurisdictional system security co-ordinators

SLIDE 7

THE CURRENT SERVICE REQUIREMENT

• In each electrical sub-network, AEMO procures to meet the System Restart Standard “the standard” which the Reliability Panel determines

• The standard specifies timeframes to: o Re-supply and energize certain significant generation within 90

minutes o Restore generation and transmission with the aim of supplying 40%

of peak demand within 4 hours o Applies equally across jurisdictions o Requires AEMO to determine the electrical boundaries o Allows AEMO to take into account diversity including: Electrical Technology Location Geography Fuel type

• AEMO procedures (consulted on) provide detail of requirements

SLIDE 8

SETTING THE SERVICE REQUIREMENT

• Clauses 4.2.6 and 4.3.1 of the NER require sufficient black start be available to allow the restoration of the power system

• Currently, AEMO procures a minimum of two black start services in each electrical sub-network – not met in all sub-networks

• These can be a primary or secondary black start service and includes generating units or trip to house load (TTHL)

• To set the requirements to meet the standard AEMO currently assumes: o NEM-wide system shutdown o No infrastructure damage to the transmission network o No generation is available from another electrical sub-network

and the island must be restored from within that electric sub-network

o One black start service is unavailable in the electrical sub-network, hence at least one more is needed

SLIDE 9

THE REVIEW

• The objective – to determine whether improvements should be made to the SRAS arrangements to ensure a more appropriate price and service balance is achieved

• The review will have a broad focus on issues that might affect the System Restart Standard, the NER, AEMO procedures and other changes that are deemed necessary

SLIDE 10

REASONS FOR THE REVIEW

• SRAS costs have trended upwards and services procured have increased, raising concerns about whether under the current SRAS arrangements: o NEM customers have an appropriate service and price

balance o In some electrical sub-networks, there are insufficient

incentives for generators to offer “competitive” prices – too few tenderers

o There are sufficient incentives to encourage a market based response

SLIDE 11

NEM SRAS PAYMENTS

$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$55

$60

Mill

ions

NEM

SLIDE 12

SRAS PAYMENTS BY REGION

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

$22

$24

Mill

ions

NSW

QLD

SA

TAS

SNOWY

VIC

SLIDE 13

CHANGES IN SRAS PRICES

• The following % change in SRAS prices does not include the increase or decrease in services, the change in service is below

Electrical Sub-network No. of Services (2008-12) No. of Services (2012-17) Change in no. of services 2011-12 ($M) 2012-13 ($M) % Change in price

Queensland - North 2 1 -1 0.97 1.3 34.0

Queensland - Central 2 3 1 2.7 2.6 -3.7

Queensland - South 2 2 0 1.2 2.3 91.7

New South Wales - North 3 3 0 10.2 11.5 12.7

New South Wales - South 3 2 -1 10.6 10.7 0.9

Victoria - Latrobe Valley 1 2 1 1.7 2.5 47.1

Victoria - North and West 0 2 2

South Australia 3 3 0 3.2 3.6 12.5

Tasmania - North 2 2 0 3.9 6.3 61.5

Tasmania - South 1 1 0 1.9 3.1 63.2

SLIDE 14

INTERNATIONAL LEVELS OF BLACK START SERVICE

SLIDE 15

PROJECTED SRAS RECOVERY BY JURISDICTION - 2012/13

SLIDE 16

OPTIONS AEMO WILL CONSULT ON

• What risk level is it appropriate to cover? Should we cover this risk; assume a NEM-wide, region-wide or electrical sub-network black system?

• What is the level of residual risk that beneficiaries should manage? For example: o Encourage generators to “manage” for a higher level of service

than is procured by increasing incentives - encourage a more market based approach

• What level of service is appropriate and how effective will this be? For example: o Re-determining the appropriate number of electrical sub-

networks in some regions and the likely impact • Is it appropriate for SRAS to be recovered on a cost reflective

basis - global vs regional recovery, particularly for Tasmania?

SLIDE 17

OPTIONS AEMO WILL CONSULT ON

• Is the procurement approach appropriate, has it resulted in competitive pricing – competitive tender process (current) vs cost of service?

• Are the terms and conditions of the SRAS arrangements appropriate? For example: o Generator liability concerns o The level of reliability of services o Duration of contract period

• Further actions to improve participation: o Earlier procurement, sufficient time for investment in black

start o More proactive AEMO/generator engagement for

procurement

SLIDE 18

POWER SYSTEM STUDIES

• South Australia – could restart using one black start service and from Victoria, currently three services procured

• Victoria – reduced from two to one electrical sub-network, no black start capability from Tasmania assume available from South Australia and NSW

• NSW – no studies undertaken, however could restart from Snowy (Vic), Qld and Colongra (Central Coast)

• Tasmania – reduced from two to one electrical sub-network, no black start capability from the mainland

• Queensland – reduced from three to two electrical sub-networks, combining Central and North Queensland

SLIDE 19

CONSULTATION - 2013

• Publish Issues and Options Paper – mid January • Submissions close – mid February • Draft Report – late March • Submissions close on the Draft Report – late April • Final Report – June

SLIDE 20

QUESTIONS?

Contact: Taryn Maroney D: 02 8884 5609 M: 0408 081 242

E: taryn.maroney@aemo.com.au