Energy and the Earth

Energy and the Earth

A new normal, as Basslink finally resumes

With little by way of fanfare, Basslink resumed operation this week after almost 6 months.

Basslink is Tasmania’s proverbial umbilical cord - a 500 megawatt submarine HVDC cable that connects to the mainland providing both electrical power and data exchange. Along with unusually dry conditions last Spring, Basslink’s failure back in December last year contributed to an unprecedented energy crisis in the Apple Isle.

To help avert the crisis some 220 megawatts of diesel generation was installed at a cost of around $44 million. The moth-balled Tamar Valley (gas-fired) Power Station was bought back online, and deals were brokered with large industrials to reduce their energy consumption. Some analysts have estimated the total cost of the crisis at around $400-500 million (see also).

With Basslink’s resumption, the process of repairing the damage begins.

Notwithstanding the immense flood damage, Tasmania’s drenching rains in May followed by torrential rains in early June have at least helped stymie the energy crisis. With HydroTasmania’s smaller catchments now overflowing, many of its run-of-river power stations are operating at more-or-less full capacity. In a matter of a few short weeks Tasmania has gone from acute energy shortage to excess.

Basslink flows for the 4 days period June 13th - 17th. Re-connection occurred on Monday June 13th, around midday. Flows are in megawatts and are positive northwards towards Victoria. Basslink failed on December 20th 2015. Data from AEMO 5-minute dispatch tables.

Meanwhile, the larger hydro catchments such as Gordon have received much needed replenishment. Over the last six weeks total storage has doubled to 27%, increasing at a near record rate of about 2% per week. Storages are now back to levels comparable to mid June in 2014 and 2015. If good winter rains continue, then it is plausible that storages might top out at around 50% capacity by the end of the traditional filling season in late October to early November. That would be a much healthier position heading into the next Summer than in either of the last 2 years.

Tasmanian hydro storage as percentage of total capacity. Data from HydroTasmania. Yellow diamonds show mid-June levels for each year since 2008. Colour bands show the typical annual cycle involving dam filling in the winter months from May through October and summer drawdown from November through April.

Because of the excess power production following the recent rains, since resumption Basslink has been flowing almost entirely northwards into Victoria at an average rate of about 140 megawatts and, at times, as much as 350 megawatts. That represents about 10% of total Tasmanian dispatch, none of which is being contributed by the emergency diesel generators that were bought in to deal with the crisis, and only a tiny bit from Tamar Valley and Bell Bay gas units.

Meanwhile, elsewhere on the NEM

With mainland wholesale electricity prices now at extraordinarily high levels of around $100 per megawatt hour, HydroTasmania will be relishing Basslink’s resumption. Such is the crazy brave new world of energy supply, HydroTasmania’s exports are now worth around an additional $2 million a week. Now that the rains have come, HydroTasmania prayers will be for those prices to remain.

Map of power flows across the 5 state regions in the National Electricity Market (NEM) including interchanges for the 18 day period 1st-18th June. The prices for this period have been extraordinary in historical times, averaging close to $100 per megawatt hour in volume-weighted terms (see the figure for a comparison to the period 2 year before when the carbon tax added an ~ $20 per megawatt hour). Negative values for NETINTERCHANGE imply net imports, positive values imply net exports. Data from AEMO’s 5-minute dispatch tables.

However, with mainland prices currently way above what they were even in the Carbon-tax years, questions should be asked.

Memo to our political masters - just why have prices doubled to near record levels despite the removal of the carbon price?

If we factor out the contribution of the carbon tax, prices in New South Wales and Victoria are almost three times what they were in the comparable period two - three years ago.

Map of power flows across the 5 state regions in the NEM including interchanges for the the week period 1st-22nd June, 2014, for comparison with the image above. Note that prices for this period have averaged close to $50 per megawatt hour in volume-weighted terms, about half what they have been in the comparable week, 2016. Note also the 2014 prices include the carbon tax, so in equivalent terms, prices were even lower and for NSW and Victoria were effectively 1/3 of this the 2016 June prices. That is a huge change. Data from AEMO’s 5-minute dispatch tables.

Some pundits will no doubt point to recent changes in the South Australian market, following the closure of the Northern Power Station in Port Augusta. However the national electricity flows mostly converge on New South Wales. So the drivers for price setting there would appear much more important.

Illustration of the current extraordinary electricity wholesale prices in NSW. Volume weighted prices for the 3-week period to 14th June, from 2008 onwards, shown in red squares. Half hourly prices are shown in small background grey dots, with the subset for the 3 week period shown in red. Black squares show the carbon tax years (purple mask) adjusted downwards by removing the carbon price (assumed at $20 per megawatt hour). Note logarithmic scale. Data from AEMO half hour price and dispatch tables.

And as indicated in the two maps shown above, there have been no obvious changes to the demand and dispatch settings in New South Wales over the last 2 years. So with no obvious reason for such a price spike, it wouldn’t surprise if the regulators were taking a keen interest, not to mention large energy consumers with market exposure.

I doubt HydroTasmania’s latest prayers will be answered in the short-term, since the current prices seem unsustainable. At least that is, not until we see some major structural transformation in mainland generation, such as the closure of one or more of the Latrobe Valley brown coal generators. With the Victorian Government this week setting ambitious targets to generate 25% of its electricity from renewable energy by 2020, and 40% by 2025, that may not be very far away. When that happens, HydroTasmania will be hoping its dams are full and Basslink is operational. And by then the Apple Isle could be even better off if it were to invest more in its exceptional wind resource.

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