RERT – The Challenges of Maintaining Supply in Extreme Weather

High voltage electrical tower pylon.  in Plenty, Melbourne, Aust

RERT operates outside of the National Electricity Market (NEM) and involves contracting large energy users to either use less energy or generate power from their own generators when called upon by AEMO.

Basically, big industrial users like aluminium smelters, steelworks and paper mills are compensated for ‘switching off’ to provide emergency relief if the power network is threatened.

Summer is traditionally the time of year the power network is most stretched. It’s not just high demand, but extreme temperatures and climatic events like storms and bushfires that can challenge reliability.

With the recent closures of Hazelwood and Northern Power stations and another summer of extreme weather conditions predicted, AEMO identified a heightened risk of supply disruptions in Victoria and South Australia over the 2017/18 summer.

In its 2017/18 Summer Readiness Report, AEMO determined the outlook warranted the use of RERT and contracted over 1,000 MW of generation and demand response reserves for the summer.

While RERT has been around for decades, it has always been considered a last resort option. Up until last summer, it had only been called upon three times in 20 years for a total cost of $5 million[1].

So why was the summer of 2017/18 so different?

It was the first time in NEM history that RERT capacity was actually dispatched, on 30 November 2017 and 19 January 2018.  The six hours on January 19 came at a cost of $24 million for Australian consumers.

AEMO anticipated a high demand peak from rising temperatures and high bushfire risk on 19 January and dispatched several contracted providers with long notice periods and minimum run times. Actual demand fell short of forecasts, partly because actual demand is lowered once large users curtail usage due to RERT activation.

This scenario illustrates the challenges of maintaining supply in extreme weather events. It is a further example of the complexities that the energy industry is grappling with as it looks to the best way to address the trilemma of affordability, reliability and sustainability.

At ERM Power, we know energy supply continuity is a major concern for our large commercial and industrial customers, particularly those in the manufacturing sector. We support a structured, long term approach to system reliability through carefully considered national bi-partisan energy policy. The National Energy Guarantee (NEG) is the mechanism to achieve enduring policy, and one of the objectives of the NEG will be to ensure that there is adequate supply of reliable generation available.

While further RERT dispatches could be on the horizon in summers to come, we would foresee a solution with the appropriate checks and balances in place to ensure minimal impact on Australian businesses.

[1] AEMO, Expiry of the Reliability and Emergency Reserve Trader, 3 January 2012.