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The future of energy generation and storage

Discussion in 'General Chat' started by Value Collector, May 2, 2015.

  1. Smurf1976

    Smurf1976 Well-Known Member

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    Tamar Valley CCGT reached full output at 11:55am today following yesterday's startup.

    Also some of the OCGT's in Tas were run today. That was a purely commercial decision, not required for any technical reason, in response to interstate market prices. Had they not been run then someone else in another state would have supplied that power at whatever price but in short Hydro Tas was offering a lower price than others who had idle or underutilised plant at that time. A commercial decision in all cases. Likewise everyone else with plant running would have been offering supply at lower price than those who had plant sitting idle since price is the basis of dispatch subject to any technical constraints (eg maximum flow on transmission lines) being met.

    Today's hot weather in NSW pushed demand there to high levels and that was supplied from Qld and Vic as well as from sources within NSW. With demand fairly low in Vic, Tas and SA the transmission lines Vic - NSW were at their limit transferring power north.

    A considerable amount of oil-fired generation, a few hundred MW, was run in Qld today in order to supply power into NSW. That's in addition to coal, gas and hydro generation in Qld. Needless to say, oil isn't cheap.

    A point about pricing and dispatch is that different generators (businesses owning power stations) take very different approaches. As some random examples:

    Hazelwood (majority owner Engie) almost always just sits there and generates. Price is whatever the market gives them, they don't generally withhold supply or otherwise try to move the price other than by virtue of simply being there.

    Hydro generators (Snowy Hydro and Hydro Tas being the dominant two) are necessarily constrained in terms of total output. That is, they can't run constantly 24/7 at maximum output without running out of water (though we do have some individual hydro power stations in Tas which operate constantly but most are set up for higher output intermittently). So they set prices for each station in order to achieve the desired level of output over a given period of time (weeks, months). Eg if we want to run power station x for 60% of the time then set a price that will be exceeded 60% of the time and which will thus result in that plant operating as desired. It's a bit more complex with ramp rates and frequency control etc but that's the basic concept. Work out how much you want to sell (generate), then price in order to achieve that volume.

    Then there are those who actively seek to move the price. There's nothing "wrong" about that, it's a market and it's perfectly legal to set prices at whatever level up to the market price cap, but it's generally the larger players who tend to do it mostly. So they'll do things like offering half the capacity of a large, say 500 MW, generating unit at $5 per MWh and the rest at $250 per MWh (random example). Their aim is to push the price up to $250 but their fallback is to keep the plant online, that is to avoid being shut down, if they don't achieve that hence offering half the capacity cheaply.

    It's pretty common to see capacity priced just below the expected pricing of competitors with genuinely high cost plant. So a coal-fired plant (cheap) prices just below the cost of diesel when they know that demand is high enough such that other coal, hydro and gas plants won't undercut them on account of already being fully utilised (or they're playing the same game). Since all price bids are made public the next day, and the cost of gas and diesel is no secret either, it's not hard to work out what rival generators are likely to be doing at any given time.

    One area where there's a real problem, and this is the point I was referring to before Christmas in relation to the Hazelwood closure, is disclosure of future operations. In terms of plant closures or limitations as of now the following is announced:

    Daandine power station (Qld, gas-fired, 33 MW) to close June 2022

    Mackay gas turbine (Qld, oil-fired, 34 MW) to close June 2021

    Smithfield (NSW, gas, 171 MW) to close 30 June 2017

    Liddell (NSW, coal, 2000 MW) to close in 2022

    That's it unless you count Hazelwood which wasn't announced until 5 months before the closure date and that's the big concern. It's a big operation and everyone gets just 5 months notice that it's closing. Suffice to say you sure can't build a replacement in 5 months! Full credit to those listed above for giving plenty of notice but the real concern is about what might not be being said? Are there more Hazelwood-like suprises on the way? There's plenty of rumours in the industry about ******** but officially it's business as usual for years to come just as Hazelwood was business as usual for at least the next decade until suddenly it wasn't.

    Then there's the question of maintenance outages. Not the minor unpredictable and urgent stuff but the major, long term outages which are planned sometimes years in advance. Let's just say that this Smurf finds it rater interesting that Hydro Tas has publicly announced, via the AEMO (Australian Energy Market Operator), 24 separate major generating plant outages over the next decade (yes really, planned up to a decade in advance). And the total for every other generating company across Qld, NSW, Vic and SA combined? ZERO! Yep, literally zero. Let's say I don't think the full story is being told there. Either that or they genuinely believe they don't need to do any major maintenance (and I sure hope they don't think that's the case).

    So there's an issue with lack of disclosure of information. Business as usual in October 2016, then we suddenly find out that the second biggest power station in Vic is closing in 5 months' time. Far too little notice there. And someone IS going to do some maintenance, aren't they? Sure hope so....
     
  2. sptrawler

    sptrawler Well-Known Member

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    Smurph, does the Eastern States have universal use of smart meters? If so do they already have time of day pricing?
    In W.A we only retrofit smart meters if solar panels are installed, and we don't as yet have T.O.D pricing.
    Having said that, there seems to be a constant undercurrent of media releases, that would indicate T.O.D pricing is high on the agenda.
     
  3. sptrawler

    sptrawler Well-Known Member

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    I think all the renewable rah, rah activists ,are going to get exactly what they wished for, really eye watering electricity prices.lol
     
  4. Smurf1976

    Smurf1976 Well-Known Member

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    Smart meters were rolled out in Victoria amid plenty of controversy. They're not universal in other states and the approach to time of use pricing varies considerably between distributors and retailers.

    In Tassie we're still using simple flat rates, same price 24/7, for the majority of residential and small businesses. Anyone on a TOU rate has consciously chosen it, it's not compulsory, and the TOU that we do have is based on set rates which don't vary from day to day. The other states are keener on the "real time" approach.

    Long term, the idea down here is to encourage residential consumers onto a simple two rate tariff with set prices adjusted in the normal manner (eg once a year). Peak rate 7am to 10am and 4pm to 9pm Monday to Friday. Off-peak rate at all other times. All the research says this will capture most of the benefits and avoids any major complexity.

    NT is going the same way as Tas and also has theirs up and running on a voluntary basis (though their times are different due to a different system load profile).

    Other Eastern states generally want to go down the track of market-linked pricing but are struggling to get it up and running due to both technical and political hassles.

    There's also some other things being trialed down here based on network demand and with consumers able to monitor their use via a smart phone app. The trial is presently limited to those who have been invited to participate. It's 12 month trial to collect data on how it would work at this stage.

    Process is customer invited to participate > customer accepts invitation if they want to > metering equipment installed and customer's phone set up > data collected > customer paid some $ for their assistance then reverts to standard metering since it's a trial only at this stage to get "real world" data.
     
  5. sptrawler

    sptrawler Well-Known Member

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    Thanks for that, the peak and demand times will be very different throughout the continent, but the effect is much the same.
    The two pricing model, is probably the smartest and would encourage innovation around load reduction through peak demand.
    The down side IMO would be, the resultant drop in peak demand, would reduce the requirement to install new plant.
    This reduced demand eventually disappears due to population growth, then demand far exceeds capacity and when that happens, we end up with the scenario you suggest.
    Unless someone stops the train, it will crash.
     
  6. Smurf1976

    Smurf1976 Well-Known Member

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    There was a pretty substantial consultation process to come up with the best solution. A group was formed consisting of generation (Hydro Tas), networks (Tas Networks is both transmission and distribution) and retail (in practice Aurora Energy) plus an assortment of members of the public, interest groups (welfare etc) and so on.

    One big advantage we've got here in Tas is that it's pretty easy to get everyone in the same room from the industry perspective. Not hard when you've only got one generation business, one networks business and only one significant retailer (in theory anyone can compete with Aurora but in practice there's limited competition for the commercial market and zero for residential).

    That's a lot easier than trying to get multiple generation owners and retailers to all agree on something (which would probably upset the ACCC anyway if they did agree on things).

    The basic outcome of that process was that keeping it simple was important to consumers most of whom have basically zero knowledge on the subject. Hence the initial thought of having 3 rates became 2 rates, simply peak and off-peak, with the times set to meet the objectives of both generation and networks. The concept of maximum demand was also thought to be overly complex for the general public so it was decided that anything of that nature would be purely optional and not forced on anyone.

    Keeping public trust was another issue that came up, the solution to which is just don't force anything. Make the TOU rates available and promote the idea but leave consumers to decide if and when they want to adopt it. So we'll continue with the 4 existing residential tariffs (2 different off-peak rates, heating, general power) in addition to having the time of use option.

    A factor in that is changes in how households consume electricity. The prospect of mass adoption of electric vehicles was certainly considered with the two rate system and the times that were chosen. There's an embedded compromise between the technical aspects of system load and what's likely to work for consumers. Getting people to shift loads to 9pm or to the middle of the day should be straightforward whereas getting them to shift loads to midnight wouldn't likely be accepted anywhere near as well.

    The NT has the same advantage of being able to easily get people from all aspects of the industry in the one room. Hence they've done much the same and have their two rate tariff available now.

    That's seen as a good thing down here since the underlying objective is to reduce actual costs rather than to increase revenue. We've already got a very high average load as a % of peak load compared to most other states (Qld is also high) and if we can go further in that direction then that's one sure way to keep prices down.
     
  7. Smurf1976

    Smurf1976 Well-Known Member

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    Well it seems that a deal has been done to return the Alcoa Portland smelter (Vic) to production and keep it in operation.

    So there goes any notion that closure of this factory was going to be some sort of half-way solution to the power supply crunch when Hazelwood power station (coal, Vic) closes.

    This could all get rather interesting....
     
  8. sptrawler

    sptrawler Well-Known Member

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    This is the down side of politicians, not having to undergo an I.Q test.IMO

    It will be interesting to see, the terms of continued operation, that Alcoa extracted from the Government.

    I wonder if Alcoa included a guarantee of supply clause, in their memorandum of understanding, if they did I would like to know the penalties for disruption of supply. lol
    Australia, the clever Country, the World leader at painting ourselves into a corner.IMO
     
  9. Smurf1976

    Smurf1976 Well-Known Member

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    I also wonder what the other party to the deal, AGL, gets from it?

    Speculating on what might have been offered but will likely never be said publicly, things involving brown coal mining royalties (AGL) and any future carbon tax or other form of cost (both Alcoa and AGL) come immediately to mind. Notable in that context is that Alcoa also has major operations in WA so they might be part of the deal in some way in addition to Portland. Likewise AGL has may other operations beyond Loy Yang power station and supplying power to Alcoa so it could be quite complex potentially.

    As for the guarantee of supply, well this time they seem to have got $240 million for supply having been interrupted. That's to cover physical damage to the plant apparently although it falls short of the actual cost so Alcoa must be throwing in some of their own money which, of course, they wouldn't be doing in the absence if it being an ongoing viable operation once the 200 or so damaged pots are fixed (which is going to take quite a while).

    It opens up a huge can of worms though.

    What about, for example, they Whyalla steelworks? No doubt they'd like some reasonably priced power too and a guarantee that they won't be left in the dark for days again.

    Then there's others. I'm pretty sure that the big 4 energy users in Tas wouldn't mind the Australian Government handing them some cash.

    Then there's everyone else in Victoria. Pretty sure they wouldn't mind some cash and/or cheap power if they promise to use it.

    Then there's SA. I doubt that anyone in Adelaide would be too upset if someone gave them a guarantee that the power won't fail again and will be handing out $240 million if it does.

    A big can of worms there....
     
  10. sptrawler

    sptrawler Well-Known Member

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    It really does my head in, the lengths we will go to, to cover up politically inept decisions.
    The politicians think, that as long as the issue doesn't blow up on my watch, it is o.k.
    They can't see, that it is the stupid decisions they are making, is causing the political backlash from the silent majority.
    Pandering to minority groups, being hand fed by the media, is causing a huge ground swell of discontent.
    Jeez we need some sensible leadership and neither party has got it.
     
  11. overhang

    overhang Well-Known Member

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  12. Smurf1976

    Smurf1976 Well-Known Member

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    With reference to that article in the Age and to the situation with Alcoa generally, there's a bigger underlying shift here and one that's relevant to investing in general and thus to this forum.

    Slowly but surely the evidence is mounting that globalisation isn't going to be the dominant paradigm going forward. Today it stands roughly where protectionism stood at the end of the 1970's - all over as a concept, just waiting for the physical dismantling to take place. Brexit, Trump, rising nationalism in general - globalisation seems to have run its course.

    I very much doubt this will be the last major government intervention for that reason. It's just the beginning in my opinion.
     
  13. SirRumpole

    SirRumpole Well-Known Member

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    No doubt this will have good and bad effects.

    Globalisation has probably failed because it did not seek to equalise wages and conditions throughout the world. The result being you have a few very rich people in say China exploiting a large number of poor workers and gobbling up industries in other countries as a result of that exploitation.

    So while I think Trump is generally a loose cannon, I agree with him on trying to reverse the globalisation trend (although I think he will probably do it in extremis as he is an extreme personality).

    Turnbull & co still stick to their "free market" delusions, but Labor seems to be wising up and coming around to the idea that local protection needs to be increased.

    Yes, a paradigm shift is certainly coming. Protectionism used to be a dirty word but I think it will become less so. I just hope that we can come to a sensible compromise and not go overboard like we usually do.
     
  14. Smurf1976

    Smurf1976 Well-Known Member

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    I think protectionism now is roughly where globalisation was in 1980 or thereabouts.

    Interestingly, it the decline seems to be following an exact mirror image of the ascent. Globalisation was certainly around as an ideology back in the 1970's but it took the election of Thatcher and Reagan to kick it into gear.

    Now we're seeing the exact reverse. Sentiment has been rising in recent years, minor politicians have gone that way but now we've got Brexit and Trump. Love him or hate him, it's pretty hard to simply dismiss the opinion of someone who is about to actually be President of the United States.

    Closer to home, Labor seems to have shifted and that was reasonably predictable but ultimately this deal with Alcoa involves the Liberals as well. Neither party has both feet in the globalisation and free market camp it would seem, both are at least part way away from that now.

    Back to the thread topic, well if we're going to have industry then we're going to need a means of powering it. Coal, nuclear, gas, hydro, wind, solar, geothermal or whatever but if you want industry then the first thing you need is power. As per an old Hydro Tas print media advertisement which ran internationally during the 1930's in an effort to attract business to the island state, cheap and reliable power really is the "master key to industry" and that remains as true today as it was back then.

    With gas prices through the roof and the imminent demise of Victoria's second largest power station this "how to power it" bit is going to be somewhat of a problem.
     
  15. sptrawler

    sptrawler Well-Known Member

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    Shutting down coal and going all in gas,renewables, is somewhat like what happened in a lot of Cities where they pulled up the tram tracks, to make more room for the cars.
    It will do one of two things, make electricity unbelievable expensive, or extremely unreliable.IMO
    The other option is nuclear, which maybe the underlying driving force, for such rash decissions.
     
  16. noco

    noco Well-Known Member

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    It would appear from this link, Loy Yang, the largest coal fired power station in Victoria will finish on the scrap heap if the CFMEU have there way which in turn will affect Alcao and AGL.

    The CFMEU have rejected a 20% pay rise over 4 years at Loy Yang so instead of going on strike, 30% of the workers call in sick......This seems to be a loop hole the CFMEU have found to avoid being fined for an illegal strike.......Disruption to make AGL pay the price.....There also appears to be ban on overtime where 50% would normally respond, the company instead were only able to muster 5%.....The other 45% did not answer phone calls.


    http://www.heraldsun.com.au/news/vi...n/news-story/57c7330db0f77b6eb00cde57a8751289
     
  17. sptrawler

    sptrawler Well-Known Member

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    That is a really dumb move, all it does is give ammunition to the Government to intervene, also gives ammo to the anti coal lobby.
    But I wouldn't be supprised if Bill Shorten isn't called in to mediate, or maybe Andrews.lol
    Just another example, of the union putting the ideology, ahead of forward thinking and members welfare.IMO
    They are lucky Hawke isn't in office, remember what happened during the 1989 pilots strike.
    http://www.smh.com.au/lifestyle/i-was-there-the-pilots-dispute-20120719-22cp6.html
     
  18. Smurf1976

    Smurf1976 Well-Known Member

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    There's 4 generating units at Loy Yang A whilst the separate Loy Yang B station right next door has 2 units of comparable capacity.

    AGL owns the "A" station and the mine which supplies both A & B stations. B station itself is separately owned and operated (though they buy their coal from AGL).

    A station has only had 2 of its 4 generating units running for the past couple of days. I had assumed technical problems of some sort but now I'm wondering if the real reason relates to lack of workers?
     
  19. noco

    noco Well-Known Member

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    There is no doubt in my mind......The CFMEU are behind it.....If they go on strike over a pay deal, the CFMEU could be heavily fined so they have resorted to a newfound tactic of sickness and requests for workers to work overtime who have been advised by the CFMEU not to answer their phones.

    The CFMEU are making the company pay a heavy price to get what they want.
     
  20. sptrawler

    sptrawler Well-Known Member

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    Maybe the Loy Yang workers need to read up on a bit of history, like the U.K coal miners strikes.
    They have knocked back a 20% pay rise over 4 years, what are they thinking of?
     
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