Australia has fallen in love with rooftop solar PV, leading the world in its uptake, with investment reaching almost eight times the worldwide average in 2020.
Many Australians are taking advantage of our abundant natural sunshine, installing solar systems on their homes to take control of their energy consumption and reduce their energy bills.
As the Australian Energy Regulator highlights in its State of the energy market report 2021, rooftop solar uptake is driving down consumption and electricity bills in most places. It’s also contributing enormously to the mix of generation in the electricity grid.
Last month a record maximum of 40% of electricity used by consumers (underlying demand1) in the mainland National Electricity Market (NEM), was met by solar PV. Demand supplied from the NEM (Operational demand2) also reached a new minimum record of 12,936 MW on 17 October.
In some parts of the NEM, solar PV has contributed even more. AEMO reports that South Australia achieved periods with up to 78% of underlying demand met by distributed PV and is the first gigawatt-scale power system in the world to approach periods with 100% of underlying demand being supplied by distributed energy resources (DER).
As well as helping to reduce emissions, solar PV is delivering savings to consumers across the board. While solar PV owners can save on their electricity bills, the broader customer base benefits too, as an abundance of renewable energy places downward pressure on wholesale energy prices.
With this rapid growth, there has been much discussion recently about how we maintain precise supply-demand balance and ensure the whole electricity system operates securely. This story looks at some of the challenges associated with that issue.
Supporting electricity system security
As solar PV generation increasingly meets overall demand, it places downward pressure on the minimum operational demand for large-scale centralised generation units in the NEM. The supply-demand balance of the NEM currently relies on the dispatchability of centralised units (particularly coal, gas and hydro that can be dispatched on demand) to supply essential system security services (such as system strength, inertia, frequency control, voltage control and reactive power management, and ramping management).
AEMO’s analysis suggests that minimum operational demand is extremely sensitive to the ongoing uptake of solar PV, weather conditions, and local economic activity. That is because when consumers meet their energy needs with their own DER assets (such as solar PV), demand for energy from the grid is reduced.
The reduction of operational demand has implications for the operation of central generation assets, that would otherwise provide system security services. By reducing operational demand these system security services are displaced.
While the wholesale energy market provides pricing signals on the value of energy every five minutes in a particular settlement period (including negative prices), this equation does not fully account for the security of the electricity system, that is also managed through active performance and visibility requirements to support network and market operations.
In the current market arrangements, it is cheaper to run some central generation because of the high cost that would be entailed in ensuring systems security if these services are not provided.
AEMO estimates that based on the physical assets currently available in the NEM, a minimum of approximately 4-6 GW of operational demand is required in the NEM to support minimum generation levels of units providing the required essential services. And based on AEMO’s forecasting, demand could fall to this threshold in 2025, or 2024 in some scenarios.