Why minimum demand has a major impact: Managing energy supply and demand

Solar power

Australia’s energy system is evolving. While the shift towards renewables presents exciting opportunities for energy consumers and providers, it also presents significant challenges – including a rapid decline in demand for energy from the grid during the day.  

Operational demand is the demand for energy supplied from the national power system, or grid. Minimum operational demand, then, is the lowest level of demand for energy from the grid in any given day. 

For the power system to be operated securely, there are thresholds that demand cannot fall below. At present, the Australian Energy Market Operator (AEMO), responsible for managing the day-to-day operation of Australia’s energy markets and systems, estimates at least 4 to 6  gigawatts (GW) of operational demand is required in the mainland National Electricity Market (NEM) at any given time. 

But minimum operational demand is falling rapidly, which will require adjustments to the grid for the system to be operated securely.

Here’s why minimum demand is becoming a major issue, and what’s being done about it.

What’s driving down demand? 

The way Australia produces and manages electricity is changing. Rather than electricity being generated solely by centralised power stations that supply energy to the grid, consumer energy resources (CER) are becoming more common – these are renewable energy units or systems that are commonly located at homes or businesses. These are also referred to as distributed energy resources (DER) or behind-the-meter systems. 

When households and businesses are able to supply more of their own energy with behind-the-meter systems, such as rooftop solar PV units, they demand less energy from the grid. 

Australia is leading the world in the uptake of rooftop solar, which is driving operational (grid) demand to new lows. 

When large-scale solar and wind resources are included, AEMO expects renewables to meet 100 per cent of underlying demand at certain times of the day throughout the year by 2025. 

Why does minimum demand matter? 

AEMO actively manages the dispatch of energy from centralised generators – including coal, large-scale solar, wind, gas and hydro units – to maintain precise supply-demand balance. 

A minimum number of these centralised units must be online, at or above minimum generation levels, to supply essential system security services, including system strength and inertia. 

System strength refers to the power system’s ability to maintain strong voltage waveforms in response to disturbances, such as unexpected generator outages, transmission line faults and tripping of large loads. Essentially, a grid with high system strength will be more resilient to these disturbances. 

Inertia is provided by synchronous generators in traditional power stations, which spin at exactly 50 cycles per second (the same frequency as the energy system). 

Maintaining this frequency is essential for maintaining the reliability of the grid – inertia acts as a shock absorber, giving the grid more ability to withstand surges and imbalances in supply and demand and recover from system shocks. A lack of inertia exposes the grid to instability. 

Presently, these system security services are provided by traditional, synchronous generators such as coal and gas fired generators. 

But solar PV panels and wind turbines are not synchronous generators. They’re connected to the grid via inverters (power electronics), and cannot provide system security with their generation.

That’s why, to support the minimum generation levels of the units that provide the services required for the secure operation of the grid, AEMO estimates that a minimum of approximately 4-6 GW of operational demand is required in the mainland NEM at any given time. 

AEMO forecasts minimum demand to decrease to this critical threshold by 2025-26. Initially, the occurrence of demand below this threshold will be rare, but over time, the incidence and duration of periods below the threshold will grow. 

As operational demand begins to fall into this range regularly, AEMO says there will be reduced operational flexibility, and it will become increasingly challenging to operate the power system securely if the necessary adjustments are not made. 

That’s why, as the generation mix changes, services that are critical for system stability will need to be provided by alternative sources. 

How will system security be maintained as minimum demand decreases?

AEMO has called for new assets, such as synchronous condensers, to be installed throughout the NEM to provide the essential system security services currently provided by traditional generation assets. This will enable minimum demand to safely fall below the forecast 4-6 GW threshold.

Synchronous condensers work similarly to generators, but with a different purpose: they help maintain the stability of an electrical grid. These machines spin at the same frequency as the grid and use inertia to absorb energy from the grid if the frequency increases. This helps to regulate the grid’s power output, keeping it steady and reliable.

Synchronous condensers store energy in a magnetic field, which can then be used if the frequency drops too low. Unlike a generator, this type of machine cannot completely reverse a decrease in frequency, but it will help to slow down the rate of change.  By slowing the change in frequency, it helps prevent power surges and instabilities on the grid. Synchronous condensers also provide other services to stabilise the grid, including voltage control and fault current injection. 

In Queensland, under the Energy and Jobs Plan, renewable resources are expected to provide 70 per cent of the state’s power by 2032, and 80 per cent by 2035. 

By this point, renewable generation and pumped hydro storage are projected to have progressed to the point where Queensland will no longer be reliant on coal-fired power stations for energy – but they’ll continue to play an important role in securing the grid. 

As set out in the Energy and Jobs Plan, generators Stanwell and CS Energy are expected to progressively repurpose their existing publicly owned coal-fired units into clean energy hubs, which will involve installing batteries and/or renewable generation around these sites, and converting the generating units to synchronous condensers.

These clean energy hubs will provide critical system strength, inertia, firming and storage, and help replace the system services provided by coal-fired generation. 

The coal-fired units will only be converted when the newly established Queensland Energy System Advisory Board is confident there is enough replacement generation, storage and supporting infrastructure in place for energy reliability to be assured. 

Until then, and as this transition takes place, traditional generation assets will continue to play a critical and ongoing role in supporting the frequency and inertia requirements of the system, ensuring the grid remains stable, secure and reliable as we move towards the future.

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