Demand Shocks from the Gas Turbine Fleet in Australia’s National Electricity Market

Abstract

The long run task of Australian power system planners is to identify the structural adjustment pathway associated with retiring the National Electricity Market’s (NEM) coal fleet. System planning models seek to do this at minimum cost subject to a reliability constraint. This involves the deployment of low-cost intermittent wind and solar resources with a mix of dispatchable, flexible ‘firming’ assets. Coal’s energy-producing role is thus replaced by renewables, and firming duties by short duration batteries, intermediate duration pumped hydro and the last line of defence – gas turbines. As it turns out, the mix of firming assets is crucial. In this article, we examine 12 (anonymised) electricity market model forecasts in the post-coal era and find all have a surprisingly heavy reliance on gas turbines during critical event winter days. Using a dynamic partial equilibrium model of the east Australian gas market, we test the severity of what appear to be demand shocks from an emergent gas turbine fleet. The episodic demand shocks present as intractable, particularly if batteries and pumped hydro plant are ‘underweight’ within the aggregate generating portfolio. Adequate time is available for policymakers to respond in an orderly manner.