Heatwave threatens to melt Victorian all-time electricity demand record today – with Reserve Trader getting a run


[Posted at 14:42 market time]

Following from the high demand yesterday, we were greeted with this ominous alert from the AEMO this morning (08:14 NEM time), courtesy of a Local Alarm configured within a display copy of NEM-Watch in the office:

Market Notice warning of low reserves in Victoria and South Australia tomorrow

Click on the image for a better view – the main text was as follows:

“AEMO declares a LOR3 condition for the combined Victorian and South Australia  Regions from 1400 hrs.to 1700 hrs Wed 15 January 2014.  The maximum energy deficit is 290 MW in the combined Victoria and South Australia Regions.  AEMO is seeking a market response.”

This forecast was for the period 14:00 to 17:00 NEM time today, Wednesday 15th January 2014.

A LOR3 condition means that there is not enough capacity to meet the demand – or, in the case shown here, the AEMO was forecasting that this would be the case during the afternoon to the tune of 290MW (or roughly the size of a city of 100,000 people).

If this situation were to prevail (i.e. without the market response the AEMO was calling for, then the AEMO would need to instruct for some load shedding across Victoria and South Australia.

The AEMO followed this up with an even more ominous notice 2 hours later that implied that there had not been a sufficient enough market response, given that the

At 10:35 the AEMO issued another market notice (Notice ID 44547) that noted:

“RELIABILTY AND EMERGENCY RESERVE TRADER (RERT) INTERVENTION – (Vic and SA) Regions- Wednesday, 15 January 2014

This Market Notice is to advise that AEMO intends to intervene by dispatching Reliability and Emergency Reserve Trader contracts (refer NER clause 3.20) to enable AEMO to maintain the power system in a reliable operating state.

AEMO estimates that the intervention will apply for the following period of time,
1300 hr 15/01/2015 to 1700 hr 15/01/2015”

The use of the Reserve Trader is a very rare event in NEM history.  I know it has been used before, but can’t remember the last time [some digging later will no doubt reveal this, or hopefully one of our readers can help us all out by commenting below!]

This goes beyond the normal Demand Side Response arrangements, which we’re heavily involved with in a large number of large industrial facilities across all regions of the NEM, and implies that there has been a market failure, in this instance, and that an additional payment is necessary to procure such a response.

In the following snapshot from NEM-Watch at 12:20 Market Time, we see that the forecast demand peak this afternoon would be higher than it has ever been in Victoria for the entire 3-and-a-half-hour period from 13:30 to 16:30:

A new all-time-record demand forecast for Victoria this afternoon

Demand did continue to climb through the day …

At 13:20 NEM time, the Victorian scheduled demand target passed the 10,000MW mark for the day, and continued climbing to 13:25 when the prices skyrocketed again:

A new all-time-record demand forecast for Victoria this afternoon

[Yes, that’s $10,589.19/MWh or 1,058.919c/kWh – which is orders of magnitude higher than what you pay at an average rate at the retail end]

And just to illustrate how wacky the NEM can be, we see (five minutes later) the prices plunge below zero in Victoria and South Australia as generators load in volume (what spare volume they have) in order to generate more in the half-hour (13:01 to 13:30) and so secure the benefits of the price spike at 13:25

Prices plunge as generators load in volume (reprice capacity to low, or negative prices)

This “see-saw of prices” has continued through the afternoon up until the time of posting.

We see, in this snapshot, that the NEM-wide demand passes the 32,000MW mark – meaning it’s already higher than yesterday (and hence the highest, so far, this summer – knocking some more entrants out of the running for our BBQ).

At 13:45 we see that the AEMO has revised its demand forecast down by about 200MW (though still expecting a new record between 16:00 and 16:30), in the latest NEM-Watch snapshot:

AEMO revises its demand forecast for later today in VIC down slightly - but still expecting a new record

We’ll have to come back later in the day to see what the peak demand was for the day – and whether it has been, indeed, a new record…

[PS UPDATED HERE]


What makes it all the more remarkable

It should be noted that these demand levels are being achieved, in spite of:

1)  There’s been outages (probably temperature-related) in various distribution networks around the NEM today.  These outages, unfortunately, do reduce the demand on the market as a whole.

2)  As noted above, there’s been Demand Side Response (or market-based load curtailment) activated today in Victoria and South Australia with our clients, and others; and

3)  This has all happened despite the ongoing trend of declining demand that has been occurring since about 2007 because of a number of factors, such as those we listed here.


And in the gas market…

It stands to reason that, with the demand being so high in Victoria and South Australia, and the wind gone missing in terms of supplying to meet the peak demand, the gas-fired generators have been running very hard to meet the demand – and, as such, the price of gas in Victoria and South Australia has risen, as shown in this snapshot from a pre-release BETA of GasWatch version 2:

A view of how the gas price in Victoria and South Australia has been driven higher by electricity demand (because of the heatwave)

About the Author

Paul McArdle
One of three founders of Global-Roam back in 2000, Paul has been CEO of the company since that time. As an author on WattClarity, Paul's focus has been to help make the electricity market more understandable.

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