‘Too Low for Zero’ as a parable for the AER Issues Paper?


I’d originally lifted the term ‘Too Low for Zero’ to discuss the increased incidence of negative prices in this longer article, but thought it might* be worth taking an (admittedly wide!) tangent to look at how the issues raised by  AER here (in response to the COAG Energy Council request) might be seen in a wider-world setting.

* not real sure – but it is a good song, so excuse the indulgence.

(A)  In the song

The lyrics in Bernie and Elton’s song are as follows:

‘Six o’clock alarm
I get the wake up call
Let that sucker jingle-jangle
Ring right off the wall
I’m too low for zero
I’m too tired to work
Tied one on with a friend last night
And wound up losing my shirt’

I’m too low for zero
I’m on a losing streak
I got myself in a bad patch lately
I can’t seem to get much sleep
I’m too low for zero
I wind up counting sheep
Nothing seems to make much sense
It’s all just Greek to me

You know I’m too low, too low, too low for zero

Cutting out cups of coffee
Switching off the late night news
Putting the cat out two hours early
It isn’t any use
I’m too low for zero
Insomnia attacks
Watching flies with my eyes till sunrise
It’s daylight when I hit the sack

Is it too much of a stretch to use the example of the song above to explore how it translates into something as arcane as the NEM Rules?

(B)  In the NEM Rules

We should start by acknowledging that there seem to be (at least!) three different perspectives that are shared by different stakeholders in the NEM, based on conversations that we’ve had:

Paradigm #1)  The view held by some Participants, particularly some coming from a background of Scheduled generation

Some readers of WattClarity have discussed with me how they see the issue fundamentally about ‘honouring the bid’ (or words to that effect).

Translating the song into the world of the NEM under this paradigm:

A promise has been made to deliver (in the form of the generator’s bids to supply when prices are negative)
… but the protagonist had a bad night, and does not want to get out of bed (the price dropped, meaning negative revenue)
… so they hit the snooze button  (they curtail output to avoid negative revenue, despite – their colleagues think – having promised to be there for start of morning shift)
… and someone else has to cover their shift (so someone else has to ramp up – and pay to do it, given the negative price! – to cover the production that the other generator reneged on)

Enough repetition of this behaviour earns the protagonist the nickname of ‘Unreliable Bludger!’, or something more colourful.

I have previously asked the question about what ‘good faith’ provisions actually mean for Semi-Scheduled plant here in this article … with the legalese wording now reading that bids shall not be ‘false or misleading’.    I can understand this paradigm.

Paradigm #2)  The view held by other Participants, particularly some operators of Semi-Scheduled generation

Others have shared with me an alternate interpretation of their obligations, which is along the lines of the following:

For Semi-Scheduled Generators, when the Semi-Dispatch Cap flag is set, they need to consider their Targets (and not at any other time)
… even in these instances, their ‘Target’ operates as a Cap according to the rules that apply to Semi-Scheduled generators
… hence they are within their rights (according to the rules) to curtail generation at times when they don’t want to generate … so long as they remain below their cap.

 … though some I have spoken with understand that under Paradigm #1 they are seen as ‘letting the team down’.

I can also understand this paradigm – though I can’t say I particularly agree with its use.

Paradigm #3)  The official view

It’s my interpretation that the view espoused in the AER Issues Paper is that:

 3a)  it’s Paradigm #2 that is actually correct, according to a strict interpretation of the rules.

 3b)  but that this is having implications for management of System Security now … and these implications are likely to grow as the Semi-Scheduled category scales

 3c)  so something needs to be changed in order to put the NEM on a more sustainable footing.

… or, back in the protagonists world, the economy clearly won’t continue to tick over if everyone hits their snooze button after a sleepless night!

 

(C)  What do I think?

We have previously written that I have big concerns that the way in which the Semi-Scheduled category currently works is neither scalable, nor sustainable.   One of the places we wrote about this was in the Generator Report Card 2018 – and specifically  in Theme 13 within Part 2 of the 180-page Analytical Component in the GRC2018:

2018GeneratorReportCard-Part2-Theme13-ParticipationCategories

I’ve continued to puzzle about the challenges, and what might be done, and took the opportunity of using enhanced data sets of ‘Raw Off-Target’ compiled for the purposes of the Generator Statistical Digest 2019 and our ez2view software to write about:

 ‘Balancing Supply and Demand … in the fast approaching ‘NEM 2.0’ world’

Readers of that article will understand that I wonder whether the concerns raised in the AER Issues Paper are ‘the whole problem’ that’s emerging in this space, or whether they view the challenge too narrowly.

Far too often, it seems to me, we end up creating a ‘solution’ to only part of a problem – or indeed an out-dated view of what the underlying problem is (the Negawatt Dispatch Mechanism being one, for instance).  That, to me, is the promise of what is proposed in terms of ESB’s broader review of what’s required for NEM 2.0 – though obviously there are questions about what chance it has of actually succeeding:

as someone else noted to me recently, prior to the creation of the NEM each of the relevant organisations (SECV, ECNSW, QEC and ETSA, etc) allocated the ‘smartest people’ to working through a design that would actually work.  I wonder what we’d find if we thought about the calibre of people who are allocated to deliberations like NEM 2.0 .  Are they ‘the smartest people’, or are these ‘smartest people’ currently operating the existing businesses?

As time permits I will have more thoughts to share about what the bigger picture seems to be, for me…

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.

1 Comment on "‘Too Low for Zero’ as a parable for the AER Issues Paper?"

  1. If you take ideas to their logical conclusion, and ignore the reasons for our current predicament (ie perfect hindsight), then all generators over a minimum capacity (30MW is convenient) should be scheduled.

    Nobody starting a grid from scratch would allow such a high proportion of unscheduled generation capacity on the grid.

    But it’s not too late. If all generators above 30MW had to operate as scheduled generators – either by contract with another generator, or by adding technology), the market matching supply to demand would function correctly. Also reduce the LGC price by 20% per year for 5yrs, then you return to an equitable market.

    Also, if scheduled generators were proportionately penalised for not meeting dispatch targets, reliability would increase.

    And if the shortfall penalty was distributed proportionately among the generators that made up the shortfall, the cost of making up generation shortfalls would fall less on consumers.

    Markets are meant to work for consumers.

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