Cost of RERT in January heatwave topped $34m
By Sophie Boot
Two days of extreme temperatures in January cost A$34.2 million, as the Australian Energy Market Operator used its reliability mechanism to avoid more extensive power cuts.
AEMO today released its incident report for January 24th and 25th, when hot weather in Victoria and South Australia strained the grid to the point of power cuts in Victoria on both days. In the reports, AEMO says the total cost of running the Reliability and Emergency Reserve Trader (RERT) function - through which it can contract power reserves in advance - was A$30.6 million, with another A$3.6 million compensation payable to market participants. That equates to A$3.20 per residential customer in Victoria, and 80 cents per customer in South Australia.
It’s lower than the A$52 million spent on twice activating the RERT in the summer of 2017/2018. AEMO puts this down to RERT contracts this summer covering usage only, compared to the previous year when some RERT contracts had both availability and usage cost components.
It’s also lower than the value AEMO estimates consumers place on reliability. The market operator said that, without activating the RERT, it would have had to shed 1,252 megawatt hours of load, compared to the 537.6 megawatts shed in Victoria over two days. AEMO estimates customers value reliability at A$41,534 per megawatt hour in 2019, so the cost to customers of that happening would have been A$52 million.
As it has previously stated, generation from brown coal was much lower than AEMO expected on the days in question, with around 1,100MW of thermal generation unavailable on January 24th and 1,600MW unavailable on January 25th. There was more wind and solar than projected, while the contribution from hydro and gas was “very close” to AEMO’s modelling.
Looking forward, the market operator is waiting for a decision by the Australian Energy Market Commission on an “enhanced RERT” which would better act as a safety net. The AEMC’s final determination is due by May 2nd, but its draft determination, published in February, would allow AEMO to contract reserves a year ahead of time, from the current nine months; introduce a RERT price guide; and tighten out-of-market rules, a proposal which has been controversial.
AEMO also said improved transmission capacity “would help to address... limitations” demonstrated in January when excess reserves couldn’t be transported to Victoria despite being available in connected regions like New South Wales and Tasmania, and that increasing home solar panel penetration and distributed energy resources would help improve system security and reliability.