Energy Transformation Strategy

The Energy Transformation Strategy is the Government's work program to ensure the delivery of secure, reliable, sustainable and affordable electricity to Western Australians for years to come.

Traditionally, electricity has been supplied to consumers through a linear supply chain of generation, transmission, distribution and retail of electricity. This traditional supply chain was characterised by large electricity generators, located some distance from demand centres; and a system of high voltage transmission power lines to deliver electricity into the low voltage distribution system to which customers are connected.

 

Traditional Electricity Supply Chain

Traditional Electricity Supply Chain

In recent years, we have experienced an unprecedented transition in the way electricity is supplied and used. More households and small businesses than ever are installing solar photovoltaic and battery systems to take control of their electricity bills. In fact, over a quarter of Western Australian households have already installed a solar system. At the same time, large-scale renewable generators are supplying an increasing amount of our electricity needs.

New Electricity Supply Chain

New Electricity Supply Chain

Large and small–scale renewables and batteries offer great opportunities for low cost, low emissions energy. However, the intermittent and uncontrolled nature of these energy sources is presenting challenges to maintain the security, reliability and affordability of the power system, particularly in the South West Interconnected System (the largest interconnected power system in Western Australia).

To manage these challenges, on 6 March 2019, the Hon Bill Johnston MLA, Minister for Energy announced the Government’s Energy Transformation Strategy. This is the Western Australian Government’s strategy to respond to the energy transformation underway and to plan for the future of our power system.

The Strategy will be delivered under three work streams

  • Distributed Energy Resources
  • Whole of System Planning
  • Foundation Regulatory Frameworks
    • Improving Access to the SWIS
    • Delivering the Future Power System

The delivery of the Strategy will be overseen by the Energy Transformation Taskforce, which was established on 20 May 2019. The Taskforce is being supported by the Energy Transformation Implementation Unit, a dedicated unit within Energy Policy WA.

Distributed Energy Resources

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Distributed energy resources, or ‘DER’, are smaller–scale devices that can either use, generate, or store electricity and form a part of the local distribution system, which serves homes and businesses. DER includes renewable generation, energy storage, electric vehicles, and controlled appliances, such as air conditioners and pool pumps.

Over the coming five years, continued uncoordinated uptake of rooftop solar PV systems will see daytime demand for traditional thermal generation fall to levels at which the stability of our main power system in the south west is likely to be compromised. In some parts of the State, new solar PV installations are already being restricted, as our network operators find solutions to local grid stability issues.

In response to these challenges, the Energy Transformation Taskforce has developed the DER Roadmap to outlines the path to achieving a future where DER is integral to a safe, reliable and efficient electricity system, providing benefits for all customers.

Released in April 2020, the DER Roadmap is a five-year plan to guide the better integration of all distributed energy resources, including solar panels, battery storage and electric vehicles, and ensure that the benefits are shared across all members of the community.

The DER Roadmap outlines the opportunities presented by DER for our power system, and identifies the urgent actions required to address the near-term challenges it brings.

It identifies actions that:

  • pilot the best ways to overcome technical, regulatory and market barriers and integrate DER into our grid,
  • progress changes to technical settings, which can provide support to the grid and greater visibility of the power system, and
  • provide customers with clear information to make informed choices about their electricity use and DER investment, and ensure that customers remain protected as new business models emerge.

Whole of System Planning

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Currently, there is no single entity responsible for planning the power system that delivers electricity to households and businesses in the south west of the State. The Australian Energy Market Operator (AEMO) forecasts our generation needs, while Western Power is responsible for planning the development of its network.

This system has served us well-enough in the past. However, managing our power system through the transition to renewable and distributed electricity sources requires stronger coordination to provide clear information for investors and planners, and to guide the development of the power system of the future.

In response to these challenges, the Government is developing a Whole of System Plan, bringing together the important aspects of power system planning under a single umbrella.

The Whole of System Plan for the south west will:

  • identify the best options for investment in our power system, to maintain security and reliability at the lowest sustainable cost;
  • assist in the transition to a lower-emissions power system by guiding the efficient integration of renewable generation and identifying opportunities for energy storage, which will play an increasing role in meeting our essential electricity needs; and
  • provide guidance to regulators and industry regarding efficient power system investment, and to policy–makers on the future needs of the power system.

Led by the Energy Transformation Taskforce, the initial Whole of System Plan will leverage recent modelling of the generation mix in the south west of the State and will be developed in close collaboration with Western Power and AEMO, and in consultation with stakeholders.

Improving Access to the SWIS

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The arrangements by which generators gain access to Western Power’s network in the South West Interconnected System (SWIS) are critically important, as they determine the ability of the generator to participate in the Wholesale Electricity Market and provide electricity to households and businesses in the south west.

Current network access arrangements do not make the best use of available transmission capacity and the existing investment in the network, resulting in barriers to entry for new generators. The arrangements have also led to an outcome where generators have different rights to access the network, creating inefficiencies in the dispatch of generators in the Wholesale Electricity Market.

The proposal to adopt a framework of constrained access aims to improve generator access to the Western Power network by providing more equitable access for generators and optimising grid use. This will help remove barriers to investment and facilitate access to the Wholesale Electricity Market for new low-cost and cleaner generation technologies. By facilitating more efficient use of available network capacity, the reforms will also provide a greater return on the investment in new and existing network infrastructure that is ultimately paid for by electricity consumers in the south west.

Constrained access will be implemented primarily by the application of security constrained economic dispatch in the Wholesale Electricity Market. This will require:

  • Measures to transition existing network access arrangements to operate and be consistent with a constrained network access model, and appropriately managing the issues that arise from this transition.
  • A new process for allocating reserve capacity credits under the Reserve Capacity Mechanism to ensure it is consistent with a constrained network access environment.
  • New arrangements for the dispatch of generators in the Wholesale Electricity Market and market systems to incorporate security constrained economic dispatch principles. This will be progressed under the Delivering the Future Power System work stream.

Changes to facilitate the reforms will be progressed largely through amendments to the Wholesale Electricity Market Rules and the Electricity Networks Access Code 2004, developed by the Energy Transformation Taskforce, in consultation with industry stakeholders.

Consultation

Consultation papers released by the former Public Utilities Office on the implementation of constrained access and submissions received in response are available here.

Delivering the Future Power System

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In the face of the rapid transformation being experienced in the electricity sector, the market systems, standards, obligations and frameworks that underpin the operation of the power system in the South West Interconnected System (SWIS) are under increasing pressure.

Unless we modernise the way the power system is regulated and managed, energy will not be dispatched at the least sustainable cost, the power system will be limited in its ability to accommodate growing levels of renewable generation and other new technologies (such as battery storage) while maintaining security and reliability, and signals for investment in the power system — at the right time and place — will be inadequate.

Some elements contributing to the Delivering the Future Power System work stream were progressed by the former Public Utilities Office, such as improvements to pricing and demand–side participation under the Reserve Capacity Mechanism, clarification regarding how energy storage can currently participate in the Wholesale Electricity Market, and foundational features of an improved spot market.

The Taskforce will build upon this work to deliver the Government’s Energy Transformation Strategy.

The Delivering the Future Power System work stream has two major elements: Power System Security and Reliability and Future Market Operations.

Power system security future market

Power System Security and Reliability

This project stream focuses on ensuring that the regulatory frameworks, obligations placed on market participants, and tools available to the Australian Energy Market Operator (AEMO) are there to ensure that power system security and reliability is maintained – despite generation mix and customer demand changes.

New Essential System Services Framework: The way Essential System Services (often referred to as Ancillary Services) are currently designed and used will not meet the future need of the power system, which will be characterised by rapid fluctuations from intermittent generation and low daytime system load. New Essential System Services and effective means for their supply will be designed around the current and future needs of the power system.

Generator Performance Standards: Alongside the design of new Essential System Services, new Generator Performance Standards will be designed and implemented — in a staged fashion — to help maintain power system security and reliability as well as improve equity in how different technologies and new and legacy generators are treated.

Regulatory Architecture and Governance: The way in which regulatory frameworks and energy technologies have evolved has resulted in gaps, duplication, and inconsistency between the instruments which govern power system security and reliability. Roles and responsibilities between AEMO, Western Power and market participants will be clarified, and change management and governance arrangements will be improved.

Reliability Standards: Various reliability targets apply to different elements of planning and operating the South West Interconnected System. Consideration will be given to the creation of common reliability standards, their governance, and how standards are reflected throughout the regulatory framework.

Future Market Operations

This project stream focusses on major improvements to the design and operation of the Wholesale Electricity Market (WEM) to ensure that electricity is dispatched at the lowest sustainable cost and the operation of the market efficiently reflects and facilitates improvements to the way Western Power’s network is accessed.

Security Constrained Economic Dispatch: The dispatch of generators around network constraints in the WEM is currently managed through manual systems and processes. With the complexity of managing the power system increasing, this is leading to inefficiencies in the market. Dispatch is also not currently co–optimised across energy and Essential System Services markets, resulting in increased costs for customers. Coupled with other improvements to the market, a ‘security-constrained’ market design with co–optimised dispatch across energy and any Essential System Services markets will automatically factor in network and security constraints when determining dispatch, ensuring that the dispatch outcomes are the lowest cost available while maintaining system security.

Synergy Facility Bidding: Synergy currently bids its generation into the market as a portfolio, rather than individual facilities, and is dispatched on that basis. The adoption of a security–constrained market design requires individual facility bidding and dispatch to ensure the system operator can manage when network and security limitations are reached at various locations on the network. Synergy will be required to participate on an individual facility basis to enable the proper functioning of the new security constrained market. An appropriate approach to facility bidding for Synergy will be developed, balancing the need for improved price transparency and better constraint management with the costs of implementation.

Reserve Capacity Mechanism under Constrained Access: The implementation of a framework for constrained access of Western Power’s network will require changes to the way capacity credits are assigned under the Reserve Capacity Mechanism to ensure that the contractual obligations of facilities to provide capacity is reflected and locational signals are provided to new facilities. This element of the Future Power System is being managed as part of the Improving Access to the SWIS work stream, in conjunction with this Future Market Operations work stream.

Controls for efficient market outcomes: Throughout the Delivering the Future Power System work stream, consideration will be given to the extent to which market design changes confer market power on individual or groups of market participants which can potentially be exploited to affect market outcomes. Scenarios where controls for efficient market outcomes may be required include rules for rebidding after gate closure, definition of short run marginal cost and situations where a market participant may have market power.

Taskforce decisions

Following consultation, the Energy Transformation Taskforce will make decisions on elements of market and regulatory design. These decisions will form the basis for draft market rules and regulations.

Taskforce decisions, information papers and consultation drafts of rules and regulations will be published in the Publications section of the Energy Transformation website as they are completed.

Announcements

Media release

Distributed Energy Resources Roadmap Launched

Energy Minister Bill Johnston has released the Distributed Energy Resources (DER) Roadmap, produced by the McGowan Government’s Energy Transformation Taskforce.

Publications

Page reviewed 27 July 2020