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Another hidden cost of intermittent renewables (It’s time to talk about FCAS and roaring price spikes!)

Posted By Jo Nova On December 7, 2017 @ 3:45 am In Electricity,Energy,Global Warming,Renewable | 133 Comments

50Hz, 60 Hz, FCAS, Frequency Control Auxillary Service.

The shape of normal AC Electricity: 50Hz (230V) and 60Hz (110V)

Nobody says much about FCAS in public  — but it’s become a hot topic among Australia’s energy-nerds and electricity traders. It never used to be a big deal, because we got it at very low cost from huge turbines — from coal, hydro, and gas. Suddenly, it is costing a lot more. As I discovered below, in one month FCAS charges in South Australia rose from $25,000 to $26 million. Wow, just wow.

What is FCAS?

FCAS means”Frequency Control Ancillary Service”. With an AC (or alternating current) system, frequency is everything — the rapid push-pull rhythm that is the power. FCAS is a way of keeping the beat close to the heavenly 50Hz hum (or 60Hz in America and Korea). Network managers cry when things stray outside 49.85Hz or 50.15Hz. So controlling the frequency is a very necessary “other service” supplied by traditional generators, but not so much from intermittent renewables.  Large spinning turbines “do” FCAS without a lot of effort. And the cost used to be a tiny fraction of the total electricity bill, but it is rapidly rising in Australia, thanks to the effect of the RET (Renewable Energy Target).

Academia and the ABC finally mention FCAS this week

Never heard of FCAS? When there is a problem with renewables, the legacy media and academics don’t want to mention it. But when renewables have any benefit, let the free advertising flow.

FCAS has been a growing problem for years as the level of renewables increased. Way back in 2011 the AEMO forecast that 20-fold price rises in FCAS were coming (see below) but all our academics at The Conversation and journalists at the ABC were silent year after year.  Lo, this week, The Conversation and the ABC suddenly discover FCAS.  Apparently it’s OK to mention it now, because the much loved giant battery of South Australia may have the antidote to the problem that was never said:

In addition, the incredible flexibility of the battery means that it is well suited to participate in the Frequency Control Ancillary Service market. The Frequency Control and Ancillary Service (FCAS) market is less known and understood than the energy market.

Having discussed FCAS in order to rave about The Battery, it was time for a green-academic to say something bad about coal. On cue:

The role of these markets is essentially twofold. First, they provide contingency reserves in case of a major disturbance, such as a large coal generation unit tripping off. The services provide a rapid response to a sudden fall (or rise) in grid frequency.

Those naughty coal turbines, just tripping out like that a couple of times a year (or decade) or so, what ever it is. Let’s not mention that wind and solar are tripping on an hourly basis.

The Conversation author isresearcher at the Australian German Climate and Energy College, University of Melbourne.

His priorities:

“Size matters but role matters more”

As the Australian consumer would put it:

“Forget the role, and tell me the cost!

The Convo-ABC doesn’t mention the cost. So I did some digging, and oh, what a surprise?

In 2011 FCAS costs in the National Electricity Market were predicted to rise 20-fold in a decade

The AEMO warned about the rising costs of FCAS in 2011. Back then they predicted charges for FCAS would rise from $10m – $200m by 2020 and the sole cause was “intermittent energy” and the RET. Even so, this is a small part of the total energy bill which is more like $12-$20 billion.

The following major findings relate to Frequency Control Ancillary Services (FCAS) in the NEM:

The Regulation requirement increases substantially in response to the LRET. The Regulation requirement increases from the present value of ±120 MW to around ±800 MW in 2019-20 in scenarios with the LRET. This increase is entirely driven by the projected increase in intermittent wind generation installed. In the absence of the LRET the Regulation requirement increases only slightly to ±200 MW due to demand growth.

Regulation costs increase substantially in scenarios featuring the LRET. In response to the increased Regulation requirement, ancillary service settlements increase from $10 million pa2 (for Regulation + Slow Contingency services) to around $200 million pa in scenarios with the LRET. As the Regulation requirement increases, more expensive FCAS bids must be utilised, increasing FCAS settlements. However, it is noted that if the FCAS market were to increase so substantially it is likely that many generators will change their FCAS bidding strategies in ways that are challenging to predict, so these results should be considered to have a high degree of uncertainty. The application of a carbon price would exacerbate this effect.

Regulation costs remain small compared with energy settlements. Despite forecast increases, Regulation and Slow Contingency service costs remain small in comparison to anticipated energy settlements of $12 – $20 billion pa ($50 – $80 /MWh) in 2019-20.

What does FCAS cost today?  It only took 2 minutes of searching to find these projections from 2011. Shame the Melbourne University  and ABC don’t seem to think cost is important to the people who may be paying their grants and salaries.

The Roaring price spikes of FCAS:

Usually the cost of FCAS in South Australia is about $840 per day across the whole state but in October 2015 it rose from $25,000 a month to $26 million!

What is FCAS?  by Tennant Reed, on AiGroup (Australian Industry Group)

Frequency Control Ancillary Services (FCAS) is a market through which electricity generators are paid to slightly raise or lower their output in order to keep the electricity system within its operating frequency of 50 Hertz +/- 0.1 Hz. The frequency drops when generation reduces or the load increases, and vice versa. It is usually a very cheap service: SA requires about 35 megawatts of FCAS, which is usually purchased from interstate suppliers for $1 per megawatt per hour (or $840 per day across the whole state).

In October 2015 the SA FCAS market price repeatedly spiked to the cap price of $13,000 per megawatt per hour while the interconnector was largely down for upgrade work and FCAS had to be procured within SA. The three local providers (AGL, Origin and Engie) bid extremely high prices to supply FCAS. Once prices exceed a high price threshold for 7 hours, AEMO is able to impose a lower cap of $300 per MW per hour for one week. Prices spiked, were capped, and spiked again repeatedly through October. The total cost of this episode, split across energy users and generators, was around $26 million – rather than the $25,000 FCAS would ordinarily have cost.

Time to pay attention to FCAS methinks! It may only be a small part of final electricity bills, but it is changing more than most other components. Something is going on…

Comments by Rod Stuart and here, may help other readers get up to speed. Commenter Robin Pittwood recommends Kiwithinker for posts about grid stability.

H/t Robert and Peter, Rod Stuart, Robber.

Image: Wikimedia Commons by Pieter Kuiper

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