National Electricity Market Management Company Limited

ABN 94 072 010 327

2006 Minimum Reserve Level Recalculation

October 2006

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1.1

INTRODUCTION

NEMMCO determines minimum reserve levels which are consistent with the Reliability Standard. Minimum reserve levels were last reviewed by NEMMCO in 2004, and since that time Basslink has been commissioned, Kogan Creek is well advanced, and generator forced outage data has been refined and clarified. As a result of these changes NEMMCO began modelling to review the current minimum reserve levels. This work was foreshadowed in the 2005 Statement of Opportunities. The following sections of this document provide a summary of the: process adopted by NEMMCO in the calculation of minimum reserve levels; feedback provided by the jurisdictions following briefings on preliminary results; additional work conducted to address those concerns raised by the jurisdictions, particularly with regard to input data assumptions; the minimum reserve levels being considered for implementation; an explanation of negative minimum reserve levels; and a regional assessment of the reserve margin available (assuming just sufficient generation to just meet the minimum reserve levels) to each NEM region at time of its 50% POE Scheduled Maximum Demand. 1.2 PROCESS

In January 2006 NEMMCO contracted ROAM Consulting to calculate the minimum reserve level for each region of the NEM, with the exception of Tasmania1. ROAM performed similar work for NEMMCO in the 2003 and 2004 assessments. The previous minimum reserve level assessment was completed in 2004. In that assessment, NEMMCO developed a methodology that aimed to determine:
-

The minimum level of NEM-wide installed capacity required to deliver the Reliability Standard in each region.

This methodology was reviewed by KEMA Consulting, who made a number of recommendations regarding the assumptions used in modelling generator performance. To address these recommendations, NEMMCO and the NGF created the Forced Outage Data Working Group (FODWG). The recommendations of the FODWG have been incorporated in the calculation of the generator forced outage statistics used in ROAMs assessment. For more information on the FODWG and its activities please refer to the following URL: http://www.nemmco.com.au/powersystemops/240-0011.htm One of the most significant aspects of the FODWG activities was the collection of a set of historical forced outage data records on an event by event basis from each NEM scheduled generator. This collection provided NEMMCO with significantly more information than had been collected previously and allowed forced outage rate (FOR) statistics to be calculated by NEMMCO on a consistent basis. Previously NEMMCO relied on generators to aggregate their own data set into a format suitable for the
An assessment of the minimum reserve levels for Tasmania was excluded from the studies. Instead the studies focus on assessing the impact of Tasmanian reserve capacity being available to Victoria and South Australia across Basslink.
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calculation of FOR statistics. It is believed that generators may have been inconsistent in their approach to data reporting and aggregation. NEMMCO was not confident in the accuracy of the FOR data being used in the 2004 minimum reserve level assessment and decided to double the FORs in the determination case2. Given the increased confidence in the recently collected FOR data set, NEMMCO no longer believes it necessary to double the FORs. Table 1 provides a high level summary of the differences between the FORs used in the 2006 and the 2004 assessments. Note: In the 2006 assessment both a Full Forced Outage Rate (FFOR) and a Partial Forced Outage Rate (PFOR) were modelled. For each partial outage a mean derating (MeanDer) was applied to the relevant generator. An Equivalent Forced Outage Rate (EFOR) has been calculated for 2006 statistics to facilitate a comparison between the 2006 EFOR and 2004 FOR. Table 1 Comparison of forced outage rates used in 2006 and 2004 assessments
FFOR 3.72% 7.76% 8.18% 2.81% 1.95% 1.78% 4.62% 4.19% 2.90% 3.79% 2.81% 16.73% 1.25% 10.00% 2006 ASSESSMENT PFOR MeanDer 4.42% 16.81% 5.83% 63.69% 0.26% 40.60% 4.70% 20.33% 5.95% 16.34% 0.00% 0.00% 19.92% 12.44% 0.17% 10.77% 2.13% 27.29% 2.88% 11.23% 4.70% 20.33% 5.55% 60.00% 5.43% 21.10% 0.00% 0.00% EFOR 4.46% 11.47% 8.28% 3.77% 2.93% 1.78% 7.10% 4.20% 3.48% 4.12% 3.77% 20.06% 2.39% n/a 2004 ASSESSMENT FFOR 5.00% 8.92% 0.24% 8.88% 5.22% 1.80% 3.72% 2.30% 1.80% 4.70% 8.88% 8.92% n/a n/a

QLD BASE QLD PEAK QLD HYDRO QLD INTER NSW BASE SNOWY VIC BASE VIC PEAK VIC HYDRO SA BASE SA INTER SA PEAK TAS NERC GADS - New plant

In addition to the FOR data, NEMMCO also provided ROAM Consulting with all input data required for their calculation of minimum reserve levels and performed shadow studies on key simulation cases. ROAM performed Monte Carlo analysis using their market simulation tool 24C and iteratively adjusted the amount of installed generation in each region to: approach 0.002% USE within each region simultaneously; maximise the capability for reserve sharing between regions; and approach an outcome which achieves the minimum level of installed generation within the NEM as a whole . For more information on the process please refer to the attached report Minimum Reserve Level Recalculation 2006.
2

The FOR for all plant was doubled with exception to QLD baseload plant

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ROAM provided NEMMCO with preliminary results including a draft set of recommended minimum reserve levels in March 06 and NEMMCO briefed each of the NEM jurisdictions on these results during April.

1.3

JURISDICTIONAL FEEDBACK ON PRELIMINARY RESULTS - APRIL

Following the Jurisdictional briefings in April, two Jurisdictions (New South Wales and South Australia) raised concerns over some key input data used in the NEMMCO studies 3. The issues raised by the New South Wales jurisdiction related to the assumed timing of a committed transmission augmentation in New South Wales. Concern was raised that studies may have incorrectly modelled the commissioning date of a project, and subsequent impact on network constraints. NEMMCO has since confirmed that the TransGrid augmentation timing that was used in the simulation studies is consistent with the advice provided by TransGrid. The South Australian jurisdiction raised concern over the forced outage rates (FOR) used in the simulations, particularly for the South Australian peaking class of plant. To address these concerns NEMMCO, ESIPC and the FODWG developed an agreed approach to re-calculate the FORs for this class of plant. This new approach was more consistent with the recently developed definitions by the FODWG and delivered a change in the FOR from 25.1% to 16.73% for the SA peaking plant. The primary driver behind the change in FOR was the exclusion of loss of availability events due to fuel supply related outages beyond the control of the generators On account of the revision made to the SA peaking class of plant NEMMCO revisited the FOR assumed for new open cycle gas turbines, and existing plant of this type without any forced outage data history. NEMMCO requested information from the proponents of new committed generation regarding the expected long term FOR of their plant and sourced information from the North American Electric Reliability Council (NERC) GADS website. This work resulted in a change in the FOR for this class of plant from 25.9% to 10%. The impact of the revised input data on the calculated minimum reserve level was then assessed. The revised minimum reserve level recommendation is presented in section 1.4.

As these concerns would take time to resolve and additional sensitivity studies were required, this precluded the minimum reserve level results being incorporated in the 2006 SOO/ANTS in early June 2006. The SOO/ANTS will now be published in October with the existing reserve levels as the basis for all conclusions. The impact of revised minimum reserve levels on the 10 year supply-demand outlook will be provided in the Executive Briefing document released with the 2006 SOO.

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1.4

REVISED RECOMMENDED MINIMUM RESERVE LEVELS

ROAM recalculated the minimum reserve levels following modifications to the FOR input data outlined above. Table 2 identifies the revised minimum reserve levels calculated by ROAM to deliver 0.002% USE in each region of the NEM simultaneously 4. Table 2 NEM-Wide Draft Minimum Reserve Levels [MW Above M10 Regional Demand Forecast]
Year QLD* NSW VIC & SA SA* 480 -1490 370 370 2006-07 560 -1430 360 390 2007-08 * This is a local requirement and must be met by generation within the region assuming 0MW support from neighboring regions.

Notes: A requirement for a 370 MW (2006-07) minimum reserve level sourced solely from within SA was identified. That is, SA must source 370 MW of generation capacity within its own region in excess of the SA 10% POE Scheduled Maximum Demand (MD), assuming 0 MW support from VIC. Similarly a requirement for a 480 MW (2006-07) minimum reserve level sourced solely from within QLD was identified, assuming 0 MW support from NSW.

The minimum reserve levels in Table 2 are consistent with just achieving the Reliability Standard in all regions. However, the practical difficulties associated with sourcing 370MW of generation in SA in excess of the SA 10% POE Scheduled MD must be recognised. In the near term it is unlikely that a minimum reserve level of 370MW in SA will be achievable. If implemented in market systems reserve trader is likely to be triggered, and may fail to deliver the required level of supply. In recognition of this practical limitation NEMMCO has re-assessed the minimum reserve level requirement in South Australia considering the committed level of plant likely to be available in Victoria for the 2006-07 and 2007-08 years. That is, ROAM has conducted further simulation studies which attempt to minimise the minimum reserve level in South Australia through consideration of the capacity available in Victoria. This method: increases the combined Victoria and South Australia minimum reserve level; reduces the South Australian minimum reserve level; and delivers the Reliability Standard in South Australia but better than the Reliability Standard in Victoria. Table 3 provides a summary of the minimum reserve levels which have been calculated in this process.

Please refer to the attached report Minimum Reserve Level Recalculation 2006 for more information regarding the actual simulated USE outcomes.

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Table 3 Reliability Reserve Levels To Be Implented [MW Above M10 Regional Demand Forecast]
Year QLD* NSW VIC & SA 480 -1490 615 2006-07 560 -1430 615 2007-08 * This is a local requirement and must be met by generation within the region. SA* -50 -50

The minimum reserve levels in Table 3 were approved by the NEMMCO Board and noted by the Reliability Panel in September 2006. 1.5 EXPLANATION OF NEGATIVE MINIMUM RESERVE LEVELS

NEMMCO notes from previous discussions with jurisdictions and market participants that it may be necessary to provide an explanation of how a region may have a negative minimum reserve level. Figure 1.5 illustrates the relationship between the required scheduled generation in each region and the minimum reserve levels in Table 3 for the 2006-07 year, assuming: regional transfers that are simultaneously feasible; interconnector transfers used to determine the minimum reserve levels in Table 3; spare capacity in Tasmania is fully allocated to Victoria; Snowy generation is fully allocated to Victoria and New South Wales; and scheduled generation capacity in the Snowy region equal to that when determining the minimum reserve levels in Table 3.

Considering New South Wales minimum reserve level of -1490 MW: NSW can have a negative minimum reserve level because NSW has the ability to share spare generation capacity from QLD, Snowy and VIC/SA (480 MW + 615 MW) using spare transfer capability on the interconnectors. The NSW minimum reserve level has been determined assuming transfers from QLD and Snowy of 1878 MW. Assuming a maximum import capability into NSW of approximately 4000 MW (2900MW on Snowy1 and 1100MW from Qld) there is 2122 MW spare import capability. This spare import capability provides NSW with access to share significant spare capacity with neighboring regions. As a result NSW can have such large negative minimum reserve level.

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Figure 1.5
QUEENSLAND

QLD

Scheduled generation required = QLD 10% POE Scheduled demand - QLD DSP + QLD minimum reserve level (480) - transfers from NSW Minimum reserve level Transfers from NSW 480 0 300 300

0 NSW

Actual import capability into QLD from NSW Spare import capability into QLD NEW SOUTH WALES

Scheduled generation required = NSW 10% POE Scheduled demand - NSW DSP + NSW minimum reserve level (-1490) - transfers from QLD and Snowy Minimum reserve level -1,490 1,878 4,000 2,122

1,878

Transfers from QLD and Snowy Actual import capability into NSW from QLD and Snowy Spare import capability into NSW

Snowy 1,900 VIC AND SA

SNOWY No minimum reserve level requirement Scheduled generation 3,778

VICTORIA AND SOUTH AUSTRALIA Scheduled generation required = VIC 10% POE Scheduled demand + SA 10% POE scheduled demand - VIC and SA DSP + VIC and SA minimum reserve level (615) - transfers from TAS and Snowy Minimum reserve level Transfers from Snowy and TAS 615 2,510 2,510 0

610 TAS

Actual import capability into VIC and SA from Snowy and TAS Spare import capability into VIC TASMANIA

Scheduled generation required = TAS 10% POE Scheduled demand - TAS DSP + TAS minimum reserve level (144) - transfers from VIC Minimum reserve level Transfers to TAS from VIC Actual import capability into TAS from VIC Spare import capability into TAS 144 -610 500 1,110

All numbers in MW except as otherwise signed.

1.6 REGIONAL RESERVE MARGIN AT TIME OF 50% POE SCHEDULED MAXIMUM DEMAND Figures 1.6.1 to 1.6.4 provide an illustration of the reserve margin available to each NEM region (with Victoria and South Australia treated as a single region). Each regions reserve margin has been assessed sequentially under the following conditions: The Scheduled demand in the region matches the 50% POE Scheduled MD projection for summer 2006/07 5 less any committed DSP in the region. The Scheduled demand in other regions is lower than the 50% POE Scheduled MD projection as peaks in regional demand do not generally occur simultaneously. To account for this, the demand shown assumes a 95% coincidence factor 6. Spare capacity in other regions is made available across interconnectors up to the assumed maximum transfer capabilities defined in Table 4 7.

The reserve available to Tasmania is illustrated at the time of the Tasmanian 50% POE Scheduled MD projection for winter 2007. 6 The Scheduled demand shown in other regions is 95% of the 50% POE Scheduled MD projection.

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Sufficient scheduled generation is available in each region to satisfy no more than the minimum reserve level requirements specified in Table 3 for summer 2006/07 8 The Snowy generation capacity matches the committed scheduled generation capacity forecast for 2006/07.

Table 4 Assumed Maximum Transfer Capability

Interconnector QLD->NSW (QNI and Terranora) NSW->QLD (QNI and Terranora) SNOWY->NSW SNOWY->VIC TAS->VIC VIC->TAS Assumed Maximum Transfer Capability (MW) 1,100 1 300 2,900 1,900 610 500

1. Special switching of some 132kV circuits in Northern New South Wales may be necessary to achieve 1,100 MW under certain conditions, provided system security can be maintained.

Figure 1.6.1 Available Reserve Margin During 50% POE Scheduled MD Projection (Summer 2006/07) - Queensland (MW)
QUEENSLAND
Reserve (% Scheduled Demand)
Coincidence Factor

14% QLD 300

QUEENSLAND Scheduled Demand - DSP Generation Support from NSW Reserve NEW SOUTH WALES Scheduled Demand - DSP Generation Support from Snowy & QLD Reserve

100% 9,071 10,058 300 1,287 95% 13,070 11,661 2,600 1,191 95% 0 3,426 95% 11,728 11,756 526 610 1,164 95% 1,366 2,002 -610 26

NSW 2,900

SNOWY

Snowy 526 VIC AND SA 610

Scheduled Demand - DSP Generation VICTORIA AND SOUTH AUSTRALIA Scheduled Demand - DSP Generation Support from Snowy Support from TAS Reserve TASMANIA Scheduled Demand - DSP Generation Support from VIC

TAS

All numbers in MW except as otherwise signed

Reserve

Figure 1.6.2 Available Reserve Margin During 50% POE Scheduled MD Projection (Summer 2006/07) - New South Wales (MW)
Transfers at the assumed maximum transfer capability can only be achieved if neighbouring regions have sufficient spare generation capacity, and under appropriate system conditions. 8 The reserve available to Tasmania is determined based on the Scheduled generation capacity to satisfy no more than the minimum reserve level of 144 MW for winter 2007.
7

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NEW SOUTH WALES

Reserve (% Scheduled Demand)

Coincidence Factor

14% QLD 1,100

QUEENSLAND Scheduled Demand - DSP Generation Support from NSW Reserve NEW SOUTH WALES Scheduled Demand - DSP Generation Support from Snowy & QLD Reserve

95% 8,613 10,058 -1,100 345 100% 13,759 11,661 4,000 1,902 95% 0 3,426 95% 11,728 11,756 526 610 1,164 95% 1,366 2,002 -610 26

NSW 2,900

SNOWY

Snowy 526 VIC AND SA 610

Scheduled Demand - DSP Generation VICTORIA AND SOUTH AUSTRALIA Scheduled Demand - DSP Generation Support from Snowy Support from TAS Reserve TASMANIA Scheduled Demand - DSP Generation Support from VIC

TAS

All numbers in MW except as otherwise signed

Reserve

Figure 1.6.3 Available Reserve Margin During 50% POE Scheduled MD Projection (Summer 2006/07) - Victoria and South Australia (MW)
VICTORIA AND SOUTH AUSTRALIA
Reserve (% Scheduled Demand)
Coincidence Factor

15% QLD 1,100

QUEENSLAND Scheduled Demand - DSP Generation Support from NSW Reserve NEW SOUTH WALES Scheduled Demand - DSP Generation Support from Snowy & QLD Reserve

95% 8,613 10,058 -1,100 345 95% 13,070 11,661 2,626 1,217 95% 0 3,426 100% 12,360 11,756 1,900 610 1,906 95% 1,366 2,002 -610 26

NSW 1,526

SNOWY

Snowy 1,900

Scheduled Demand - DSP Generation VICTORIA AND SOUTH AUSTRALIA

VIC AND SA 610

Scheduled Demand - DSP Generation Support from Snowy Support from TAS Reserve TASMANIA Scheduled Demand - DSP Generation Support from VIC

TAS

All numbers in MW except as otherwise signed

Reserve

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Figure 1.6.4 Available Reserve Margin During 50% POE Scheduled MD Projection (Winter 2007) - Tasmania (MW)
TASMANIA
Reserve (% Scheduled Demand)
Coincidence Factor

36% QLD 1,035

QUEENSLAND Scheduled Demand - DSP Generation Support from NSW Reserve NEW SOUTH WALES Scheduled Demand - DSP Generation Support from Snowy & QLD Reserve

95% 7,432 8,467 -1,035 0 95% 13,099 11,093 2,561 556 95% 0 3,426 95% 9,518 8,898 1,900 -500 780 100% 1,824 1,988 500 664

NSW 1,526

SNOWY

Snowy 1,900

Scheduled Demand - DSP Generation VICTORIA AND SOUTH AUSTRALIA

VIC AND SA 500

Scheduled Demand - DSP Generation Support from Snowy Support from TAS Reserve TASMANIA Scheduled Demand - DSP Generation Support from VIC

TAS

All numbers in MW except as otherwise signed

Reserve

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