Reliability standard: What is it and does it need to be reviewed?

This week, there has been a lot of commentary about the reliability standard for the National Electricity Market.

Reliability is about having sufficient capacity in the system to generate and transport electricity to meet consumer demand.

This is different to security which refers to the ability of the power system to continue operating within acceptable limits for physical characteristics such as voltage and frequency, as well as the ability to recover the system within these limits after certain events.

The reliability that consumers experience is the result of the electricity provided by generators, and transmission networks and distribution networks which transport that electricity to consumers. The reliability standard exists to reflect the economic trade-off between the cost of providing greater reliability and the cost of disruption to load.

The current reliability standard which was most recently reviewed in 2018 targets no more than 0.002 per cent unserved energy demand. In other words, no more than 2 MWh of outage is allowed per 100,000 MWh of demand in any region each financial year, across a rolling ten-year period.

When you look back over the past decade, there have only been two years in which the unserved energy exceeded 0.002 per cent, however, the reliability standard as averaged over the ten years has been met.

For this same period, only 0.29 per cent of all supply interruptions were a result of inadequate generation capacity, with most disruptions originating in the distribution network.

In its latest Electricity Statement of Opportunities, AEMO only forecast unserved energy in Victoria for one year across the immediate projection period, indicating no threat to the reliability standard.

It is important to remember that any increase in reliability comes at increased consumer cost and we mustn’t ignore the ongoing concerns about energy affordability in any of these reliability conversations.

The need to strike a balance between reliability and affordability is essential in managing community expectations about the level of acceptable load disruptions. The reliability standard is borne from these expectations and provides a framework for AEMO and the industry to deliver consumer reliability at least cost.

We agree with the Australian Energy Council and others that caution is needed before bypassing the independent and well-established process for reviewing the existing reliability standard. The most recent review did consider tightening the standard but found it too cost prohibitive.

At Stanwell, we are doing everything we can to maximise the availability of our power stations to ensure we continue to provide secure and reliable electricity over the peak summer period. This includes a $54.0 million overhaul at Stanwell Power Station and a $29.9 million overhaul at Tarong Power Station.