Global insight for Australia’s electricity networks:

Over the past month, David Bones, Executive Manager - Risk, Assurance and Regulation for GHD Advisory has hosted a number of client functions with electricity network businesses across Australia to share international perspectives from Paul Espie, one of GHD’s leading electricity system planning specialists.

The exchange of ideas focused on three themes:

• The economic regulation of electricity networks
• Accommodating efficient connection of renewable generation
• Managing the impact on the power system of reduced levels of synchronous generation.

Paul is based in the UK and regularly advises power sector clients across the UK, Ireland, the Middle East and Australia.

Discussion highlights

Energy market transformation to accommodate renewable generation is a topic for discussion across the world. In Australia there is much more renewable energy generation as a proportion of total system demand than in the UK, particularly in regions such as South Australia.

This raises a number of questions for Australia’s grid:

• How much renewable generation can you connect without it becoming problematic?
• How should the grid be developed to maximise consumer value?
• What regulatory structures will best support progress in the industry?

One immediate challenge is to holistically manage the uptake of distributed and large-scale renewable energy projects within current regulatory frameworks and emerging technical performance limitations.

Achieving long-term security

Demand profiles are changing. Electricity demand is impacted by increasing embedded generation comprising micro-generation, rooftop PV systems and electric vehicles. At the same time new large-scale generation projects are rapidly soaking up available connection capacity in the transmission and distribution grids.

Changing demand coupled with technology changes makes planning power networks challenging.   There are an increasing number of variables and stakeholders to be considered.

Funding constraints and the drive to maximise value means you have to carefully select where network upgrades or renewable connection should occur. There is also the challenge of justifying investments today that will benefit future generation by enabling a lower development path. Non-traditional approaches, modern technology and innovative engineering play important roles to optimise long term outcomes. Ongoing guidance and leadership can help clarify technical and economic performance to make informed decisions.

Future role of assets

The future role of aging assets needs to be considered when determining the replacement strategy. It is often no longer appropriate to replace like with like. Asking forwarding questions like, what would the optimal replacement strategy for those assets be? What is the feasibility of this strategy? Do you replace assets as they are, with higher capacity or with something smaller? Understanding the true condition of assets, and how their performance is likely to change over time is crucial to understanding the opportunity cost of deferred asset replacement.

Determining performance and environment outputs also helps guide these priorities. From there, deciding on what can be achieved with the smallest pot of money takes a coordinated approach. Increasingly we need to quantify the cost of not upgrading/replacing to build the case for investment.

Cost-effective grid planning involves challenging traditional grid characteristics and models while maintaining customer value. Common practice is to align refreshed network strategies with regulatory revenue submissions. We find that the preliminary phase of developing the regulatory submission is often the right time to complete full business reviews. This allows the review outcomes to shape the regulatory submission. This process helps to provide clarity on all the justifications that support asset replacement and upgrades.

All of us in the electricity industry need to take into account the way individuals, families, and businesses currently interact with the electricity system, and their expectations of a modern electricity grid. Keeping pace with the expectations of electricity consumers is a big driver of grid transformation.

Discussion snapshot:

• How strategic planning of transmission infrastructure delivers economic and social benefits
• How we determine how much capital expenditure is requiredto meet growth requirements within regulatory frameworks and emerging limitations
• Understanding the value the asset provides and how it aligns with market needs, taking into account the asset condition, the quality of renewable energy resources that could be connected, cost of connections, wider technical issues and market impacts helps establish sound investment prioritisation decisions

For more information, contact David Bones or Paul Espie.