January 2015 Heatwaves and electricity supply Heatwaves in Australia normally lead to significant increases in electricity demand. The main reason for this is the increased use of air conditioners over the past two decades. There are now around 6.7 million households with air conditioners installed in Australia, compared to only 1.9 million in 1990. The cumulative effect of all these air conditioners working hard at the same time translates into big surges in electricity demand as households and businesses stay cool. Australians enjoy one of the most reliable electricity supplies in the world. Heatwaves in the past have been associated with increased risk of power outages, so naturally consumers are interested to ensure that they can access electricity at a time when they appreciate it most. This briefing paper outlines some of the key issues and clarifies some of the myths relating to electricity supply during heatwaves. How much more electricity do we use in a heatwave? The short answer is: a lot. The standard measure of total electricity demand is measured in megawatts (MW) and is measured separately in each state. Demand for electricity obviously increases and decreases significantly at different times every day of every week and on weekends. The normal daily peaks of electricity demand come at breakfast and dinner times, with demand falling to very low levels overnight and low on weekends and holidays. Record peaks occur in summer in Victoria, South Australia, Queensland and Western Australia, caused by air conditioner use. But record peaks occur in winter in Tasmania due to electric heater use. Record peaks for electricity demand in New South Wales have been in both winter and summer. While hot weather occurs regularly across Australia every summer, the most intense recent heatwaves periods of extended high temperatures - have occurred in South Australia and Victoria. In January 2009 a four-day heat wave with maximum temperatures above 40 degrees Celsius set new demand records in both states. These records were nearly matched in a similarly intense heat wave in January 2014. The cumulative heat that builds up with consecutive days of very high temperatures increases air conditioner use and significantly drives up demand for electricity. How hard an air conditioner is working is directly related to the ambient temperature outside. So it is no surprise that heatwaves lead to large spikes in electricity demand.
Because electricity demand moves around constantly there is no normal demand to measure against. But to give some idea of the effect of sustained high temperatures, we can compare maximum demand during these heatwaves to a typical summer day. Table 1: Maximum Operational Demand for South Australia and Victoria i Typical Jan day ii 2009 Heat wave (29 Jan) 2014 heat wave (16 Jan) Victoria 6,643 MW 10,576 MW 10,307 MW South Australia 2,011 MW 3,383 MW 3,281 MW The record Victorian peak demand was set in January 2009. The record South Australian peak demand of 3,399 MW was set on 31 January 2011. Figure 1: Summer peak demand 2000 to 2014 iii 2
Table 2: Summer peak demand 2000 to 2014 in megawatts iv What is driving this increased electricity demand? The number one driver of increased electricity demand during heat waves is air conditioners. Household air conditioners were once a luxury. Now, they are a standard appliance in most Australian homes. In 1999, only 35 per cent of Australian households owned an air conditioner. Today, around 74 per cent of all homes have at least one air conditioner v and an increasing proportion of households now have multiple air conditioners. In 2011, nearly 600,000 households had three or more units. vi That s more than 9.2 million installed air conditioners, more than three times as many as in 1995. Figure 1 shows the steep trend in air conditioner uptake by Australian households since 1990. Refer to Figure 2 overleaf that charts the proportion of Australian households with air conditioners. 3
Figure 2: Proportion of Australian Households with air conditioners 1990-2014 vii Switching on these air conditioners at the same time puts a huge strain on our electricity networks. Around 25 per cent of all investment by network companies has been to build extra capacity into the networks for these handful of very hot days each year. This means there are billions of dollars of plant and equipment sitting idle for the rest of the year. What is the impact of rooftop solar? The amount of electricity generated by solar has increased significantly since 2006. Generous up-front subsidies and feed in tariffs have acted as catalysts to the sharp rise in the uptake of solar panels. The latest figures from the Clean Energy Regulator show that we now have almost 4,000 MW of solar capacity across Australia. To put this into perspective, the largest power station in Australia is Eraring power station in NSW at 2,780 MW. Because rooftop solar systems are behind the meter, it s only possible to estimate how much they are generating (as some of the electricity generated is used directly by the household). During the 2014 heatwave solar generation was estimated to account for 4.5 per cent of generation during the time of peak demand in SA and 2.4 per cent in Victoria. This means total peak electricity demand in both states was almost certainly significantly higher in January 2014 than the all-time record, but the effect of increased penetration of solar was to keep demand below the levels of demand set in 2009. 4
What time of day is the highest electricity demand during a heat wave? Each day there are two spikes in demand, the first is when people wake up and get ready for work in the morning and the second is when people get home from work in the evening. When people get home from work at night, they turn on electrical appliances including heating and cooling, lighting, televisions, washing machines and dishwashers. During a heatwave people will also turn on their air conditioners to cool down. The added electricity demand from households turning on these air conditioners results in the annual peak occurring in the summer for Victoria and South Australia. As many of them are turned on only when people get home from work or school, the peak demand during a heatwave usually occurs in the late afternoon or early evening, as shown in Table 3 below. Table 3: SA and VIC Peak Demand (time and MW) Year State Peak demand Local time Date 2008 09 2009 10 2010 11 2011 12 2012 13 2013 14 VIC 10,576 5:00 PM 29/01/2009 SA 3,383 5:00 PM 29/01/2009 VIC 10,105 5:00 PM 11/01/2010 SA 3,308 1:30 PM 11/01/2010 VIC 9,914 1:30 PM 1/02/2011 SA 3,399 5:00 PM 31/01/2011 VIC 9,174 5:00 PM 24/01/2012 SA 2,978 5:30 PM 23/01/2012 VIC 9,774 5:30 PM 12/03/2013 SA 3,095 6:00 PM 17/01/2013 VIC 10,313 5:30 PM 28/01/2014 SA 3,281 7:00 PM 16/01/2014 South Australia boasts the highest penetration rate of solar panels in Australia; a quarter of SA homes have solar. The recent increase in solar panel installations continues to decrease demand during daylight hours. This has the effect of pushing the peak demand time deeper into the evening (as the sun sets, solar systems reduce output). As as shown in table 2, for the last two years, peak demand in South Australia has been pushed back to 6:00 PM and 7 PM respectively. What is the impact on electricity demand of several extremely hot days in a row? Looking at the data from heatwaves dating back to 2008, we have noticed that peak electricity demand tends to increase slightly every consecutive day during a major heat 5
wave. This makes sense, as buildings tend to accumulate heat, meaning air conditioners need to work progressively harder each day to achieve the same temperatures. For example, looking at two separate and milder four-day heatwaves in South Australia and Victoria, we can see the demand increase both with the temperature increasing and the duration of the heatwave. Figure 3: Peak demand and temperature, 31 December 2012 to 4 January 2013, South Australia viii Figure 4: Peak demand and temperature, 20-25th of January, 2012 - Victoria ix What happens to electricity prices during a heatwave? The short answer is: nothing. The surge in demand does tend to drive up the spot electricity price in the wholesale market for electricity, which is constantly moving up and down trading throughout the year. This wholesale price fluctuates significantly primarily to act as a signal to different types of generators to switch on and switch off. The actual price almost all of us pay for our electricity has already factored this volatility into the unit price for electricity we pay. 6
So while there may be very high spikes in the wholesale price during a heat wave, consumers can rest assured their kilowatt hour rate for electricity will not change. Like other times of the year, the main factor that increases or decreases electricity bills is the amount of electricity being used. As we can see from our own bill, this tends to increase during both very hot and very cold weather as we increase use of electricity intense appliances like heaters and coolers. What causes blackouts during heatwaves? Historically, the risk of interrupted electricity supply has increased for two main reasons: (1) a shortage of supply of electricity (too much demand/not enough power stations) resulting in planned and managed interruptions to supply and (2) spikes in demand in specific parts of the network tripping the equivalent of fuses resulting in localized outages until the fault or fuse can be repaired or re-set. Heatwaves increase the risk of both events occurring, but these types of outages are otherwise unrelated. The likelihood of bush and grass fires increases during heatwaves, which can threaten powerlines and lead to blackouts. Heatwaves over consecutive days also increase the overnight temperatures, which keeps the operating temperatures of network assets such as transformers high and makes them more prone to failure. Are we likely to run out of electricity in a heat wave? The risk of running out of electricity has reduced in the last few years. Total demand for electricity has reduced since 2009, primarily as a result of falling industrial demand from the closure of large industrial facilities like aluminum smelters and car factories. In addition, growth in rooftop PV installation and growth in energy efficiency saving products have contributed to reductions in overall electricity consumption. The result of more generation and less demand means the electricity system is oversupplied. This makes it far less likely that we will simply run out of power. Refer to Figure 5 overleaf that shows unused capacity in Victoria and SA during the 2014 heatwave. 7
Figure 5: Unused Capacity in Victoria and South Australia during the 2014 heatwave (MW) x To illustrate, let us look at the last heat wave in South Australia and Victoria in January 2014. At the times of highest demand, we can see that there was still around 335 MW xi of spare capacity in Victoria and 188 MW xii of spare capacity in South Australia. These figures were significantly higher than the corresponding figures in the January 2009 heatwave. During heat waves power stations cancel maintenance and repair work so that all available capacity is ready to dispatch electricity if required. As with all mechanical systems running near capacity there is always the risk that a fault occurs in a power station at these critical times. So there is always some risk of a coincidence of events resulting in a shortage of electricity at peak times during a sustained heat wave. But under current conditions, the risk of that is low. What about localised outages? During times of very high demand there are incidences of localised outages. This is not due to shortages of supply, but rather surges in demand in a street or suburb tripping fuses and other control systems in the network. These outages are normally local in nature, the cause is identified quickly and power is restored quickly. Crews are on high alert during heat waves to ensure power is restored as quickly as possible. Because these big surges in demand are so infrequent, heat waves are one of the few times that network operators get to stress test their systems. Networks are constantly being maintained and upgraded to ensure sufficient capacity peak events like heat waves. But upgrading electricity networks is costly and can push up power bills, so capital is only spent if required. 8
This is challenging because network operators are not notified where and when households and businesses install energy intense appliances like air conditioners. Another important cause of localised outages during heat waves is the threat of bush fire. In regional areas facing high bushfire risk network providers will sometimes be asked to turn off power along lines that could increase the risk of bushfire in those areas. This is understandably frustrating for those communities who are left without any power during these type of outages, but it is done as a result of detailed assessment balancing the risk of residents not having electricity with the risk of powerlines starting a bushfire. ------------------------------------------- This briefing paper was prepared by the Energy Supply Association of Australia. For more information, please contact Andrew Dillon, General Manager, Corporate Affairs Email: andrew.dillon@esaa.com.au Phone: 0438 016 679 or 03 9205 3114. i Source: AEMO, Note: Typical Summers day AEMO uses January 30, 2013, maximum 29.1 degrees in Vic and 30.6 degrees in SA, 2009 maximum demand occurred on Thursday January 29 where it was 42.7 degrees in Vic and 43.0 degrees in SA. 2014 maximum demand occurred on Thursday January 16, 2014 in South Australia and 44.2 in SA and on January 28, 2014 where the temperature was 43.9 in Vic. ii Source: AEMO, Note: Typical Summers day AEMO uses January 30, 2013, maximum 29.1 degrees in Vic and 30.6 degrees in SA, 2009 maximum demand occurred on Thursday January 29 where it was 42.7 degrees in Vic and 43.0 degrees in SA. 2014 maximum demand occurred on Thursday January 16, 2014 in South Australia and 44.2 in SA and on January 28, 2014 where the temperature was 43.9 in Vic. iii Source: Australian Energy Market Operator (AEMO), NT Annual Power System Review, Power and Water Corporation and IMO Statement of Opportunities. Note: data not available for Tasmania between 1998-99 and 2002-03. 2013-14 WA and NT has not yet been released. All demand data is native demand data released by AEMO. iv Source: AEMO, Source: AEMO, NT Annual Power System Review, Power and Water Corporation and IMO Statement of Opportunities. Note: data not available for Tasmania between 1998-99 and 2002-03. 2013-14 WA and NT has not yet been released. All demand data is native demand data released by AEMO. v Productivity Commission 2012 vi Australian Bureau of Statistics 2011 vii Source: Productivity Commission 2012, ABS viii Source: NEM-Review, www.nem-review.info/, BOM ix Source: NEM-Review, www.nem-review.info/, BOM x Source: NEM-Review, www.nem-review.info/ xi Source: NEM-Review, www.nem-review.info/ xii Source: NEM-Review, www.nem-review.info/ 9