Hydro Tasmania Presentation to OTTER on Potential Regulation of - - PowerPoint PPT Presentation

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Hydro Tasmania

Presentation to OTTER on Potential Regulation of Raise Contingency FCAS

• How the FCAS issues have unfolded
• Dispelling FCAS Myths
• What others had to say (and why)

10 September 2009

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Tasmanian FCAS Timeline

Mar 08 FOS Review Start Dec 08 - FOS Decision

• Causer Pays Rule Submitted

Apr 09 High priced events May 09 AEMO changes inertia Aug 09 Causer Pays Draft

New entry will & must provide FCAS

Oct 08 ACCC not opposed to AETV sale Dec 09 FOS change

Where is the new FCAS?

Aug 08 Draft FOS Decision Jul 09 OTTER intention to regulate

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HT Typical R6 Trapezium

1 2 3 4 5 6 7 8 9 10 10 20 30 40 50 60 Energy Target (MW) R6 (MW) 20 40 60 80 100 120 Relative Efficiency %

R6 FCAS Comparison

Pelican Point CCGT Bid Trapezium

2 4 6 8 10 12 14 16 50 100 150 200 250 300 350 400 450 500 R6 (MW) Pelican Point CCGT Bid Trapezium

The efficient supply of raise contingency FCAS is central to the supply-side equation in Tasmania Typical hydro generator Typical CCGT

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Tasmanian FCAS Timeline

Mar 08 FOS Review Start Dec 08 - FOS Decision

• Causer Pays Rule Submitted

Apr 09 High priced events May 09 AEMO changes inertia Aug 09 Causer Pays Draft

New entry will & must provide FCAS

Oct 08 ACCC not opposed to AETV sale Dec 09 FOS change

Where is the new FCAS?

Aug 08 Draft FOS Decision Jul 09 OTTER intention to regulate

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A B C D E F G Import 0 to 478MW Export 0 to 594MW 0MW 478MW 594MW 50 50 No-go zones Envelope of minimum R6 required locally (balance supplied globally) Local R6 for Basslink trip 450 210 Z

Figure 1

Co-optimisation R6

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Co-optimisation L6

G Import 0 to 478MW Export 0 to 594MW 0MW 478MW 594MW 50 50 No-go zones 90 135

450

Envelope of minimum L6 required locally (balance supplied globally) Current 30-40MW of local L6 For Basslink export

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Co-optimisation R6 & L6

G Import 0 to 478MW Export 0 to 594MW 0MW 478MW 594MW 50 50 No-go zones 90 135

450

210 Z Envelope of minimum L6 required locally (balance supplied globally) Envelope of minimum R6 required locally (balance supplied globally) Current 30-40MW of local L6 For Basslink export Local R6 for Basslink trip

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Tasmanian FCAS Timeline

Mar 08 FOS Review Start Dec 08 - FOS Decision

• Causer Pays Rule Submitted

Apr 09 High priced events May 09 AEMO changes inertia Aug 09 Causer Pays Draft

New entry will & must provide FCAS

Oct 08 ACCC not opposed to AETV sale Dec 09 FOS change

Where is the new FCAS?

Aug 08 Draft FOS Decision Jul 09 OTTER intention to regulate

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AETV FCAS Liability

(1st -17th April)

• Made the commercial choice on

level of exposure to energy/FCAS markets knowing commissioning programs

• Declined existing Raise and

Energy capability of BB unit 2

• Approximately $425k (assuming

fully exposed)

• AETV investment in FCAS =

Nil??

• HT investment in FCAS = $800k

(30MW R6 & 100MW L6)

19.3 2.3 R5 18.7 2.3 R60 9 1 R6 Max MW Avg MW

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Tasmanian FCAS Timeline

Mar 08 FOS Review Start Dec 08 - FOS Decision

• Causer Pays Rule Submitted

Apr 09 High priced events May 09 AEMO changes inertia Aug 09 Causer Pays Draft

New entry will & must provide FCAS

Oct 08 ACCC not opposed to AETV sale Dec 09 FOS change

Where is the new FCAS?

Aug 08 Draft FOS Decision Jul 09 OTTER intention to regulate

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Summary of Submissions

• Noticeable omissions

– Independent advice (eg AEMO & CRA in TFOS) – New wind proponents – Other new entrants (geothermal)

• No assessment of net

benefit (approach correctly adopted by AEMC in TFOS review)

Raise or lower?

RTA

Submission lacks any substantiating argument or facts AER NGF R40s Hydro Tas Experienced market participants who recognise the risks of market intervention. Oppose regulation on market principles. Energy Response LMS and Infratil (PPA) Businesses exposed to FCAS due to failure to manage market risks. Support regulation as cheap means of protection from competition Aurora Energy & its 100% subsidiary AETV

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Cost and savings allocation

Savings Costs Production savings Aurora/AETV FCAS Costs Hydro Tasmania New entrant retailers Consumers

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Summary

• April ’08 – Issues

– New generation required – Trade off of supply side costs and benefits – R6/L6 availability and costs central to equation

• Dec ’08 – TFOS Determination recommends

‘package’ of measures required to ensure net benefit

– Slightly tighter FOS – Contingency size limit – Obligation for new entrant to bring new R6/L6 to market

• Apr ’09 – high prices expose AETV’s

commercial choice not to provide or procure FCAS – inconsistent with TFOS submissions

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Where to from here?

• OTTER announce intent to declare Hydro Tasmania

raise contingency FCAS as declared service.

• April 08 issues exacerbated and remain unaddressed
• How does declaration of a single participant address

the key FCAS issues?

• What are the market and competition risks created by

such a declaration?