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Demand shocks from the gas turbine fleet in Australia's National Electricity Market

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  • Paul Simshauser
  • Joel Gilmore

Abstract

The long run task of Australian power system planners is to identify the structural adjustment pathway associated with retiring the National Electricity Market's (NEM) coal fleet. System planning models seek to do this at minimum cost subject to a reliability constraint. This involves the deployment of low-cost intermittent wind and solar resources with a mix of dispatchable, flexible 'firming' assets. Coal's energy-producing role is thus replaced by renewables, and firming duties by short duration batteries, intermediate duration pumped hydro and the last line of defence – gas turbines. As it turns out, the mix of firming assets is crucial. In this article, we examine 12 (anonymised) electricity market model forecasts in the post-coal era and find all have a surprisingly heavy reliance on gas turbines during critical event winter days. Using a dynamic partial equilibrium model of the east Australian gas market, we test the severity of what appear to be demand shocks from an emergent gas turbine fleet. The episodic demand shocks present as intractable, particularly if batteries and pumped hydro plant are 'underweight' within the aggregate generating portfolio. Adequate time is available for policymakers to respond in an orderly manner.
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Suggested Citation

  • Paul Simshauser & Joel Gilmore, 2024. "Demand shocks from the gas turbine fleet in Australia's National Electricity Market," Working Papers EPRG2414, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg2414
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    References listed on IDEAS

    as
    1. Simshauser, Paul & Nelson, Tim, 2015. "Australia’s coal seam gas boom and the LNG entry result," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), October.
    2. Hammerle, Mara & Burke, Paul J., 2022. "From natural gas to electric appliances: Energy use and emissions implications in Australian homes," Energy Economics, Elsevier, vol. 110(C).
    3. Flottmann, Jonty, 2024. "Australian energy policy decisions in the wake of the 2022 energy crisis," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 238-248.
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    5. Paul Simshauser & Tim Nelson, 2015. "The Australian east coast gas supply cliff," Economic Analysis and Policy, Elsevier, vol. 45(c), pages 69-88.
    6. Simshauser, Paul & Newbery, David, 2024. "Non-firm vs priority access: On the long run average and marginal costs of renewables in Australia," Energy Economics, Elsevier, vol. 136(C).
    7. Guittet, Mélanie & Capezzali, Massimiliano & Gaudard, Ludovic & Romerio, Franco & Vuille, François & Avellan, François, 2016. "Study of the drivers and asset management of pumped-storage power plants historical and geographical perspective," Energy, Elsevier, vol. 111(C), pages 560-579.
    8. Billimoria, Farhad & Adisa, Olumide & Gordon, Robert L., 2018. "The feasibility of cost-effective gas through network interconnectivity: Possibility or pipe dream?," Energy, Elsevier, vol. 165(PB), pages 1370-1379.
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    More about this item

    Keywords

    Gas markets; gas turbines; renewables; firming capacity;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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