If I should stay, I’ll only be in your way: coal and the transition

Events in Queensland on 25 May 2021 tested the resilience of the Queensland demand/supply balance with 3GW of coal generation suddenly coming offline due to a loss of generation at the Callide power station. According to AEMO’s preliminary report – released on 1 June 2021 – on the event, the outage also led to a cascading event of generator trips and network failures across a couple of sites some distance away from the Callide power station.

In this ‘Chart of the week’, we take a closer look at how the Queensland supply/demand stack evolved through the day via a time-of-day analysis. We also discuss what the impact of such events could mean for the market going forward. As the reliability of ageing coal assets across multiple regions are likely to contribute significantly to intraday volatility as they approach the end of their technical lives and are required to respond flexibly to market signals throughout the renewable transition.

As seen in Figure 1, the Queensland market experienced a normal start to the day on 25 May, with the region having a healthy stack of supply consisting of variable renewables as well as coal and gas units. As expected, Queensland was exporting to New South Wales (except for the morning peak) with prices looking benign with an average of $45.63 up until 2 PM (trading interval). Shortly after 1.30 PM, a loss of generation from unit C4 of Callide C led to a sudden trip of Callide units C3 and B2. Subsequently, it led to the tripping of a series of generators (Gladstone, Stanwell and Yarwun) at 2:06 PM.

From a supply gap perspective, this led to the reversing of Queensland exports, as well as a rapid ramp-up of gas and hydro in a bid to fill the unexpected supply gap in the market. Interestingly, the event also led to a curtailment of renewables of around 458 MW due to a shortage of system strength (which was provided by the lost central Queensland coal units). As frequency went below 48.6Hz, AEMO suspects that under-frequency load shedding took place and disconnected approximate 2,300 MW load in Queensland and 40 MW in NSW.

Given the significance of this event, a key question to ask then is: is this unprecedented in the state, and how does this compare to other forced outage events in recent history?

From a pricing perspective, the market outcomes on that day were unprecedented in Queensland. This was the first time in the state that the market has seen a sustained Market Price Cap (MPC) for three trading intervals. The closest Queensland had come to this level pricing in the last five years was in Jan 2017 high price event where the price reached $13,882.77, although this was due to generator pricing behaviour rather than any major system event.

Going forward, this event again highlights the potential role of gas as a transition fuel and potentially a reserve asset given the ramp-up of the technology through the rest of the day whilst other coal units were looking to reconnect. More importantly, this event highlights the need for stakeholders to examine the resilience (as opposed to reliability) of the NEM to potential failures of coal generation as the assets continue to age