Posted: Feb. 25th 2019

Australia Energy Market Report – December 2018

Market Changes in December 2018:  

Demand increased in all states in December as summer conditions caused some very high demand days.  The largest increase occurred in the southern part of the NEM, where VIC and SA experienced concurrent days of +35 degrees on five occasions.

QLD also experienced a heat wave in mid-December that caused volatility.  However, average prices in all states came down due to high baseload availability and the impact of the post-Christmas period.

Despite this, price volatility increased with several +$10,000 spikes.  In QLD, there was one instance where prices went to the market price cap and demand response was used by AEMO to manage conditions, as demand was nearing capacity.  In VIC and SA, spikes of +$10,000 occurred on high demand days when wind was low to moderate.

Electricity Trading Summary for the Week Ending 31 December 2018: 

The market trended up in Calendar 2019 in most states.  NSW increased by 2.81% to $92.48, VIC went up by 3.15% to $102.47, QLD was up by 2.45% to $79.28 and SA decreased by 1.87% to $101.79.

There are a number of factors influencing the increase in electricity pricing.  The hot, dry summer has resulted in increased energy usage and demand.  There are also concerns regarding a lack of rainfall which can affect the level of electricity produced by hydro power sources.  With a shortfall in electricity production from hydro, the generators may have to rely on gas fired generation.  Due to high gas prices in Australia, this will drive rates up.

The continuing volatility and instability due to a rapid changing market puts pressure on generators and suppliers to increase pricing.  It is hoped that pricing comes down in the cooler months when energy usage reduces.

Current News on the Electricity Market: 

In mid-December 2018, sever thunderstorms caused a loss of power throughout the NSW central coast to approximately 28,000 homes.  Power outages also caused trains to stop running throughout the greater Sydney area.

The Australian Energy Market Commission released its 2018 Residential Electricity Price Trends Review, identifying key pricing trends for homes in Queensland, NSW, Victoria and Tasmania to 2021.  The report finds that wholesale costs are predicted to fall due to existing and planning new generation and battery storage, with forecasted electricity demand flat.  The cost reduction is expected to be larger than any increase in network costs and associated environmental costs.

Based on current regulatory decisions by the AER and ERA, network costs are expected to increase in NSW, ACT, Victoria, South Australia, Tasmania and Western Australia by 2020-21.  Network costs are expected to decrease in South East Queensland and remain stable in the Northern Territory.  In 2017-18, network charges represented from 30-51 percent of a typical residential electricity bill.

A new regulation has highlighted the thousands of offers electricity retailers make to new customers, mostly through commercial comparison sites.  These sites typically do not include the best possible offers, funneling consumers into higher-cost plans in exchange for fees from energy companies.

From January 1, companies selling electricity in New South Wales, South East Queensland and South Australia are required to publish all of the offers they make to new customers on the Australian Regulator’s Energy Made Easy price comparison website.  Retailors in Victoria are subject to Victorian regulations.

Renewable Market Update: 

A project to storage energy generated from biogases in silicon will be piloted in SA.  Partly funded by SA’s Renewable Technology Fund, the first commercial pilot will be used in Glenelg Wastewater Treatment Plant.

The Bureau of Meteorology and CSIRO report, State of Climate 2018 was released.  Among its findings, the report highlights that Australia’s climate has warmed by just over 1 degree since 1910, leading to an increase in the frequency of extreme heat events.

According to the AEMC’s 2018 Residential Electricity Price Trends Report, 9732 MW of new generation and battery storage in expected to enter the NEM in the coming 3 years, with the major contributor being new large-scale solar and wind generation.  New thermal generation and upgraded existing generators will also contribution to total new generation.

Gas Market Update: 

Elevated temperatures across the east coast continued into December leading to higher gas-fired generation.  Coupled with the QLD LNG projects operating at high utilization, gas pool prices continued to trade at elevated levels with the average Victorian price setting at $10.14/GJ.

The December price settled at the highest of 2018 and was 51% higher than December 2017.

Iona Underground Storage also operated at high usage with participants taking the opportunity to pack storage position as mass market demand rolls off.  Despite higher pool prices, Iona increased by 3.2 PJ to end the year at 15.2PJ, 2.4PJ lower than the start of 2018.



Australia Energy Market Report – December 2018