Posted: Feb. 25th 2019

Australia Energy Market Report – January 2019


Market Changes in January 2019: 

Prices soar due to tight supply and high demand.  The wholesale electricity prices climbed to the market cap of $14,500 per megawatt hour on Thursday, 24 January 2019 in the afternoon and into the evening in Victoria and $13,481 in SA.  NSW prices also topped $10,691/MWh.  Maximum prices of $14,500/MWh persisted for several hours later on Thursday, 24 January 2019 (afternoon) in Victoria and South Australia, and again in Victoria on Friday, 25 January 2019.

Both South Australia and Victoria were facing load shedding of up to 40MW, on top of a 700 MW deficit forecast.  The issue was compounded by the fact that two coal generators had undergone shutdown.  A generator had been taken offline unexpectedly at AGL Energy’s Loy Yang A coal-fired power station as the result of a tube lead that could take days to fix.  Energy Australia’s Yalloum coal-fired power station was also running one generator short, after one of the plant’s four units were taken out of the mix for scheduled maintenance.

AEMO is also considering paying energy-intensive industries such as aluminum smelters to power down during peak demand hours to avoid a blackout.

Electricity Trading Summary for the Week Ending 4 February 2019: 

The market trended slightly downward in Calendar 2019 in all states except South Australia.  NSW decreased by 1.40% to $95.57, VIC went down by 0.58% to $113.67, QLD was down by 3.03% to $78.10 and SA increased by 0.11% to $111.58.

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 from 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.

Current News on Electricity Market: 

Victoria faced peaking demand from weather as Melbourne city peaked at 42.8C and weather records were high across the state, with Swan Hill baking in 47.5C heat due to which power was cut to more than 20,000 homes and businesses.  Victoria is currently importing 100MW from Tasmania and 350MW from New South Wales, which in turn is imported from Queensland.  If the interconnectors had a higher capacity, there would not be such a big problems because it is not so hot in New South Wales and Queensland.  South Australia is producing a lot of wind and is importing less than 100MW from Victoria.

Releasing its summer outlook last November, AEMO warned of a heightened risk of forced blackouts in both Victoria and South Australia, partly due to Bureau of Meteorology forecasts of drier conditions, warmer than average temperatures and extended heatwaves.  It was initially thought that Reliability and Emergency Reserve Trade (RERT) would be enough to maintain power system reliability and system security using reserve contracts during the blistering heatwave.  The RERT is essentially a form of ‘demand response’ where businesses sign up to a program where they can curtail their energy use at times of crisis and be paid for it.  However, demand proved to be even higher than expected and AEMO triggered the RERT as well as ordering the Alcoa smelter – which is the biggest energy user in Victoria – to power down.

Snowy Hydro fired upon its 300 MW Valley Power gas peaking plant to help ease the supply squeeze.  The mercury hit 47 degrees near Adelaide just before 2PM, while Port Augusta hit 49.5 degrees in the early afternoon and the SA government switched on its emergency diesel generators for the first time at AEMO’s request.  Reserves were also particularly thin in NSW after the sudden failure of a unit of AGL Energy’s ageing Liddell coal plant.

Renewable Market Update: 

  • Neoen’s Coleambally Solar Farm that commenced operation in November 2018 provides the highest energy output of any solar farm in Australia’s national electricity market (NEM).  Set on 500 hectares of country New South Wales is Neoen’s recently completed Coleambally Solar Farm.  With 567,800 polar PV panels set to produce more than 390,000MWh of renewable energy per annum, it’s currently producing the highest energy output of any solar far in the national electricity market (NEM) – enough to power 65,000 households.
  • 35 power stations were accredited with a combined capacity of 198 megawatts.  This includes the 110 Wemen Solar Farm in Victoria.
  • Darlington Point Solar Farm in New South Wales (275 megawatts) signed a power purchase agreement.  2018 was a record year with more than 360 power stations accredited with a cumulative capacity of 3376 megawatts.

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Australia Energy Market Report – January 2019