Oliver is one of our staff members Justin’s’ eldest 10-year-old son. A couple of years ago he was diagnosed with Autism Spectrum Disorder (ASD). He is a very smart, intelligent and loving boy and is known as a High Functioning Autistic, which you may have heard of in the past called Asperger’s syndrome.
Autism affects roughly 1 in 59 children and 1 in 37 boys. Children like Oliver find it hard to fit into the standard schooling system often requiring extra resources that are not always available. Luckily for Oliver, he has recently been accepted to attend the Autism Queensland School on a part time basis. Oliver will split half his time between his regular school and Autism Queensland School to give him all the tools in life outside of pure academics. Each class only has 6 children in it of a similar age and skill set to allow for a more tailored and effective educational experience. Edge would like to wish Oliver and his family all the best for his first day at Autism Queensland School.
Children like Oliver benefit from these services due to generous donations by the public. You too can assist in making a difference in these children’s lives by donating here https://autismqld.com.au/page/make-a-donation.
Edge focuses on ensuring the information we hold about your business’s energy costs and consumption is safe and secure. We also like to ensure that information is only provided to parties within your business, that are authorised to have access to that information. A challenge for Edge has been to maintain this security requirement through the use of Edge Live, whilst also ensuring it widely accessible by staff within your organisation as possible.
We have recently added some features to Edge Live that can provide you comfort when it comes to providing the right people with access to the right information within your organisation.
As an Edge Customer, you are provided your own unique ‘tenant’ within the Edge Live system. Some of our larger customers have multiple tenants, reflecting the organisation of their various business units. Each user is assigned access to one or more tenants. Data is held securely within the scope of a tenant and cannot be viewed unless a user has access to that tenant.
We have recently extended Edge Live to support a hierarchy of tenants. A particular tenant may have a parent tenant, or multiple child tenants. This hierarchy can be set up in Edge Live to reflect the organisation of your business. This means that a user can easily view data across multiple areas of your business, without having to switch between tenants.
Edge Live data (e.g. sites, invoices, reports, and contracts) is associated to particular groups. A tenant can have multiple groups. While users generally have access to all groups within a tenant, they can be restricted to only view the data belonging to one or more groups.
Not only do these features ensure the security of your information, it also helps us to effectively communicate only relevant data and information with members within your organisation. For example, on-site personnel may be restricted to reports, meter data, or dashboards associated with the particular site at which they work. Finance personnel may only have access to accrual and invoice reconciliation dashboards and your invoices.
By defining the type of information your staff can access via Edge Live, we can be confident that the information that we provide is relevant to the role they perform, thus giving them the information they need to make informed decisions.
Speak to your Portfolio Manager today about how we can configure your Edge Live tenant and its groups to maximise Edge Live’s userability within your organisation.
The Energy Security Board (ESB) released a new version of the proposed National Energy Guarantee (NEG) following feedback from a variety of interested parties. The ‘Draft Detailed Design of the National Energy Gurantee: Consultation Paper’was released 15 June 2018. Also included was a paper by the Federal Government setting out the proposal for key areas of legislation which will be set at a Federal level. To support the papers a number of technical working papers were released to explore key aspects of the NEG.
The new version remains focused on reducing emissions in line with Australia’s commitment under the Paris Agreement and ensuring reliability. In addition to these key priorities, a third priority was to ensure that electricity remained affordable going into the future.
In regard to emissions, the largest change from the original version is a voluntary decoupling of the electricity contract written and the emissions levels. A retailer will still need to purchase contracts to keep emissions below a set threshold, however the emissions will no longer have to come from the same contracts that they have purchased electricity from. In theory, a retailer can purchase the output of a coal fired power station however not take on the emissions. That retailer would then be exposed to the emissions at the spot market which could be met through a separate contract with a renewable generator for only the emissions component.
In practical terms, the current proposed NEG is for all intents and purposes a cap-and-trade scheme. A retailer will be provided a cap on emissions. If they exceed that cap, they will have to purchase emissions credits from a low emitting source. If they are under the cap, they can sell their over commitment to other retailers. There will be the option to carry forward a limited amount of a previous compliance year’s over-achievement, for use in a later compliance year.
Reliability will come from AEMO’s forecast of supply adequacy. Each year, AEMO estimates supply adequacy for the following 10 years. If a material gap is identified, AEMO will notify liable entities (likely to be retailers and large users 5MW or greater) that there may be a reliability obligation. If the material gap is still present 1 year out, AEMO may start procuring demand response or additional generation. At this stage all liable entities must disclose their contract position to the AER. If a period with a projected reserve gap has demand above a one-in-two-year event, AER will monitor compliance against the reliability target. Each liable entity must demonstrate that they have procured sufficient qualifying contracts (such as fixed price contracts of a suitable nature, demand side management, or firm generation) to cover their position during peak demand. It is proposed that a reliability gap will also trigger liquidity obligations for vertically integrated retailers to make financial contracts available to the market via the central exchange. Furthermore, it is proposed that large users may transfer their reliability obligation to their retailer, but will have to ensure that their Electricity Sale Agreement addresses this. If a liable entity has insufficient qualifying contracts, penalties may apply. The level of penalties is undecided however a suggestion has been made to link to AEMO’s cost of procuring responses.
As with anything, the cost of both the emissions and the reliability components
of the NEG is likely to be passed on to consumers.
Modelling done to justify the introduction of the NEG assumes that the certainty brought by the NEG will reduce the risk premium of new power stations and cause more trading to occur. Both these factors would likely bring down energy prices (compared to business as usual). However, if the market does not see this as a much more stable investment environment, a reduction in wholesale prices is unlikely to materialise.
The NEG will expose consumers to both emissions and reliability costs. In terms of the emissions component, for most consumers this will be another pass-through cost added to their bills. Any trigger of a reliability gap could drive the cost of acquiring qualifying contracts (such as financial contracts) much higher in the relevant period. Whilst the liquidity obligation aims to counter this, we have concerns around how this will be enforced. It is critical to protecting against extortionate costs under this component. The current version of the NEG discusses a number of ways of addressing this and the ESB recommends creating a new repository for contracts as well as a market liquidity obligation. The repository would be able to report on all over-the-counter (non-exchange traded) products including volume and price. This may only be reported in aggregate for the market instead of identifying the parties to the deal. Very little detail is provided regarding the register. The market liquidity obligation would require large vertically integrated retailers to make contracts available where there is a reliability gap. The retailers must offer to buy and sell contracts at a maximum spread so that prices can’t be set too high for buyers and too low for sellers. As with the repository there are few actual details on the liquidity obligation.
The emissions component has the potential to be highly variable from retailer to retailer. Each retailer will look at the generation they have produced and what emissions contracts they have purchased. If they haven’t purchased sufficient contracts for their entire load, they will assume to have procured the rest at spot. The spot emissions is calculated as the total emissions intensity of all generation less the generation volume already contracted in the emissions registry. A retailer or consumer is unlikely to know in advance how much will be forward sold and therefore the emissions costs can be highly uncertain. The retailer is likely to pass through this cost directly to the consumers, who ultimately wears the risk.
It is critical for all consumers who are agreeing electricity contracts with their retailers to understand how things such as the NEG are managed by their retailer and passed through. For the more sophisticated purchasers there is an opportunity to proactively manage some of this exposure themselves.
The Federal Government will continue to make laws regarding three key areas of the NEG. The key areas are:
Setting emissions targets
Treatment of emissions-intensive trade-exposed industries; and
The role of external offsets
There is a separate paper exploring these issues. The emissions targets are proposed to be expressed in tonnes of CO2-e/MWh. The target will be to meet a 26% reduction on 2005 levels by 2030. This is the target which was set at the Paris Agreement. There has been some criticism that if electricity only meets their proportion of the reduction, all industries will have to make the same reductions. The criticism is that it is much more economical to meet a greater share of the obligation from the electricity sector where alternatives to carbon emissions are cheaper than in other sectors.
The Federal Government is proposing to keep emissions-intensive trade-exposed industries exempt from the NEG obligations. This is to maintain international competitiveness.
This means that the rest of the electricity market will be required to purchase
additional volume to make up for the exemptions.
The paper also discusses the role of external offsets including the Australian Carbon Credit Units (ACCU) which are currently part of the Federal Government’s safeguard mechanism. They have also opened up to the possibility of allowing a limited number of overseas certificates be used for surrender.
There are still some large outstanding issues with both the ESB and the Federal Government’s papers. The ESB is pushing ahead to get a decision from the COAG Energy Council in August 2018. To facilitate this date, the turn-around time for comments are limited. The Federal Government is seeking comments by Friday 6 July 2018 and the ESB wants their comments by 13 July 2018. The commencement date of the NEG is due to be 1 July 2020.
If you would like to understand more about the NEG and the potential impact it may have on your energy portfolio moving forward, please visit edge2020.com.au or alternatively you can call one of our team directly on 07 3905 9220 or on 1800 EDGE ENERGY.
Melitta has spent over a decade working in the energy sector in roles including Retail Pricing Analyst, Account Manager and Customer Relationship Manager. As Portfolio Manager at Edge, she focuses on building and maintaining strong relationships with clients and key stakeholders. She’s unwavering in her commitment to using the Edge’s efficiencies and insights to deliver solutions that save clients time and money.
What is the best piece of advice you have ever received?
It’s not necessarily advice, but a quote from Winston Churchill has stuck with me over the years. “Continuous effort – not strength or intelligence – is the key to unlocking our potential”.
It is the little things that we do each day that add up to big changes.
Name a place you have never been to and would like to visit. Why?
I would really love to travel through South America. The culture, the food and the history all entice me to travel there. Highlights would certainly be trekking through the Amazon and seeing Machu Picchu.
Who or What inspires you?
Communities and social enterprises that are working for the improvement of the environment and society inspire me. I have made many changes in my life that impact both myself and my daughter and I hope to encourage others to make changes by having conversations and sharing my personal experiences. If we all could make one positive change towards the environment every day, imagine the global impact. The actions of individuals can have far-reaching effects.
What is one of the biggest challenges facing energy customers today?
In such a volatile energy market, reducing energy costs is a serious challenge for businesses. With pricing in both the gas and electricity markets doubling in recent years, costs that would have generally been low percentage OPEX are now being highlighted by management as critical areas to review.
Energy efficiencies, renewables, Power Purchase Agreements and on-site generation (including solar PV and battery storage) all tend to be at the forefront of conversations with clients and prospective clients as they try to navigate the best path forward for reducing energy costs for their businesses.
What does a typical day look like for you at Edge?
On any given day I will have a number of scheduled client deliverables which could include weekly and monthly market reporting, site specific accruals and reconciliation reporting. Beyond this, I work through queries from my clients that may include contract reviews, data analysis or third-party communication with Network Providers and Retailers.
For the 50,342 animals that arrived at the RSPCA Queensland centre over the past year, it was a second chance at life. One of those lives belonged to 3 year old ‘Roger’, a domestic short hair ginger tabby cat. Roger had been surrendered by a family that no longer wanted him and after spending 4 months in the Wacol RSPCA shelter, was re homed. Roger was given another chance of life after being adopted by Kristy McGrath, our Head of Operations & Client Delivery, at the recent RSPCA Pop Up Adoption Day in South Brisbane. Already having two dogs and two horses, adopting Roger from the RSPCA was an easy decision when it came to adding to her animal family.
Edge has always been a big supporter of the animal community and charity foundations. And whilst choosing the right pet is fun and exciting, it takes time, planning and lots of research. To make the process easier, the RSPCA has introduced Adopt a Pet, a national website that lets you view some of the animals waiting to be adopted at RSPCA locations across Australia.
Join Edge in giving these animals another chance of life. Visit their website, and give a dog, puppy, cat or kitten a second chance to find their loving home!
By Thomas Dargue, Edge Manager of Markets & Advisory
In this summer edition of the market update we look at some of the issues which is causing price differences in wholesale prices across the east coast of Australia. Since the start of summer, the divide has mainly been across the Murray river with QLD and NSW to the north and VIC, SA and TAS sitting to the South.
The summer started in December with modest spot prices across all the regions. The region with the highest price was TAS at $90.96/MWh with the lowest price being QLD at $76.56/MWh. The interconnectedness of the market means that prices in NSW was similar to QLD while SA and VIC were closer to TAS. The prices in NSW started deviating from the southern market as the interconnector with VIC became increasingly constrained. Throughout January there were large price spikes in SA and VIC increasing the average price south of the Murray. The constrained interconnector meant that the prices never travel north and both QLD and NSW had modest prices.
Figure 1 Average NEM spot prices.
Tasmania had similar prices throughout the three months however these seem to be too high for the State Liberal Government. There is an election in Tasmania 3 March 2018 and one of the policies put forward by the State Liberal Government would be a split from the NEM. TAS would still be physically connected through Basslink however would not be subject to the price setting mechanism set out for the NEM. The State Liberal Party is expecting this to result in lower wholesale prices for TAS.
Prices for summer to date has been higher in SA than any other state however there haven’t been any black outs. This is in part due to the operation of a new 100 MW battery installed by Tesla which provides energy during peak times as well as support for frequency. With an election in SA 17 March 2018 the incumbent State Labor party made its own electricity policy announcement. It would seek to further partner with Tesla to install 50,000 rooftop solar panels and batteries. When combined this would create a virtual 250 MW power station.
The Energy Security Board (ESB) realised its Draft Design Consultation Paper on the National Energy Guarantee (NEG). The NEG seek to find a balance between affordability, reliability and carbon reduction which could be politically acceptable. With the number of schemes already rejected by the Federal Government, the ESB has managed to come up with a scheme which could get bi-partisan support. At this stage there is quiet optimism however there are large concerns over the effect on contracting going forward. The ESB is looking for written submissions by 8 March 2018 and have the final design by the second half of 2018.
The forward prices generally reduced for 2019 as spot prices were less volatile than seen in previous years over summer. The exception was SA where there is still uncertainty around security of supply.
Table 1: ASX prices for Calendar Year 2019
NSW
QLD
SA
VIC
1 DEC 2017
80.75
68.11
92.94
86.55
28 FEB 2018
76.38
64.03
94.36
82.90
The forward prices were lowest in QLD where we expect a large amount of new renewable generation to be built. Concerns over sufficient supply in other regions kept prices higher.
Despite higher forward prices and the highest average spot prices in the NEM, a hydrogen electrolyser will be built in Port Lincoln, South Australia. This will produce hydrogen using excess wind and solar (i.e. when prices are low) to produce hydrogen both to power a 10 MW gas turbine but also for export purposes. By using power intermittently, it is able to ramp up during low prices and not run during high spot prices which will also stabilise the grid and allow more wind generation to be dispatched in the region (wind in SA is currently being curtailed by AEMO to avoid frequency issues). It seems counterintuitive to put an energy intensive industry in SA however for very flexible consumption of electricity who are able to take advantage of low, or even negative, spot prices there is opportunity in the state.
If you would like to discuss the electricity market outlook and potential impact to your electricity portfolio, please contact Thomas on 07 3905 9226 or on 1800 EDGE ENERGY.
The ACCC released the second interim report into gas supply arrangements in December 2017. In the initial report (released September 2017) it was reported that there would be shortages in gas supply available to east coast consumers in 2018. The report found that buyers of gas were receiving offers from a reduced number of suppliers and that prices offered were above the ACCC’s benchmark prices. It was also noted in the report the lack of participation from the QLD LNG producers in the domestic market. This reported lack of participation from the LNG producers prompted the Federal Government to act. The result was the creation of a Heads of Agreement with the LNG producers which would see additional gas allocated to the domestic market. According to the second Interim Report (released in December 2017), since September 2017 the QLD LNG producers contracted 42 PJ’s of gas under long-term supply agreements to domestic buyers for supply in 2018. The majority of this gas was sold to aggregators and retailers. The ACCC’s forecast for the balance of gas was also updated in the second interim Report and resulted in an improved balance of 75 PJ’s. The change in balance has been driven by a 12 PJ increase in supply and the lower demand from the LNG producers (63 PJ). Whilst on face value the market has gone from deficit to surplus, the balance remains tight and subject to gas producers meeting forecasts.
Table 1. Gas Balance
September Expected Domestic Demand Scenario (PJ)
December Expected Domestic Demand Scenario (PJ)
Supply
1,901
1,913
Domestic demand
642
642
LNG demand
1,314
1,251
Projected Balance
-55
20
Source: ACC Gas Inquiry Report – Second Interim
According to the report, there continues to be a shortage of production in the southern states to meet demand (SA, NSW, ACT, VIC and TAS). As a result, these states will continue to rely on gas transported from QLD. Additional costs to transport gas from QLD to VIC and SA are currently between $2/GJ and $4/GJ. Transporting gas south from QLD is not only expensive but due to limited firm capacity in key pipelines is not always feasible. Firm capacity in these key pipelines is predominately booked by the major retailers. It was examined by the ACCC if the major retailers were making spare capacity available to other users on major pipelines through secondary trading. It was found that on the major pipelines this was not the case however, there was some evidence to suggest this may have been occurring on the less critical pipelines. Since the ACCC investigation it has been observed that the retailers have increased the availability of spare capacity to other pipelines participants improving competition.
FIRM CAPACITY – The amount of transmission guaranteed to be available to the shipper – up to MDQ & MHQ every day
AS AVAILABLE CAPACITY – This capacity is typically spare contracted capacity that is offered on the secondary market. As can be disrupted or delayed, it is not necessarily guaranteed.
The ACCC expects that transportation costs will start to come down as regulatory reforms begin to take effect.
Domestic prices to large C&I customers were around $16/GJ in early 2017 and even higher for smaller business customers. Since July 2017, it was reported that prices between $8/GJ and $12/GJ were achieved by large C&I customers.
GAS PRICES
Across each of the east coast trading hubs January average prices were higher than the Q417 average.
Table 2. Hub Prices
Adelaide price ($/GJ)
Brisbane price ($/GJ)
Sydney price ($/GJ)
Melbourne price ($/GJ)
Q417
$7.14
$7.68
$7.12
$6.20
JAN18
$ 8.10
$8.16
$9.71
$8.64
FEB18
$9.29
$7.33
$9.71
$8.67
Source: AEMO
Recent news
Four projects have received funding from the South Australian Plan for Accelerating Exploration (PACE) gas program’s second round. The program was designed as part of a suite of measures to increase investment in local gas production and to ease price pressure in South Australia. The four projects to receive funding were:
$6.89 million for the Santos-Beach Cooper Basin project to deploy a heat-energy recovery system to offset natural gas used to run the Moomba petroleum processing plant
$5.26 million for the Senex Cooper Basin Gemba exploration/appraisal project
$6.89 million for Beach /Cooper Energy’s Dombey project in the Otway Basin
$4.95 million to the Rawson/Vintage Nangwarry project in the Otway Basin
Under the program, gas extracted through the PACE program must first be offered to local electricity generators, enhancing the affordability of supply. Whether the cheaper gas is passed onto end customers by the gas generators is more difficult to say.
Moving north to QLD, Senex’s 100% owned Western Surat Gas Project recently recorded a significant milestone, which was an all-in well cost of $1.2 million. The strong results have promoted Senex’s reputation in the market and has encouraged Project Atlas, which is another Surat Basin project expected to bring first gas in 2019, to be sold to the domestic market.
On 12 December Independent Scientific Inquiry into Hydraulic of Onshore Unconventional Reservoirs in the Northern Territory releases its draft final report. The overall conclusion of the report was:
“The overall conclusion of the Report is that risk is inherent in all development and that an onshore shale gas industry is no exception. However, if the recommendations made in this draft Report are adopted and implemented in full, those risks may be mitigated or reduced – and in many cases eliminated altogether – to acceptable levels having regard to the totality of the evidence.”
Since the release of the draft final report the panel has engaged with the Northern Territory community, Government, Industry, environmental groups, and other relevant stakeholders about the content of the report. This is the last opportunity for the Territorians to express their views on the inquiry.
The final round of regional consultations concluded mid-February and the final day for submissions due to the panel is 25 February 2018. At this stage the panel has committed to providing the Final Report to the government in March 2018.
If you would like to know more about what is happening in the gas market and how your business may be affected, please call Edge on 07 3905 9220 or contact your Edge Portfolio Manager.
We are seeing a significant increase in large users exploring renewable generation off-take opportunities. This includes behind the meter build-own-operate or power purchase agreements (PPAs), and offsite commercial arrangements otherwise referred to as corporate PPAs, synthetic PPAs, or simply contracts for difference (CFDs). The reasons are mixed. Some are looking to meet future corporate emissions targets. Others are aiming to achieve lower energy costs. Some are looking to further diversify procurement strategies. All are fearful of missing out on the next big opportunity.
Edge are actively involved in taking large electricity users through the process of assessing, and where feasible, entering into arrangements with renewable generation. We provide a range of services covering everything from practical energy market expertise and advice through to strategy development and implementation and even transaction support. This is particularly helpful where the renewable generation forms part of a new or existing electricity sales agreement as negotiating terms can otherwise be difficult. Large mining, transport, agricultural and manufacturing clients are amongst those leading the way. Elsewhere in the market, we have all seen the announcements from users such as Sunmetals, Telstra, Onesteel, Sunshine Coast Council, Universities and smaller aggregated buying groups (to name a few). The list is growing rapidly.
Looking beyond the consulting jargon, the diverging spectrum of price forecasting curves, and the race for the next Renew Economy or AFR headline, are these deals really the right thing for your business? Absolutely, they can be. But they may also not be. It is critical that you understand the current electricity market including renewable generation, and the potential financial benefits and costs these opportunities can bring to your business. Edge can work with you to identify and understand these critical components to ensure you take the right direction when considering renewable generation in your portfolio. It is important to consider how adding renewable generation will affect your current position including your electricity contract.
You’re shown the aggregate market price of electricity and LGCs today and a comparable renewable generation blended off-take price. Depending on the region and generation project, you’re looking at $130 to $150/MWh on the market against $60 to $70/MWh for renewable generation. The savings appear staggering. But some things may be too good to be true and the devil certainly is in the detail.
Term
These opportunities are long term propositions, typically seven to twelve years though can be as long as twenty years or as short as three years. A lot can happen in this time and only one thing is for certain, things will change. Supply and demand profiles will change. Project and market pricing will change. Governments and their priorities and policies will change. Depending on your corporation’s view on being quarantined (for better or worse) from these changes, you may lean towards all longer term, a blend of longer and shorter term, or no longer term contracting.
Project Risk
Renewable project developers are everywhere. Long haul business class cabins are filled with them. Virtual office spaces have never had it so good. But not all have the experience in developing projects in Australia, therefore lacking experience with NEM based network service providers (NSPs), Australian government and council bodies, EPC contractors, and the like. Go to any NSP public forum and you’ll see first-hand the challenges that face NSPs around renewable project connections. Be it sheer volumes of enquiries, network or timing constraints, project risk is rife. An off-take start date can quite literally make the difference between a business case supporting the opportunity or not. Partnering with a credible counterparty and / or managing project risk is critical.
Price Forecasting
The harsh reality is, we spent 2017 being privy to too much price forecasting that existed simply to suit the narrative. You can make generation opportunity in or out of the money with a suitable forecast curve. Price forecasting plays a significant role in assessing the optimal renewable generation project and the potential value and risk that sits within in it. Projecting future spot prices is a quantitative minefield. There are a few well known modelling tools utilised by equally well-known consultants to generate spot price forecasts in the NEM. Edge also generates in house spot price forecasting. Whomever you utilise to produce future price curves, challenge the inputs and demand shape on the outputs. With significant volumes of renewable generation set to enter the NEM and aging fossil fuel plant preparing to exit, we are moving into a new dynamic in the NEM. The characteristics of the supply curve are changing considerably. As storage technology advances, the behaviour of intermittent generation too will advance. As users are forced to explore demand side management (DSM) opportunities, the demand profile will also change. Five-minute trading intervals will change supply and demand behaviour. To adequately assess any renewable generation or off-take opportunity it’s about the expected spot outcome and the sensitivity around this result, measured in each trading interval. Having a high and low case based around randomly selected forced outages doesn’t even begin to address the uncertainty in the electricity market. Even if a project is priced firm to a flat mega-watt (MW) profile, understanding the potential impact to the shape the merits of the firm pricing against other procurement strategies.
Regulatory Risk
Either we are getting older and more in tune with the volatile nature of politics, or politics has taken regulatory racket ball to the whole next level. Investment in new generation in the NEM has previously stalled due to policy uncertainty. The more recent run of high electricity prices is testament to this. Just when the market does what markets are supposed to do and responds to price drivers with new entrants and technological advancements, our policy makers inject more uncertainty in the form of a National Energy Guarantee (NEG). The end game of the NEG is noble. To promote that we meet our international emissions commitments, whilst ensuring our electricity is reliable, secure, and of course affordable. Achieving this whilst not forcing any politician to back down from previously stated principals. The practical application of the proposed design however is a very long way from readiness, and in its current form is alarmingly at risk of causing segregation and market power that can only result in higher energy prices. Meanwhile the Government has cast a dark cloud over the application of the Renewable Energy Act, and specifically the ability for renewable energy projects to receive certificates if they are commissioned after the target date of 2020. It’s a risk that not even all the developers are aware of. As an off-taker you must make it your priority to be across it and manage it.
Shape Risk and Firming
Renewable generation is intermittent. The question remains; what happens when the sun isn’t shining, or the wind isn’t blowing? Storage solutions are on the rise, but the dispatch limitations and costs still make it very challenging to get the business case across the line. Clients who are looking to integrate renewable generation in their portfolio must be aware of the risks associated with shape risk. This includes managing their shape with the overall shape of their hedge portfolio (tenure, type, etc.) and spot risk. How can one best introduce intermittent generation (or intermittent offtake) into a portfolio, and what is the most efficient and effective means to manage this risk. Firming products are one of the most sought-after products in the NEM today. Physical solutions have their role in mitigating some shape risk and include DSM, onsite generation, and storage solutions. Financial solutions also stand to play a significant role, including both traditional electricity derivatives and weather derivatives. Securing firming products is undeniably challenging. Hydro and gas generators have five-minute settlement to consider. Furthermore, gas generators need to clear long-term fuel supply hurdles. Coal generators may not be so eager to firm a product that will ultimately stand as the perfect competitor to their own offtake. Edge work closely with clients to understand shape risk and firming solutions. We actively engage with the wholesale market to seek and deliver solutions that work best for each individual client.
Settlement
Settlement of third party PPAs need not be complicated. In fact, it need not be independent of your electricity invoices. Edge has negotiated PPAs that settle directly between the project and off-taker. We have also negotiated settlement services with retailers to ensure consumers benefit from longer term renewable generation whilst still only receiving monthly invoices form their retailers. Understanding the cash flow implications and adequately addressing credit counterparty risk is all critical but certainly manageable.
Accounting
There are accounting implications as to how these arrangements are structured. Whilst we are across these due to our involvement in large offtake deals, we are not an accounting firm. We would strongly recommend that any consumer exploring these opportunities ensures their accounting advisors are across implications such as implied lease agreements, impacts to the balance sheet, and / or derivative accounting.
Whatever stage your organisation is at in considering Renewable Energy as a part of your electricity portfolio, Edge can help. If you would like to learn more about Edge, please visit edge2020.com.au or alternatively you can call one of our team directly on 07 3905 9220 or on 1800 EDGE ENERGY.
In addition to Snapshot functionality which provides you with information relating to your current and forecast spend and consumption, you can now access your Invoice Reconciliation and Accrual outcomes instantly within Edge Live.
Your Edge Portfolio Manager undertakes your Invoice Reconciliation services the same business day that your final invoice is issued by your Retailer. From here, the payment advice and outcomes are published instantly on Edge Live. You will receive an email notification that the reconciliation outcome is available, with links through to the Invoice Reconciliation Report. Providing you with details of the invoice outcome, broken down to the detailed levels of energy, network, markets and other costs.
Figure 1 Invoice reconciliation outcome in detail.
Viewing the results is easier and more efficient than ever before. View them in Edge Live directly from your web browser rather than having to open excel and find the information relevant to you. Though if you need to, the data can be exported to excel easily with the click of a button within Edge Live.
You will be provided with the invoice reconciliation outcomes, advice on whether to pay or not to pay and any additional personalised comments from your Portfolio Manager relating to your portfolio and individual sites.
Figure 2 Invoice reconciliation notification at an invoice level.
Your monthly Accruals reporting is also available via the online portal. Again, providing an easy and efficient way to advise your finance teams what the expected electricity spend of your portfolio will be as you near the end of each month.
And don’t forget about the existing Dashboard module. Filter by site and drill-down on specific time-frames of your electricity portfolio so that you can get a clearer view of consumption and costs.
Your Portfolio Manager will be in touch soon to discuss these new features with you, and ensure you have access to Edge Live as well as answer any questions you may have.
We have some exciting features planned for the remainder of 2018. If you have any feedback or suggestions on how Edge Live can be of more value to your business please do not hesitate to let us know, and we will do our best to incorporate this into our Edge Live development roadmap.
To learn more about Edge Live functionality click here, or speak with your Edge Portfolio Manager.
The Children’s Hospital Foundation helps sick kids today and tomorrow by funding life-saving medical research, investing in vital new equipment, and providing comfort, entertainment, support and care for children and their families.
To support this great charity, Edge will be attending The Coffee Club Telethon Ball for the 2nd year running on the 18th of this month.
Unfortunately this event sold out quickly, however there’s a lot you can do to support a child with an injury, serious illness or life threatening disease. You can donate money to help save precious young lives. Donate your time to make a difference at our children’s hospital. Or raise funds for vital research and equipment, spread smiles and support families through difficult times.
You can make a difference to sick kids and their families today and tomorrow. To find out more visit the Children’s Hospital Foundation site at www.childrens.org.au and be sure to tune into Channel 9, Saturday 19 November for the annual Telethon.
Meet Oliver King!
