Edge Insights – Issue 3

Edge Insights provides you with the latest news in the energy industry and showcases some of our services that help to ensure businesses maintain their optimal energy arrangements at all times. In this edition:

  • Large Scale Solar Conference
  • Procuring Your Energy
  • Staff Profile: Kristy McGrath
  • State of the Market: Q117 electricity prices overview
  • AEMO releases Gas statement of opportunity
  • Join ‘Team Jess’ & save lives

 

Large Scale Solar Conference – Sydney

The competitive round for large-scale solar photovoltaics held by ARENA saw enough successful projects to triple existing production of large-scale solar in Australia. Edge is proud to have assisted with several of these projects to bring them to financial close.

The large-scale solar technology is also a developing technology. To stay on top of the market and to discuss future challenges, we attended the recent Large Scale Solar Conference hosted by Informa in Sydney. The conference was well attended with representation from State Governments, ARENA, Clean Energy Finance Corporation, as well as new and existing developers and research institutions.

Large-scale solar has come a long way from being a collection of fixed plates at the fringe of the market (both literally and figuratively). It is now becoming a highly integrated and bankable technology. The cost of large-scale solar is now equivalent to wind in many regions and continued innovation is bringing the cost down even further.

There is further development in the integration of large-scale solar including mix use with wind and batteries, and installation with pump storage hydros to provide baseload technology. There is also an opportunity in further innovation for investment in renewable generation.

With financing costs being the most significant project consideration involved with large-scale solar, getting the right financing structure is critical. The most important lesson learned was early and genuine engagement will get a better result. This means engagement with community, Large Scale Solar Conference – Sydney land holders, transmission service providers, and consumers. Without genuine engagement, a project will rarely be successful.

Large-scale solar is now cost competitive with other technologies and with more innovation and improvements to come, it is one of the technologies of the future.

The conference was packed with useful presentations and perspectives. If you want to hear more about large-scale renewable energy, please contact us on 07 3232 1115.

PROCURING YOUR ENERGY

ACHIEVING LOWER COSTS & MITIGATING RISKS

Recent events show the National Electricity Market (NEM) is changing and becoming more volatile. Electricity prices have risen significantly and the market presents risks for consumers when it comes to managing their electricity supply and spend. At Edge, we develop tailored procurement strategies to achieve lower costs and mitigate risks for our customers. These strategies may include one or more of the following options.

Fixed Price, Fixed Term

The traditional way of purchasing electricity is to agree rates for peak/offpeak usage with a retailer for a defined term. The term would typically be for a year or two, but could be as short as a quarter or as long as five years.

This contract type is easy to manage and provides a known energy rate for the duration of the contract. All price uncertainty is worn by the retailer.

Pool price exposure

This pricing arrangement involves taking on exposure to the variable electricity spot price (pool price) which varies for each 30-minute period. Pool exposure may involve part or whole load exposure to spot prices. Generally, spot price exposure is recommended for loads that can respond to pricing changes. (Curtail usage during high prices and operate during low prices).

Spot price exposure comes with a considerable increase in risk, and variability in cash flows. For consumers who cannot hedge spot prices physically, we would only recommend incorporating spot exposure if done so in conjunction with a component of fixed pricing.

 

Hedging

All customer connection points settle in the market against the pool price. This pool price exposure can be hedged using relatively standard electricity derivative contracts.

Any mismatch between hedged quantities and actual load shape will result in pool exposure either through over-hedging (contracts greater than load in which case exposure is too low to pool prices) or under hedging (contracts less than load in which case exposure is too high to pool prices).

Progressive purchasing

Progressively agreeing fixed prices (as opposed to one price) is a method of diversifying timing (market) risk. This type of purchasing involves locking in a price for part of the electricity load in advance in incremental stages. It provides the benefit of improved price risk management and the flexibility to lock in prices quickly. Generally, the minimum energy block that retailers will allow progressive purchasing is 1MW though some retailers have started to offer this product in lower increments. Progressive pricing is most commonly conducted on a quarterly or calendar year basis.

What approach works for you?

There are many combinations of the above options that are possible, all of which will have differing risk profiles and price premiums. We can implement a strategy that includes one or more of these options that has been tailored to your energy portfolio by conducting a thorough analysis of your demand, usage and business drivers.

Let us show you how we can bring your electricity costs down.

STAFF PROFILE

Kristy McGrath

What is the best piece of advice you have ever received?

Find success in your failures.

Name a place you have never been to and would like to visit. Why?

The Bungle Bungles in Western Australia. The mystery and myths behind this place would make it an exciting place to visit.

Who or What inspires you?

My parents. They both worked hard to give us everything we needed to be happy and healthy. Their physical and mental determination provided excellent childhood memories and solid foundations for me to build on.

What is one of the biggest challenges facing energy customers today?

The energy industry is changing and announcements in the market can have a significant impact on the cost of electricity. Keeping up with the industry can be time consuming and requires expertise and constant monitoring. Often, the people responsible for managing business energy costs are time-poor and manage multiple utilities. We help these customers by making sense of the market and providing tailored advice for their portfolio.

What does a typical day look like for you at Edge?

I review client deliverables and work with the team to ensure they’re delivered on time. This could mean reviewing client reports, agreements or papers. I also manage the operations of the business. This includes negotiating contractual agreements through to auditing internal risk controls under our Quality Management System.

STATE OF THE MARKET
Q117 MARKET OVERVIEW

With warm weather and increased demand, the first quarter of a calendar year is generally high-priced compared to the rest of the year. Higher demand means more expensive generation is dispatched, contributing to a higher spot price.

Traders were not prepared for a high-priced quarter. With the exception of South Australia, all other states underestimated spot prices. This means all forward contracts for these states (excluding SA) for the first quarter were higher than the eventual spot prices.

Demand played a key part in the spot prices for most of the National Electricity Market (NEM). Gas compression in LNG fields and a warm summer has contributed to increasing demand in Queensland. The other states in the NEM also experienced elevated demand. Victoria was somewhat protected; not recording a single temperature above 40 degrees for Melbourne. Demand was already lower in Victoria due to an outage at the Portland smelter. Power was cut to parts of its plant in December 2016 causing the aluminium in more than 200 smelting pots to cool and solidify cutting production to one-third of capacity. The smelter still hasn’t recovered and the future capacity is currently uncertain.

In South Australia and New South Wales, the heatwave caused involuntary load shedding as the system struggled to cope with peak demand. In Queensland, there was record demand during the quarter. What was unusual about the high demand was that it was set on a Sunday. Demand for electricity is usually lower on weekends as many businesses do not operate.

After the issues with Basslink last year which was returned to service in June, Tasmania had a quiet quarter with spot prices averaging $98.22/MWh compared to $177.17/MWh for the first quarter of 2016.

There were several announcements during the quarter. With both system security issues and higher prices, electricity was a major focus for politicians.

The Federal Government announced a feasibility study into adding 2,000 MW of pump storage hydro at Snowy Hydro. This would assist with capacity constraints and assist with integrating additional renewable generation. The feasibility study is due by the end of 2017 however it is likely that it will take at least four years to build.

The South Australian State Government announced a plan for South Australia to avoid future black outs. The plan includes a 100 MW battery farm, 250 MW of stand by gas plant and greater usage of South Australian generation through a new state based scheme. The Australian Energy Market Operator’s (AEMO) new CEO Audrey Zibelman presented the final report on the power system event which led to South Australia losing power. The report contains 19 recommendations to strengthen the system. Many of the recommendations were specifically targeted at the system event which happened in South Australia but most are applicable across the entire market.

AEMO RELEASES GAS STATEMENT OF OPPORTUNITIES

gasfired

Gas supply and security of electricity supply have been hot topics in the industry and the political and media space this quarter. This was explored in the recent annual statement of gas opportunities published by the Australian Energy Market Operator (AEMO). The report focuses on planning across the energy supply chain and the interdependencies of gas and electricity

Key points in AEMO’s gas statement include;

  • Declining gas production may result in insufficient gas to meet projected demand for supply of electricity from summer 2018–19.
  • Maintaining system security is becoming more challenging and the risk of supply shortfalls in both gas and electricity markets is increasing.
  • Market responses could alleviate the risk of forecast gas or electricity shortfalls. E.g. Increases in gas production from existing fields, additional supplies via the Northern Gas Pipeline, exploration and development, and alternatives to GPG.
  • Continued upward pressure on gas and electricity prices may threaten the financial viability of some commercial and industrial customers.

 

 

 

 

RESPONSE TO GAS SUPPLY ISSUES

There was a concern that a shortfall in supply could cause issues with supplying industrial consumers or the supply of gas for electricity generation to meet peak demand. The Prime Minister recently sought assurances from gas producers that the shortfall would not transpire. Gas producers agreed to make more gas available to the domestic market “as soon as possible”.

Victoria and the Northern Territory currently have moratoriums on both on-shore conventional and unconventional gas exploration. In addition, New South Wales’ buy-back of a significant number of the State’s Petroleum Exploration Licences has put a stop to any possibility of new gas developments in the State. Bucking the trend, Queensland continues to support on-shore gas exploration for both supply to the liquefied natural gas (LNG) export industry and the east coast market.

News has also emerged that Origin Energy and Engie have struck a gas supply deal in South Australia. Origin will supply gas to Engie’s Pelican Point Power Station for three years providing 240MW of electricity in South Australia.

CUSTOMER’S FEELING THE PAIN

Customers coming off retail gas supply agreements are certainly feeling the pain of a market experiencing tight supply. AGL confirmed in early March that AGL is out of contracted gas and may be required to supply customers from the spot market. AGL has been quoting $20/GJ for gas for customers in NSW in 2017 and beyond, with some customer’s experiencing a trebling of their previous contract gas prices.

In the east-coast gas market, gas retailers are limited and in some instances, appear to be pricing uncompetitively. Customers who are yet to secure gas contracts in 2017/2018 should explore all options open to them

JOIN ‘TEAM JESS’ AND SAVE LIVES

We’d like to introduce you to Jessica. Jess has a rare immune deficiency, which means her immune system doesn’t work as it should. Her body can’t respond to infection and she can get sick very easily. To keep her healthy, Jess requires treatment with a blood product called Intragram every four weeks. This life-saving infusion means Jess is no longer sick all the time and it allows her to do all the fun things she loves. It wouldn’t be possible without blood donations.

To raise awareness of the importance of blood donation, Jess’s family has JOIN ‘TEAM JESS’ AND SAVE LIVES created ‘Team Jess’, a Red 25 group that is part of the Australian Red Cross Blood Service’s Group Blood Donation program. Jess’s family would like to encourage everyone who is able to donate blood, to join ‘Team Jess’ and help them achieve their goal. Blood donations can be made at any Australian Red Cross Blood Service Donor Centre or Mobile Donor Van in Australia. donateblood.com.au.

Did you know that only 1 in 30 people donate blood, but 1 in 3 will need it in their lifetime? 

Full PDF edition: Edge Insights – Issue 3

Clean Energy Regulator Releases 2017 Surrender Percentages

The Clean Energy Regulator has released the 2017 environmental certificate requirements. The number of Large-scale Generation Certificates (LGCs) which must be surrendered each year is fixed. However, the surrender percentage depends on the expected consumption of electricity across Australia less any applicable exemptions for energy intensive trade exposed industries.

The surrender percentage for LGCs in 2017 is set at 14.22%. This is higher than the 2016 surrender percentage of 12.75%, but lower than what was widely expected in the market.

The STC percentage was set at 7.01% which is lower than the 2016 target of 9.68%. Each year, the Clean Energy Regulator must determine how many STCs will be created during the year and divide this number by the amount of power expected to be consumed. With the rate of installation of solar PV in decline and electricity demand increasing, the STC percentage is lower. It was widely expected that the percentage would be lower in 2017 than in 2016, though not to this level. Earlier in the week we saw the price of STCs fall from the clearing house price of $40.00/certificate to $39.90/certificate. This is the first time since April 2016 that the price has fallen below $40.00/certificate.

All consumers who has been accruing STCs and LGCs should be checking with their retailer on how they are going to recover their accrued amounts.

If you wish to discuss your energy needs with Edge or learn more about how we can validate your bills from first principle please feel free to email us at admin@edgeenergyservices.com.au

AEMO Releases Recommendations to Avoid Further ‘Black Outs’ in SA

The Australian Energy Market Operator (AEMO) has released its final report on the South Australia (SA) region black system event on 28 September 2016 (Black System). During the event some 850,000 SA customers lost electricity supply, affecting households, businesses, transport and community services, and major industries.

In the report, AEMO notes that with less synchronous generation online, the electricity system is experiencing more periods with low inertia and low available fault levels. This is making it increasingly difficult to keep the system secure. It is no longer appropriate to rely solely on synchronous generators to provide essential non-energy system services (such as voltage control, frequency control, inertia, and system strength). Instead, additional means of procuring these services must be considered; from non-synchronous generators (where it is technically feasible) or from network or non-network services such as demand response and synchronous condensers.

AEMO has already released three preliminary reports describing the events on 28 September 2016 and the immediate actions undertaken.

AEMO’s final report has 19 recommendations, 3 of which have already been implemented.

System Event

On Wednesday 28 September 2016 tornadoes with wind speeds in the range of 190–260 km/h occurred in areas of South Australia. Two tornadoes almost simultaneously damaged a single circuit 275 kilovolt (kV) transmission line and a double circuit 275 kV transmission line, some 170 km apart. The damage to these three transmission lines caused them to trip, and at 4.16pm a sequence of faults in quick succession resulted in six voltage dips on the SA grid over a two-minute period. As the number of faults on the transmission network grew, nine wind farms in SA exhibited a sustained reduction in power as a protection feature activated. For eight of these wind farms the protection settings of their wind turbines allowed them to withstand a pre-set number of voltage dips within a two-minute period. Activation of this protection feature resulted in a significant sustained power reduction for these wind farms. A sustained generation reduction of 456 megawatts (MW) occurred over a period of less than 7 seconds.

The reduction in wind farm output caused a significant increase in imported power flowing through the Heywood Interconnector. Approximately 700 milliseconds after the reduction of output from the last of the wind farms, the flow on the Heywood Interconnector reached such a level that it activated a special protection scheme that tripped the interconnector causing it to go offline. The SA power system then became separated (“islanded”) from the rest of the National Electricity Market. Without any substantial load shedding following the system separation, the remaining generation was significantly less than the connected load and unable to maintain the islanded system frequency. As a result, all supply to the SA region was lost at 4.18 pm, resulting in a ‘Black System’.

The first round of customers had power restored by 7.00 pm the same day. Approximately 90% of load in SA had been restored by midnight. The remaining load was gradually restored as fallen transmission lines were bypassed, and all customers had supply restored by 11 October 2016.

Findings of the investigation

AEMO published a number of findings from the investigation. Critically it found that the wind farms were able to continue operation throughout the grid disturbances, and it was only the control system setting which caused them to turn off. Changes made to the turbine control settings shortly after the event has removed the risk of recurrence given the same number of disturbances. AEMO was not aware of these settings and they note that access to correct technical information is critical for system security.

The investigation found that if the wind turbines hadn’t switched off the Black System would have been avoided. AEMO cannot rule out the possibility that later events may have caused a black system, despite not being aware of any system damage that would have led to this.

In order to maintain a secure system, AEMO must have sufficient inertia in the system as well as frequency control and voltage stability.

AEMO recommendations

Following the Black System event, AEMO has come up with 19 recommendations to minimise the risk of SA being islanded and if so, can continue to operate if this occurs. These recommendations are in addition to operational changes which have already occurred. As mentioned, the windfarms have already changed their control setting to allow many more ride-throughs before switching off. They are also working to keep AEMO informed of any changes to control settings. The Heywood Interconnector is not running to as high capacity as previously operated to allow for more contingency. AEMO also require a minimum number of on-line synchronous generators in SA.

AEMO’s recommendations are summarised below. Of the 19 recommendations the following are likely to have the largest impact to the National Electricity Market.

• Stricter licensing of new generation
• AEMO to assess options for improved forecasting of wind speeds which can cause windfarms to cut out (not a feature of the blackout event)
• AEMO to modify operational procedures for SA island operations
• AEMO to support ElectraNet in reassessing control strategies to achieve very rapid switching of reactive plant to manage the risk of severe over voltages in SA that might occur due to large levels of under frequency load shedding following separation.
• AEMO to put in place more rigorous processes to monitor weather warnings for changes to forecasts, to trigger reassessment of reclassification decisions where relevant
• AEMO to review and implement, following consultation, a more structured process for reclassification decisions when faced with power system risks due to extreme wind speeds.
• AEMO to investigate a better approach to ensuring that the minimum stable operating levels of generating units are taken into account in the dispatch process
• AEMO to review market processes and systems, in collaboration with participants, to identify improvements and any associated National Electricity Rules or procedural changes that may be necessary to implement those improvements

AEMO plans to complete its recommendations by December 2017 but note that this may not be achievable subject to consultation time.
The full report can be downloaded here

A Plan for South Australian Power

The South Australian Government released their plan for their energy future. It contained a number of new strategies including:

  • 100 MW battery farm
  • 250 MW gas fired plan for emergency use only
  • 200 MW of emergency plan until the gas plant can be brought online
  • Local power to direct plant and the interconnectors with Victoria
  • Energy Security Target under which a portion of electricity must be sourced from within South Australia
  • South Australian Gas Incentives which would provide an additional $24 million for local gas exploration which would primarily be made available for South Australian consumers

The South Australian Government is also planning to tender its consumption to allow a new private generator to be built. Part of the tender would require a synchronous renewable generator to be built.

Currently the policies are vague in detail though an expression of interest for the battery storage has already been issued with responses expected by 31 March 2017.

Edge continues to monitor the announcement to assess the impact on the market. Further analysis will be posted once details are released.

Update on Hazelwood closure

Engie announced on 3 November 2016 that they would close down their 1,600 MW Hazelwood power station in March 2017. The markets have reacted to the news of the closure by increasing the forward cost of electricity across the National Electricity Market.

The outlook from the Australian Energy Market Operator (AEMO) is not looking good for Victoria. If the state experiences hot weather next summer there may not be enough generation available to meet peak demand without further load reductions. Their medium term outlook is published at least weekly and the most current to 17 March 2017 shows that the 2017-18 summer could see reserve shortfalls if there is a warm summer.

Table 1: Medium Term Outlook for Victoria
Source: AEMO

Currently seven of the eight units at Hazelwood is running. Unit eight came off on Sunday 12 March 2017 with an unplanned outage citing a boiler leak. This would not have been part of the shutdown plan but boiler leaks can usually be repaired within a few days so Engie might have decided that it is not worth bringing back on.

The current plant is to take three units out of service on 27 March 2017, another three the next day and the final two units on 29 March 2017. Following this there will be a decommissioning of the plant and a rehabilitation of the site including the mine which can take up to four years.

Hazelwood is a source of heavy pollution in the electricity market and is part of an older generation of technology which needs to be replaced in order to reduce carbon emissions. It has been a very cost effective and reliable source of power for the past 52 years helping to stabilise Victorian power prices and provide support to the rest of the market since interconnection. It will also have a profound impact on the people working in the region.

Prime Minister gets assurances over gas availability

The Australian Energy Market Operator (AEMO) published their Gas Statement of Opportunity on 9 March 2017. It highlighted that there could be insufficient gas to meet demand from both industrial users and power generators. The report highlighted that there could be insufficient gas as soon as the 2018-19 summer.

Following this report, the Prime Minister held a meeting with nine company leaders on Wednesday 15 March 2017. The gas companies committed to increase domestic supply if needed to meet demand. The Prime Minister is quoted as saying that the gas producers ‘understand the absolutely critical importance of maintaining their social license to be doing business in Australia’. He stressed that the Federal Government wanted to see the market come up with a solution but would not shirk from measures which would ‘protect Australian businesses, jobs and families’.

Snowy Hydro Scheme to Potentially Increase Pumped Storage Hydroelectricity Capability

Yesterday the Federal Government announced funding to conduct a feasibility study into expanding the Snowy Hydro Scheme by adding an additional 2,000 MW of pumped storage hydroelectricity. This additional storage was part of the original design of the Snowy Hydro Scheme but considered unnecessary at the time. The feasibility study is scheduled to be completed by the end of 2017 and if the study is successful the upgrade could be completed as early as 2022.

The use of pumped storage hydroelectricity will add additional capacity to the system but no additional energy. It requires nearly double the amount of energy to push the water up to the higher dam than the amount of energy that is created when released into the lower dams. With New South Wales and Victoria suffering from lack of energy it is difficult to see where the additional power will come from to make this efficient.

Pumped storage hydroelectricity presents a number of desirable properties to the current energy market. It is the only true fast start synchronous technology. Wivenhoe pumped storage hydroelectricity in Queensland can go from being completely offline to 500 MW synchronised and providing frequency services in 11 seconds. For comparison, the best gas generator takes 8 minutes to start up and another five minutes to synchronise.

Pumped storage hydroelectricity will also be able to provide frequency control services even while not generating power. By keeping the turbine spinning but not converting to electricity it can be used essentially as a fly wheel while consuming virtually no water.

Hydros (pump storage and otherwise) typically have a normal operating life of around 100 years though truthfully no-one really knows what will make them stop working. They can also store a large amount of energy economically. Unlike a battery which will typically only be able to store energy for 1 to 2 hours at maximum capacity, a pumped storage hydroelectricity generator is only limited by the size of the upper dam capacity.

The other potential benefit of the Snowy Hydro development is in support of Australia’s Renewable Energy Target.  Whilst pumped storage hydroelectricity is not a renewable source of generation, other parts of the Scheme (run of river hydros) is. If adding pumped storage hydroelectricity to the current run of river scheme is considered a major upgrade, the baseline for the run of river could be reset to zero. This means that the Snowy Hydro scheme would generate an LGC with each MWh of generation. This will be equivalent to approximately 6,500,000 extra LGCs coming into the market, or almost 20% of the total target of 33,000 GWh. Perhaps this is part of the Federal Government’s plan behind meeting the Australia’s Renewable Energy Target.

Battery Storage in SA is Not That Simple

Recent involuntary load shedding across South Australia, Victoria and New South Wales has led to a discussion on the current operation of the National Electricity Market.

On 9 March 2017 Atlassian co-founder Mike Cannon-Brookes tweeted that Tesla’s battery division could solve South Australia’s power problems in 100 days. This would occur by building ten 100 megawatt hour battery farms which Tesla confirmed that they would be able to provide in the requested 100 days. Since then, other battery providers have offered to provide quotes for a similar product. Since the tweets started, Mike Cannon-Brookes has received several offers to help with funding and on Friday 10 March asked Tesla for seven days to sort out politics and funding.

Battery storage has come a long way over the last four years and is widely considered a potential solution to integrating renewable generation into the grid. The capacity of the proposed solution would be more than sufficient to meet the supply shortages seen to date in South Australia. During the last brown out in, 100 MW for one hour would have prevented involuntary load shedding.

The problem in the short term is how to integrate the batteries into the market. Batteries work on direct current while most of the market works on alternative current. This means that the batteries would need to include an inverter. It is not certain that the current prices quoted would include this. The quote also doesn’t include local costs such as connection to the grid and installation. There are other potential issues with integration of batteries in the market. It is uncertain how a utility scale battery would register and comply with strict frequency standards.

The proposal has sparked renewed debate on the role that technology can play in solving the issues we are facing in the current energy market.

Powerlink’s revised revenue proposal to the AER

In December 2016, Powerlink submitted a Revised Revenue Proposal to the Australian Energy Regulator (AER) for the 2018-2022 regulatory period. This was in response to the AER’s Draft Decision which was released in September 2016.

Powerlink’s Revised Revenue Proposal at a glance

  • The Revised Revenue Proposal is focused on responding to consumer concerns over electricity prices by driving increased efficiency and delivering cost reductions.
  • Powerlink continues to align with the AER’s guidelines and approach to meet the needs of customers while allowing for the continued delivery of reliable supply of electricity.
  • The AER’s Draft Decision accepted most of Powerlink’s January 2016 Revenue Proposal, including operating expenditure forecast and rate of return methodology.
  • The key element which was not accepted by the AER was forecast capital expenditure required for network investment. 
  • Powerlink has not accepted the AER’s Draft Decision and the Revised Revenue Proposal responds to matters raised by AER and includes a revised capital expenditure forecast.

Key Points of Powerlink’s Revised Revenue Proposal Include:

Electricity prices

  • 31% reduction in indicative transmission price in the first year of the regulatory period. This reflects a 3% increase from Powerlink’s January 2016 Revenue Proposal. (The cost of high voltage transmission represents approximately 9% of total delivered energy costs for a typical Queensland (QLD) residential electricity consumer)
  • Translates to between $25 and $41 savings (2.9%) for the average QLD residential household annual electricity bill. An increase from the $22 to $37 savings outlined in Powerlink’s 2016 Revenue Proposal.
  • Price Growth remains within CPI over the balance of the regulatory period

Maximum Allowed Revenue (MAR)

  • Original proposed MAR $4.02B (smoothed) – AERs Draft Decision proposed a reduction of 7.4%
  • Powelink’s Revised Revenue Proposal for MAR is $3.74B
  • 7% lower than Powerlink’s January 2016 Revenue Proposal for the 2018-2022 period
  • 0.6% higher than the AER’s Draft Decision due to revised capital expenditure forecast

Forecast Capital Expenditure

  • Original proposed forecast expenditure $957.1M – AERs Draft Decision proposed a reduction of 19.3%
  • Powerlink’s Revised Revenue Proposal for total capital expenditure forecast is $886M
  • 7% lower than Powerlink’s January 2016 Revenue Proposal for the 2018-2022 period
  • 15% higher than the AER’s Draft Decision

The costs/revenue and percentages have been referenced from both AER and Powerlink published documents.  There may be minor differences which could be the result of rounding and / or advising costs in smooth, nominal or real terms.

AER’s Final Determination is due to be released by 30 April 2017.

You can find more information regarding Powerlink’s proposal and the AER’s decision here.

We are experts in the National Energy Markets. Find out how we can save you money on your energy charges by contacting us here or on 07 3232 1115.

Heatwave conditions force load shedding in SA

A severe heatwave in South Australia yesterday culminated in increased usage that pushed demand beyond the capabilities of the generators. This led to outages in the network as the market operator commenced load shedding.

Demand was the highest it had been for three years with the maximum five-minute demand set at 3077.47MW at 6:15 p.m. market time. This is despite a continued uptake of residential solar photovoltaic (PV) systems.

There were some interesting announcements leading into the period. The Australian Energy Market Operator (AEMO) was aware this was an unusual event and published a market notice at 3:15 p.m. (market time) to be aware that temperatures would be high across SA, NSW and QLD.

There were concerns surrounding reserves for SA most of the day. AEMO operates with three Lack-of-Reserve (LOR) levels.

LOR1: If the largest unit fails there will be a LOR2 condition

LOR2: If the largest unit fails, there will be a loss of power

LOR3: There is an actual loss of power. There is no solution in which all demand can be met

There were several LOR1 conditions during the day but AEMO didn’t respond. More interestingly was a LOR2 warning at 5:13 p.m. (market time) stating that AEMO was aware of an actual LOR2 condition forecast until 7:00 p.m. (market time). Required contingency was 200 MW but there was only 114 MW available. AEMO decided not to intervene but wanted to seek a market response. As we now know, the LOR2 turned into an LOR3 as wind generation reduced.

Figure 1: SA Generation and Demand 08/02/2017

 

The orange area represents the available generation for the state with the grey and yellow being the maximum support from the interconnector. The blue line is SA (five-minute) demand. The heat didn’t dissipate as the day wore on. Electricity demand continued to rise with the addition of domestic air conditioners as residents were returning home. The drop in the orange availability represents the reduction in wind. As wind kept reducing in capacity, there was insufficient power in the state to meet demand and there were rolling brown-outs.

Figure 2: SA wind generation and spot prices 08/02/2017

 

The 30-minute wind generation data shows the drop in availability. Wind generation is affected during hot weather as there isn’t enough energy in warm wind.

There are wide reports that additional power stations were available but didn’t run. Torrens Island A and Pelican Point each had a unit which was not available. It is unlikely there was enough gas going to the power stations to start another unit.

It is very questionable what market response AEMO was expecting at 5:13 p.m. since all available generators were on (except one unit at Pelican Point and one at Torrens Island A). From the outside, it looks like they were hoping LOR2 would not become LOR3.

With temperatures forecast at similar levels today, more outages can be expected. With the political backlash, it is unlikely there would be an appetite to curtail residential customers again. This could mean that AEMO and the Government may prefer to take the risk with business and commercial customers instead.

If you’re looking for stability in your energy pricing, please contact our energy procurement experts here or on 07 3232 1115.