AER’s State of the Energy Market in 2023

The AER released their annual ‘State of the Energy Market’ report last Thursday for 2023 for Australia’s electricity and gas markets. This included some relatively good news as the energy system in 2023 has “experienced fewer shocks and better outcomes than in 2022”. The 2023 wholesale electricity market prices have declined from the record prices in 2022, largely due to the government interventions in the coal and gas markets. Despite the decline, prices remain high by historical standards.

A media release by the AER accompanying the report stated, “Increases in wholesale energy prices were evident in retail prices, with estimated electricity bills rising between 9% and 20% in all NEM jurisdictions in 2022-23, impacting households already experiencing broader cost-of-living pressures. “

The report highlighted the pressures for investment in renewables to permit the retirement of coal generation. The report also commented on Liddell’s retirement in April 2023 going smoothly due to the new renewable generation and recent favourable market conditions.

The transition to new energy infrastructure faces several challenges:

  • The vast scale and required coordination of investments.
  • Rising costs in the infrastructure sector.
  • The need for community engagement in infrastructure planning and development.

The report highlighted the government involvement and support in investments including joint initiatives between Australia Government and state and territory governments.

The dynamic between electricity and gas markets is increasingly interconnected. As regions shift from gas demand to electricity demand (like replacing gas heating with electric air conditioning), it’s anticipated that pressure on gas markets will decrease, while electricity demand will surge. Factors like electric vehicle adoption will further influence electricity demand and the necessity for new infrastructure.

Furthermore, planning will now also factor in emissions reduction to serve the long-term interests of energy consumers, integrating it with other goals such as price, reliability, and supply security.

An interesting comment was made in the report executive summary highlighting concerns in the industry surrounding issues of competition in the market and market power outlined below.

“Our concerns are around the reduced liquidity of exchange-traded hedging products, the declining number of clearing service providers for electricity derivatives, and the levels of concentration of ownership of flexible generation capacity, particularly in NSW and Victoria. The AER’s anticipated new powers in relation to contract market monitoring will allow us to better monitor participant behaviour and gain sharper insights on issues of competition and market power.”

Future of Contract Markets and the Baseload Swap

It is no surprise, when I say the National Electricity Market (NEM) is going through a vast transition and transformation, with an ever-increasing penetration of renewable generation, in the form of both utility scale renewable generation and household installations.

The world as we know is also battling the global pandemic that is Coronavirus. This has had a significant impact on people and their livelihoods and health.  along with a significant impact on energy markets around the globe. To top it all off, energy markets have had to endure a supply price war recently, between OPEC’s unelected leader, Saudi Arabia and non-OPEC oil producer, Russia.

With a rapidly evolving and ever-changing energy landscape, what should our contract markets look like? Are the current products fit for purpose or offer value in an energy landscape like the NEM? As a generator, the days of capturing value and running flat out all hours of the day, are indeed starting to dwindle, with quick, nimble, and easily dispatchable fast-start generation likely to excel in the near to longer-term landscape. Take South Australia (SA) as a good example, as to the success of fast-start plant. On the 04/04/2020 at 12:00pm, the 5 minute spot price was down at -$1,000/MWh, which is where it stayed the majority of the morning, due to low demand and strong generation, trying to send megawatts into Victoria (VIC), maxing out the interconnector. Shortly after that, at 12:20pm, prices spiked to above $300/MWh for the next 30 to 40 minutes or so, with fast-start gas generation swooping in and capturing this short-term high price period.

If this type of generation is the key to success in this new look NEM that we operate in, where fast-start, short burst generation is taking its place to complement the intermittent renewable generation in wind and solar, utility or household, that continues to penetrate the market, why are our contract markets continuing to predominantly offer baseload swaps?

A baseload swap is a contract for energy, say 5 MW for $70/MWh, for a defined period, for a month, a quarter, a calendar, or financial year. The way a swap works is the $60/MWh becomes the strike price in which the seller of the swap pays the floating price (the price of the underlying wholesale product which is electricity in this instance) and the buyer pays the fixed $70/MWh.

Say you have contracted a baseload swap for 5 MW for the entire calendar year of 2020, this would mean that for every half hour (with electricity settling every half hour as per the underlying wholesale market settlement regime in the NEM), of the entire 2020 calendar year, the buyer will pay the seller $70/MWh, and the seller will pay the buyer the underlying wholesale or spot price. For example, say this morning the wholesale or spot price for electricity for the half hour ending period of 9:30am was $40/MWh; this would result in the buyer paying the seller $70/MWh for 5 MW, whilst the seller would pay the buyer $40/MWh for 5 MW, resulting in a $30/MWh contract for difference (CFD) payment going from the buyer to the seller.

However, think about this, the baseload swap is exactly that, baseload. So, a contract for calendar year 2020 means you are locked into that same position (unless you sell out of the position) 24 hrs, 365 days.

So, do baseload contracts offer appropriate value anymore, in a market which are short-lived upward volatility and recently longer periods of downward volatility?

Mid last month, Snowy Hydro struck a contract defined as a ‘super-peak’ swap, which will cover what has been defined as the “super peak” periods of the day, generally morning and evening peak usage when solar is ramping up or down. The trade was brokered through an over-the-counter (OTC) trading hub operated by Renewable Energy Hub, and it is believed, similar deals will be a gateway to funding and bringing into the market technology such as batteries and demand-response into the energy markets.

Snowy Hydro has been procuring renewable PPA’s for a while, through wind and solar generation, including the 90 MW it procured from the Sebastopol Solar Farm in NSW. They are looking to use the renewable generation and back it with their significant hydro fleet, to sell a new range of products to its customers.

With wholesale energy prices reducing significantly since September 2019, and the overabundance of generation in states such as QLD and SA, and with the rapid introduction of new technology, it is likely a significant number of customers will choose to take more wholesale/spot price exposure, rather than contracting ahead of time.,

This fuels the argument for the need to have more flexible and robust products, ones that are for particular trading intervals, perhaps in the day, day-ahead products, week-ahead products, or perhaps more products like Snowy’s ‘super peak’ product?

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

What’s Oil got to do with it?

There is no doubt that energy markets and the energy industry itself are rapidly evolving and moving away from fossil fuels. The evolution of energy seems to be coming, and only coming faster given this tumultuous time the people and countries across the world have endured. Lets start with oil; Australian’s across the nation are very aware of the recent global oil price crash to new historic levels, particularly when it is reported in the news headlines that Australian’s are seeing almost 15-year lows at the petrol bowser. The impact of the recent oil price crash however does not stop at the bowser, it has and will continue to have significant impacts on energy markets across the globe including in Australia.

Oil prices have been hit recently due to two major events; one being the global epidemic of COVID-19, resulting in a significant reduction in demand for oil across the globe. The International Energy Agency’s (IEA) April 2020 reports an expected drop in demand of global oil of 9.3 million barrels(mb)/day year on year for 2020, with April 2020 demand estimated to be lower than 2019’s demand by 29 mb/day. The second impact to oil markets has been the oil price and supply war between OPEC’s pseudo leader Saudia Arabia and non-OPEC nation, Russia, two of the largest global oil exporters. Saudi Arabia and Russia could not agree levels of supply, leading to Saudia Arabia flooding the market with oil and prices, both spot and futures, reaching new lows. The quarrel between the two global oil market power-houses and the impacts of the COVID-19 on demand for oil has led to the historical event where the West Texas Intermediate (WTI) oil price index fell into negative price territory, with May 2020 future prices settling at -USD$37.63/barrel on the 20/04/2020, after reaching a low of -USD$40.32/barrel earlier that day.

The major oil index, WTI, saw futures prices for June 2020 contracts settling at around USD$17/barrel on the 29/04/2020, whilst Brent Crude, another major oil index also felt the pain of slowing demand, with prices dropping below USD$20/barrel on the 27/04/2020. But the impact of tumbling oil prices reaches far and wide, particularly here in Australia. Australia has a booming natural gas industry and was the largest exporter of liquified natural gas (LNG) as of January 2020. A significant number of gas sales agreements are linked to the crude oil indices, with Australian gas companies feeling the hurt given the tumble in oil prices. Brent Crude oil futures for June 2020 contracts settled at around USD$24/barrel on the 29/04/2020. At these prices, the likes of Santos and Oil Search will be hurting given both flagged a cashflow breakeven oil price of ~USD$25-29/barrel, and USD$32-33/barrel, respectively. Demand for natural gas in international markets has also tumbled, and due to the linkage between oil prices and gas contracts, spot contract prices have shifted down, with June 2020 contracts settling at AUD$2.87/GJ (~USD$1.88/GJ) as of the 30/04/2020, again a far reach from prices seen in November 2019 of ~AUD$7.30/GJ (~USD$5/GJ).

Further impacts of the oil market crash on gas markets has been cheaper domestic gas prices for consumers. Queensland, the largest gas extractor and exporter on the east coast has seen prices in its short-term trading market (STTM) in Brisbane reach as low as AUD$2.31/GJ in March 2020, a significant drop from AUD$9-11/GJ we witnessed the same in 2019. Other energy commodities have also seen a decline off the back of the oil price tumble, including thermal coal. As stated above, with gas prices domestically and internationally falling away, thermal coal prices have come off due to energy users opting for cheaper fuel sources such as oil and gas. Spot thermal coal contracts for the May 2020 settled at USD$52.35/metric ton(mt) on 30/04/2020, far softer than spot prices a year ago at ~USD$90/mt.

This brings us to the all-important energy market and commodity, electricity, which with all the above combined has seen electricity prices fall off a cliff. The National Electricity Market (NEM) in the last few years has been on a renewable power growth spurt. Queensland for instance has the highest penetration of large scale solar generation of approximately ~2,400 MW and a significant penetration of rooftop solar reaching ~2,100 MW, combine them together and on a mild April day in 2020, you have almost 2 thirds of maximum demand. With renewable energy displacing thermal/fossil fuels, off the back of reducing pricing for the technology and subsidies in the form of renewable energy certificates (RECs), combined with both far cheaper gas prices allowing gas plant to bid in and capture price spikes due to their fast-start and intermittent operating capabilities, and reduced demand for electricity due to the impact of COVID-19 with business and industry operating skeletally, electricity prices continue to sit at prices not witnessed since 2016.

All the above has been caused by two events, both significant to the global economy, and the energy industry in their own rights. One thing is for sure, the events have helped push the electricity market on the East Coast of Australia into a new direction far quicker than it may have if the two COVID-19 and the oil price crash did not occur. We are seeing new market design concepts (ie. capacity markets, two-sided markets) and new contract market products (ie. super-peak swap) coming to light, that give way to new technologies and greater competition. The abundance of natural gas in Australia is affordable for households for heating and is finally being utilised as the ‘transition’ or bridging fuel it was always pegged as, to renewable energy in the wholesale market. One thing is for certain, change is afoot, and it definitely has me excited.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

History making Oil price – what it means for Energy in Australia

Overnight the major oil price index, the West Texas Intermediate (WTI) Crude Oil Index fell from trading at USD$20.97/barrel to enter negative price territory for the first time in history, with May 2020 future prices settling at -USD$37.63/barrel on the 20/04/2020, after reaching a low of -USD$40.32/barrel. The event was sparked off the back of increasing storage concerns given excess supply build-up brought on by suppressed demand as a result of COVID-19. The recent announcement by OPEC + to cut demand by 9.7 million barrels a day in May and June months, and the additional 5 million barrels per day to be cut by other nations outside of OPEC and Russia, including the US, Canada and Brazil has done little to quash concerns of an oil supply glut with consultancy firm Rystad Energy estimating demand will be cut by 27 million barrels a day in April and 20 million into May as a result of COVID-19’s impact on global usage.

The market for WTI Crude Oil entered con-tango yesterday (20/04) with spot prices significantly lower than future prices for the commodity, however today (21/04) it has bounced back breaching positive price territory sitting above USD$1.00/barrel at 3:30pm (EST). Brent Crude Oil prices however remained relatively static on the 20/04, ending the day in the mid $USD20/barrel range at USD$26.04/barrel, despite the traditional correlation of trading between WTI and Brent Crude oil prices. So why is the oil price so important to Australia, well as Edge has previously pointed out in the past, a significant number of long-term gas deals are linked to an oil price index, likely Brent but also WTI. This has huge ramifications for Australia who became the largest exporter of liquefied natural gas (LNG) as of January 2020 this year, a commodity and industry which also contributes massively to the Australian economy.

With LNG sales effectively hitched to oil prices, I can only imagine what the contract price for some of the underpinning investment and long-term contracts of domestic and international gas looks like! We have witnessed that domestic gas prices across the NEM and international LNG Spot market prices have both taken a dive off the back of the recent oil price and supply war and the impacts to demand from COVID-19. Currently the ACCC has calculated LNG netback contract prices of gas to the Wallumbilla Hub (domestic gas hub connecting gas from QLD to southern states) at prices of AUD$3.73/GJ and AUD$3.60/GJ for April and May 2020, the cheapest price the commodity has been in the last 4 years, with future prices looking likely to hit $3/GJ. Currently the JKM (Japan Korea Marker) spot LNG market index for Asia – which is a significant demand hub for Australian spot LNG cargoes – is depicting prices of AUD$3.39/GJ for future contracts for June 2020 as of 20/04/202, however given the recent negative price event in international oil prices it is likely these future contract prices could fall further.

With LNG markers like the JKM heavily correlated to movement of oil prices it is likely we will not see a return to the AUD $8/GJ JKM Swap price for some time. The oil price slump is also expected to impact investment decisions, as once again the gas industry and heavily correlated to global oil prices. Majority of the domestic gas players including Oil Search and Senex Energy are gearing up for extended periods of reduced returns and cheaper gas prices due to a significant number of gas sales contracts linked to the Brent Crude oil index. Oil Search indicated to the market its break-even oil price range of USD$32-33/barrel, without funding growth projects, well above the current future oil contract prices; whist Senex Energy’s Chief, Ian Davies stated that “Demand has fallen off a cliff,” and that they were “planning for fairly soft prices for a while.” Even the likes of Santos flagged they are aiming for a free-cash flow break-even oil price of USD$25/barrel in 2020, however needs a price of USD$60/barrel to fund new growth projects, which could see the Narrabri project in jeopardy.

What is incredible to see is investment decisions like Arrow Energy’s Surat Gas Project still going ahead even when energy markets are entering unchartered territory. Arrow Energy’s joint owners, Shell and PetroChina have finally given the go ahead to the $10 billion development of Arrow’s vast gas resources located southern Queensland’s Surat basin, sanctioning the commencement of phase 1 of the Surat Gas Project on 17 April 2020. Arrow’s joint owners have decided to push forward with the expansion despite the recent downturn in oil and gas prices felt across the globe due in part to the COVID-19 outbreak and the recent oil price war. The Surat Gas Project is expected to bring on 90 billion cubic feet (~95 PJ) of gas a year, with 600 phase one wells set for construction this year with first gas expected in 2021, according to Arrow’s announcement.

The Surat Gas Project also comprises some big steps for the industry, with the deal underpinned by significant infrastructure collaborations and gas sales agreements which will see Arrow gas compressed and sent to market via Shell’s existing QGC infrastructure (including existing gas and water processing, treatment and transportation infrastructure). Good news for these gas volumes is that part will be allocated for sale into the domestic wholesale gas markets on Australia’s east coast, and part will be allocated to be converted to LNG via QCLNG’s liquified natural gas infrastructure located on Curtis Island, near Gladstone port. This is welcomed news with manufacturing firms across the east coast screaming for further domestic gas reserves to be developed in order to keep domestic gas prices at reasonable levels and increasingly de-linked from international LNG prices and indexes, such as the Japan Korea Marker (JKM).

In addition, it was also announced the Andrew “Twiggy” Forrest-backed LNG import terminal located at Port Kembla in NSW has been given the tick of approval by the NSW State Government. The Australian Industrial Energy venture which is co-backed by the Japanese firm Marubeni and global trading shop JERA in continuing forward with plans to build and operate the Port Kembla import terminal with a likely final investment decision expected later this year and first gas imports in 2022, with customers and the Australian Energy Market Operator (AEMO) reporting expected shortfalls of the commodity in regions such as Victoria and New South Wales could come as early as 2023, with shortfalls especially apparent into and beyond 2024.  

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

Infigen want an Operating Reserve Market

Infigen have submitted a letter to the Australian Energy Market Commission’s Chairman requesting the introduction of an Operating Reserves and Fast Frequency Response rule change. Infigen state in their letter that this market proposal they have put forward would “relatively simple to implement and would provide added confidence that sufficient resources to respond to unexpected changes in supply or demand would be available”, as stated in their letter.

Most importantly, Infigen have stated a rule change such as this would remove the reliance on and provide an alternative to the RERT (Reliability and Emergency Response Trader) procurement and contracts of which cost consumers $34.5 million, and avoid further intervention in the market by the market operator. Infigen believe that a “free-rider” problem may occur under tight capacity scenarios in the market increased risks of random government interventions to avoid adverse market and operational outcomes.

As such, they believe “marginal value of incremental capacity is by definition very high and delivers considerable benefits to the entire market’” calling out that raising the market price cap does not solve the issue with systemic risk to portfolios/participants caught short due to plant outages or network failures. Instead, Infigen have called for the introduction of a Operating Reserves market for near term to avoid increasing the market price cap and increase the reliability and security of supply to consumers.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

COVID-19 / NEM Impact Statement

COVID-19 has impacted us all in recent weeks. At Edge we have put plans in place that have allowed us to provide all services our clients require without disruption.

We are working diligently to understand the impacts COVID-19 could have on the energy markets in the short and longer term. As more information comes to light, we will provide further updates on the impacts to the market and our clients.

As we are only a few weeks into this pandemic we will try and provide an understanding of the impact COVID-19 could have on the market.

Oxford economics, a team of 250 economists, has recently published a paper providing a high-level update on the impact of the pandemic on the world economy. Their initial work predicts a short, sharp recession to the global economy with major national economies going into deep recession during the first half of 2020. It is modelled that over the full year global growth will drop to zero.

Oxford economics are predicting, based on historic experience, a strong bounce back in activity once social distancing measures are relaxed. It is forecast that businesses that can get through the first half of 2020 should be prepared for a strong second half of 2020, with global growth forecast above 4%.

Overseas experience

As China was the first country to close-down as a result of COVID-19 we can learn from their recent energy experience and translate it into the Australian market.

In January and February energy production dropped significantly with thermal power dropping 8.9%, hydro dropping 11.9% and nuclear and wind dropping to a lesser extent at 2.2% and 0.2% respectively. On the flip side Solar generation increase by 12%.

Early indications are that thermal and hydro station dropped production the most due to reduced staffing level causing lower operational hours. Renewables were impacted the least due to their non-dispatchability.

It is estimated that during the height of the Chinese lockdown period over the 27 days, demand decreased by 16%.

At Home in Australia


Large generation portfolio’s including the likes of Stanwell and AGL have publicly acknowledged they have put plans in place to ensure generation meets demand, this includes stockpiling coal to ensure security of fuel supply. Smaller generators on the other hand may not have the staff to guarantee operation of their units over the long term due to illness.

Energy Price Impacts

With the additional impact of lower energy demand in Asian countries such as China, Australia’s liquefied natural gas demand significantly reduced, resulting in excess domestic gas supply particularly on the east coast of Australia. Although majority of the LNG facilities on the east coast reside in QLD, we have seen an increase in gas generation and a decrease in bid prices in regions more dependent on and abundant with gas-fired generation, such as South Australia. We are seeing approximately 600 MW more of gas-fired generation in March 2020, compared to March 2019, bid in at prices below $50/MWh. Assisting this is the collapse in natural gas prices in the Adelaide Short-term Trading Market, which has traded at the mid to high $5/GJ range for March 2020, compared to the significantly higher price range of $10 – $11/GJ we witnessed back in March 2019. Both of these variables are introducing cheaper supply in the energy markets both for heating (in homes) and electricity generation. With interconnection remaining relatively unconstrained this is resulting in lower prices across all NEM regions.


AEMO has put in place its pandemic response plan so the market operator can continue to operate the NEM and WEM efficiently and safely. Key actions in the pandemic plan include limiting contact with key staff such as control room and other business critical staff.


Following the initial breakout of COVID-19 in Australia and the early shutdown of some businesses, demand fell by about 600MW in NSW or about 8% of average demand. This was reflective of all states. Over the recent week the steep reductions in demand experienced at the start of COVID-19 have flattened out as a result of two possible reasons. In some regions such as Victoria, demand has increased. The first reason for this change in demand is consumption has moved from businesses to individual homes. Across Australia average demand is currently only 7% below last month’s average. The demand change is also attributed to seasonal change which has resulted in a reduction in load associated with cooling.

Change in demand – daily profile

The chart below illustrates the change in demand across the day and compares a summer profile and a transition to an autumn profile. The top line is early February with the bottom-line showing demand from Monday the 23rd March.

Source: AEMO 2020

The chart shows morning peak has reduced slightly however the demand over the evening peak has dropped significantly.

Impact of large users

It is expected that large users would be impacted significantly by the virus however this does not appear to be the case. With parts of the world such as South Africa shutting down mines and industry following government direction the supply / demand balance is falling in the favour of Australia. Add to this the favourable exchange rates, the export potential of commodities from Australia remains strong. The Australian mining industry is also designated as an ‘Essential Service’ so at this stage they are sheltered from future lock downs. This positive news for the mining sector which will benefit mining rich states with demand expected to reduce to a lesser extent than other states.


If the trends overseas are reflected in Australia the current installed capacity of renewable generation will continue to operate at strong levels providing staffing is available to operate and control the assets.

There will be a likely slowdown in the development of renewable projects as a result of the restrictions on travel, meetings and specialist staff available for construction, connection, commissioning and final approvals.

This slowdown will impact the future mix of generation assets across Australia, the current trend in carbon emission reductions and the supply and price of environmental products.


Edge has modelled the impact of a 10% reduction in demand with a business as usual generation profile for large scale renewable generators to understand the impact this downturn may have on LGC supply and price.

The 10% reduction in demand could reduce the RPP percentage by 0.32%. The likely effect of a reduced percentage and business as usual renewable production will be surplus LGCs in the short term and reduced prices for LGCs.


With the downturn of the economy it is expected that less roof top solar will be installed resulting in a reduction in the current surplus of certificates carried forward since 2017. The reduction is expected to reduce the STP below 20%.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

World Economic Forum – EU’s proposed carbon border Tax

The World Economic Forum was held late last week in Davos (Switzerland) with foreign leaders all around the globe coming together to talk about the global economy and hopefully generate some fruitful action.

Probably one of the more market shifting proposed schemes put forward at the World Economic Forum was that of European Commission President, Ursula von der Leyen. Von der Leyen’s proposal is a daunting one from Australia’s point of view, as it could have a significant impact on the country’s vast economic dependence on exportation of minerals and goods.

The proposed scheme, labelled the ‘carbon border adjustment mechanism,’ would be a tax applied to carbon-intensive good from those countries that are not pulling their weight as to lowering emissions under the Paris climate accord.

The economy likely to feel the brunt of this proposed tax-scheme would be China, with the scheme’s proposed first target industries being steel, cement and aluminum. Von der Leyen did however message the scheme could expand into the mining and resources sectors.

Although Australia’s most prominent trade partner in the resources sector is China, Europe was a big receiver of coal exports from Australia in 2019 and could very well be in the firing line with constant debate between Australian politicians and other world leaders as to whether Australia is indeed pulling their weight per the Paris agreement.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

Water – a top priority for Tarong Power Station

Current weather conditions are placing an increased reliance on the diminishing water catchments across Australia. These water catchments store water for use by various parts of the local community including drinking water for residents, irrigation and Electricity generation.

Stanwell recently announced water sustainability is a top priority for its Tarong Power stations located within the South Burnett region.

Water is an essential necessity for thermal power stations to make electricity. The water is used for steam production and cooling.

Tarong power station consisting of 4 X 350MW thermal units and a 443MW supercritical unit. These units obtain their water from two sources, the primary source is Lake Boondooma and secondary from a pipeline using water from Lake Wivenhoe or recycled water produced under the Western Corridor Recycled Water Scheme.

Stanwell corporation is focusing on mitigating the impact on the South Burnett community by reducing the usage of water from Lake Boondooma to ensure the South Burnett community have access to drinking water. Initial initiatives used at the power station to reduce the reliance on Lake Boondooma water include the use of recycled water from the ash dam and stormwater.

Tarong Power Station have access to water from Lake Wivenhoe if Lake Boondooma drops below 34%, currently the Lake Boondooma’s level is 22.95% as of the (Source: SEQWater 2020). Lake Wivenhoe water also comes at an added cost. Water is currently the highest operating cost for Tarong Power Station.

An alternative to using Lake Wivenhoe water is the use of purified recycled water from the Western Corridor Recycled Water Scheme. The scheme is not currently in operation, however when operating and supplying water to Tarong Power Station it will add significantly to the costs of generation.

Tarong Power Station first used purified recycled water from the Western Corridor Recycled Water Scheme in June 2008 following a similar water supply limitation brought on by the 2008 drought.

As a result, the increasing marginal cost to generation caused by the higher water cost, Tarong Power Station may change its operation and reduce generation or dispatch its units at higher prices. Under either scenario this may increase the cost of wholesale energy in Queensland.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

Semi-scheduled and Intermittent Non-scheduled Generators urged to advise of De-ratings

A new market notice within the National Electricity Market (NEM) posted by the Australian Energy Market Operator (AEMO), one we have not see before was issued to all market participants on the 23/12/19. The market notice requested and served as a reminder for all semi-scheduled and intermittent non-scheduled generators to ensure they update their market availability bids, update their SCADA Local Limit or, if unavailable, advise AEMO control room to implement a quick constraint to the reduced available capacity level; and update intermittent generation availability in the EMMS Portal to reflect reduced plant availability as is required under the National Electricity Rules (NER), per NER 3.7B(b).limits.

This was an interesting constraint for AEMO to issue as it was due to extreme heatwave conditions across the south east coast of Australia, and as with most generating plant, under extreme heat, some form of derating on its physical capacity and output can occur. On the 23/12/19 AEMO’s weather service provider was forecasting extreme high ambient temperatures across all NEM regions, hence AEMO’s market notice to these participants to remind semi-scheduled and intermittent non-scheduled generators to advise AEMO of any reduction in available capacity caused by temperature derating.

Particularly interesting is that the often “set and forget” approach to renewable generators such as solar and wind generators, as classified by AEMO as semi-scheduled generation is being watched with greater scrutiny, particularly after the events of 2016 in SA where a state wide blackout was triggered by a severe weather, damaging more than 20 towers, downing major transmission lines, and with multiple wind farms currently shouldering some of the blame for the state going black due to the wind farms switching off when the transmission lines went down.

Semi-scheduled: A generating system with intermittent output (like a wind or solar farm), and an aggregate nameplate capacity of 30 MW or more is normally classified as a semi-scheduled generator unless AEMO approves its classification as a scheduled generating unit or a non-scheduled generating unit. AEMO can limit a semi-scheduled generator’s output in response to network constraints, but at other times the generator can supply up to its maximum registered capacity (AEMO 2014).

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.

Gas power stations for Victoria and Queensland

The federal government recently announced an agreement to underwrite new gas turbines in Victoria and Queensland to provide relief from expected high peak prices. The operation of these assets, below the usual short run marginal cost of current open cycle gas turbines (QLD – $106 / MWh – AEMO 2019) will potentially limit the likelihood of high prices or price volatility over the morning and evening peaks resulting in reduced average spot outcomes.

Under the new generation underwriting plan, which was proposed by the ACCC, the government will assure an amount of the electricity generated will be purchased for a set period into the future.

The Victorian generator will be located at Dandenong, south-east from Melbourne’s CBD and the Queensland asset will be located near Gatton, 90km west of Brisbane.

The 132MW Queensland generator is proposed by Quinbrook Infrastructure Partners, while the 220MW Victorian asset is proposed by the APA group.

Mr Taylor (Minister for Energy and Emissions Reduction) has previously said the government had been “hard-nosed” with these projects and each of them would have to prove commercially viable and benefit the jurisdiction in which they were going to operate.

Both projects are expected to commence construction next year once private sector finance has been secured.

If you would like to know more, please contact Edge on 07 3905 9220.