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The truth about power prices and generation – big sticks don’t work but renewables do

A few days before he was rolled from the top job, Malcolm Turnbull said “We will not hesitate to use a big stick, as we did with gas, to make sure the big companies do the right thing by you, their customers.”

Well the latest quarterly update from the AEMO shows just how effective that “big stick” was with the gas companies. The AEMO reports notes that:

“Wholesale gas prices increased across all markets compared to Q3 2017 despite a year-on-year reduction in demand (largely due to reduced gas-powered generation (GPG) demand). Average quarterly gas prices in the Declared Wholesale Gas Market (DWGM) in Victoria and Brisbane’s Short-Term Trading Market (STTM) were the second highest on record.

And it doesn’t look like getting better any time soon.

“2019 electricity futures prices rallied over the quarter, particularly in Victoria and New South Wales. This coincided with: a reduction in hydro dam levels in mainland Australia; relatively high gas prices (coupled with some expectation of this continuing into 2019); forecasts of a hot and dry start to 2019; and concerns over the potential delays to the connection of new renewable projects to the grid.”

Luckily, Tasmanian hydro stepped up.

“The quarter recorded the highest NEM hydro generation since 2013, underpinned by record quarterly hydro output from Hydro Tasmania, which contributed to:

  • Tasmania’s wholesale electricity price reducing substantially (to $43/MWh) as Hydro Tasmania changed its market offers to increase output. Practically, the change in bidding translated to an additional 1,000 MW offered below $50/MWh compared to previous quarters – an 88% increase.

  • Comparatively high levels of inter-regional transfers north on Basslink and the Victoria to New South Wales interconnector. Total inter-regional transfers during the quarter were 18% higher than in Q2 2018, and were at their highest level since Q4 2016.”

Wind and solar also upped the ante.

“Over 1,200 MW of new large-scale solar and wind capacity began generating during the quarter. The amount of large-scale solar capacity that commenced generation during the quarter is higher than the NEM’s entire large-scale solar capacity at the start of the year. This, coupled with favourable wind conditions, led to record quarterly variable renewable energy (VRE) output which contributed to:

  • GPG continuing its downward trend in 2018: year-to-date GPG at the end of Q3 2018 was at its lowest level since 2006 and 21% lower than in 2017. Q3 2018 was the first quarter on record in which wind output has exceeded GPG.

  • Quarterly NEM emissions reaching their lowest level on record, both in terms of total emissions and average emissions intensity.

The South West Interconnected System (SWIS) reached over 1 GW of rooftop PV and solar farm capacity installed. High amounts of small-scale PV are resulting in falling minimum daytime demands as well as an increase in the occurrence of negative prices.

While the overall movement in average demand varied geographically, one element was consistent across all NEM regions – “the impact of small-scale PV in reducing operational demand in the middle of the day. Increased small-scale generation has the effect of offsetting consumption, thereby lowering the overall grid demand for electricity. This is a trend that has been increasing over time as the level of installed small-scale PV capacity continues to rise.”

While renewable generation in the NEM reached record quarterly levels, the New South Wales black coal-fired generation fleet recorded its lowest availability since Q2 2016, largely due to extended unit outages at Bayswater and Vales Point power stations.  Average generation from Queensland’s black coal-fired fleet reduced by 155 MW compared to Q3 2017 despite a 265 MW increase in average availability. The reduction in output was due to an increase in the duration of lower priced periods: Queensland’s wholesale price was below $60/MWh 36% of the time during the quarter, compared to 15% of the time in Q3 2017. This contributed to reductions in average output at price sensitive generators including Tarong and Stanwell power stations (-249 MW and -160 MW, respectively), with Millmerran Power Station reducing average output by 268 MW due to lower availability.

Brown coal-fired generation was steady compared to Q3 2017, but reduced by 216 MW when compared to Q2 2018, largely due to reduce availability and output from Loy Yang A Power Station.

We have heard many times the dubious claim that the South Australian blackouts were due to their reliance on wind energy.  But no-one seems to point out when things go the other way.

On Saturday 25 August 2018, at 1311 hrs, the NSW-QLD interconnector (QNI) tripped, separating Queensland from the rest of the NEM. This also resulted in activation of the Heywood Emergency Control Scheme and separation of South Australia from the rest of the NEM. There was also approximately 1,110 MW of under-frequency load shedding in New South Wales, Victoria, and Tasmania. Market impacts included:

  • “The South Australia spot electricity price reduced to around -$450/MWh, due to the loss of export to Victoria which caused a temporary excess of supply in South Australia. Prices rapidly recovered to pre-event levels.
  • Queensland’s energy price increased to around $1,400/MWh for a single dispatch interval.
  • More than $10 million in frequency control ancillary service (FCAS) costs incurred – all mainland regions recorded FCAS prices at the price cap of $14,500/MWh.”

Key drivers of system strength directions during the quarter included periods of relatively low prices (<$50/MWh) and high wind output (>1,100 MW) which resulted in synchronous generators seeking to decommit from the market for commercial reasons.

This seems to be a common practice.  If the price gets too low, the generators shut up shop.

But don’t expect to hear any of this from the COALition.


17 comments

  1. New England Cocky

    Bring on the alternative energy project developments.

    Yvonne Langenberg for New England

    Women supporting Adultery support National$

  2. Miriam English

    I expect we’ll soon hear complaints from the coal industry similar to what I read in New Scientist some years ago, when the head of nuclear power in Germany was complaining that it wasn’t fair that solar and wind were making electricity so inexpensive that the nuclear industry couldn’t make a profit. I hooted with laughter at that. I’m sure the official making the complaint didn’t even see the absurdity of his stand.

    I’m delighted to see the politicians and fossil fuel industry gradually making themselves irrelevant.

    Thanks for digging all this up, Kaye. You’re the best!

  3. Kaye Lee

    Miriam,

    As I said to my husband last night, listening to politics at the moment is like watching chimpanzees hurling poo at each other. It’s worse than reality tv. So I just happened to notice that the AEMO released the update yesterday and I could find no commentary on it. Everyone’s too busy watching the shit fight. The fact-based report makes for interesting reading from a non-political non-profit main player.

  4. Frank Smith

    The long running saga over an extension to the Acland Coal Mine near Oakey on the Darling Downs continues with the Land Court recently placing restrictions on noise levels at the mine site. Acland produces thermal coal for heating water in power stations – a large proportion of its output is exported. This is an interesting case as a certain shock-jock called Alan Jones has campaigned loudly and vigorously AGAINST this mine extension. In spite of the summary in this article from the Environmenta Defenders Office, I heard Ian MacFarlane (remember him) this morning claiming this ruling was a significant step for assuring the mine’s future.

    https://www.edoqld.org.au/new_acland_coal_mine_stage_3_judicial_review

  5. Kaye Lee

    The 1.1 GW of new rooftop solar capacity last year was the most in Australian history, eclipsing the previous record in 2012. And the 16 large-scale renewable energy projects completed during the year added 700 MW of new generation to the mix.

    Perhaps most significantly, the large-scale renewable projects either under construction or which had attracted finance add up to more than seven times the amount of work completed in 2017. These 50 projects add up to 5300 MW of new capacity and 5750 direct jobs

    https://www.cleanenergycouncil.org.au/news/2018/May/renewable-jobs-global-local-record-irena.html

  6. jimhaz

    Energy producers/retailers are like banks/scammers. Now being private, they will do whatever possible to price gouge.

    I reckon a lot of my cheap Chinese made appliances are failing due to the voltage being ramped up to ABOVE the allowable maximum so as to increase the meter rates.

    Btw…One of the first things I would do if a PM is to disallow Chinese appliances (hit them with high tariffs) until there was a certainty that they would last 7 years.

  7. New England Cocky

    Glen Innes has two wind farms each alone capable of powering the whole of northern NSW.

    Armidale has at least one solar farm that is reported as capable of powering northern NSW.

    Uralla has a solar farm proposal for 2400 acres (or ha?) to commence construction in mid 2019.

    All four projects are exporting energy out of New England into the national grid.

    Why is coal relevant????

    Which university(ies) have a Faculty of Coal Chemistry to research and develop procedures to extract the petrochemical products from coal that are required by modern societies? None that I am aware. Talk about forward planning …..

  8. Bronte ALLAN

    Whilst I find it bloody difficult to understand a lot of what is happening regards power generation etc I find that here in SA our energy bills just keep getting higher with every quarter! We have 10 solar panels on our roof, & yet our power bill is still in the $ 280-350 range (for 3 adults) every quarter. Yes we have lots of lovely solar farms & wind farms, but still the power costs go up! The one coal fired power station we had at Port Augusta was closed–far too prematurely in my opinion–& so we have to rely on all these new systems for our power. We also have a back up for power using diesel generators (?), which are really ecologically good–NOT!!–so I do not really know just how our state will cope when we get 40c plus days. I agree that we must have solar & wind farms, but here in SA the inept, lying bloody labor mob have practically bankrupted the population with the huge power bills they are really responsible for. The incoming Liberal mob has inherited the worst possible scenario for power production in the country & it will only get worse, not better! I think it is time that the “new” forms of nuclear power stations were checked out & if ok then Australia must start building them!

  9. Paul Davis

    Well Bronte Allen, you would have been thrilled to see the report yesterday that all those pesky solar panels are responsible for boosting the 240volt supply to dangerous 250+ levels blowing all our light bulbs and ruining our appliances. The power supply companies cant guarantee a safe 240v supply …. my goodness it must be hell for you in South Australia! But have patience, your beloved LNP are sorting it for you and the Big Battery and the wind and solar farms will all be decommissioned so your Xmas power bill will be halved.

  10. totaram

    Bronte Allen: You do realise that your power has been privatised, and the costs you are being charged are what the wonderful “market” is delivering to you. What has it got to do with the “bloody Labor mob” ? Did you even read Kaye Lee’s article? Bloody difficult to understand, right? There’s your answer! No, I’m not going to explain any more. Cheers!

  11. totaram

    For anyone interested in more “fair-dinkum power” here is the opinion of the Aussie billionaire co-founder of Atlassian, a software company (which had to move to the US to get funding, because here they only fund industries that make holes in the ground or cut down forests).

    https://flexppenergymatters.cmail19.com/t/j-l-ptrdrlk-jjdhidtyc-b/

    He is the guy who got Elon Musk to put in the big battery in SA.

  12. Miriam English

    The only tears from Morrison would be crocodile tears.
    How can he expect anybody to believe a word out of his mouth?

  13. Bryan farrow

    Hydro Tas might wholesale the price at $43/MWh, but for Tassie resident consumers, who still own Hydro Tas./Transend/Aurora, the retail price we are charged/ripped off varies between 17c & 33c/kWh, or multiplied by 1000, $170 & $330/MWh plus a ‘supply charge’ totaling about $1.20/day.
    Not happy Jan.

  14. Kaye Lee

    Mr Morrison said while holding the Immigration portfolio in government and opposition, he earned a reputation as “someone that likes to go and speak to people”.

    “So if I have to make hard decisions … I don’t do it from some room in Canberra without having personally met with and looked these people in the eyes … that are affected by my decisions.”

    Gee….I seem to remember….

    Immigration Minister Scott Morrison says he makes no apologies for an assertive video telling asylum seekers on Manus Island and Nauru that they will never be resettled in Australia and should consider returning home.

    In the video Morrison warns asylum seekers: “If you choose not to go home then you will spend a very, very long time here and so I urge you to think carefully about that decision and make a decision to get on with the rest of your life.”

    Also…

    Scott Morrison directly contributed to tension in the Manus Island detention centre during a late September visit, according to an explosive set of allegations made by former G4S guard Martin Appleby, who is the first guard to speak publicly since the unrest on Manus in February that left one asylum seeker dead.

    The immigration minister addressed a compound in late September, resulting in a state of “high alert” being called for riot, fire and self-harm. Appleby made these observations in a video diary that was recorded just days after Morrison’s address. The minister, according to Appleby, told asylum seekers: “You will never see the shores of Australia.” The decision to address asylum seekers in this manner, “put people’s security at risk, including his own”, and was a turning point in tensions within the camp, according to Appleby.

    And when the Labor Party flew the families of the victims of the Christmas Island drownings to their funerals….

    Opposition Immigration spokesman Scott Morrison says Immigration Minister Chris Bowen needs to justify the expense.

    “The minister has made a decision to incur quite a significant cost here, and we need to know how much,” he said.

    “To make these arrangements in Sydney, when arrangements could have been put on place on Christmas Island. And if the families wanted to travel to Christmas Island they could have travelled to Christmas Island at their own expense.”

    The government dismissed Mr Morrison’s claim that ”any other Australian who wanted to attend a funeral of someone who died in tragic circumstances would have to put their hand in their own pocket”.

    And let’s not forget…

    Scott Morrison is the guy who responded to reports of children self-harming on Nauru by suggesting that Save the Children workers were making false claims, and even coaching children to self harm, in order to undermine the government.

    Crocodile tears indeed

  15. terence mills

    In the region of Far North Queensland that I live in we have seen significant projects involving solar and wind turbines coming on line and feeding into the grid.

    We read in local press that we are close to self sufficiency when it comes to renewable energy yet the facts are elusive.

    Checking my electricity bill ( we only have one supplier, the Qld government owned Ergon) we have a simple, no frills format.
    We have the general domestic tariff at around twenty five cents (.25c) per KWH and the Off-Peak tariff at twenty one cents (.21c) per KWH plus GST.

    In addition we have a Service Fee of around ninety cents (.90c) per day.

    We also get a solar rebate for our 1.5 Kw rooftop solar system and we get a codgers discount.

    Our account doesn’t show the proportion of renewable energy versus the coal-fired component coming from central Queensland.

    There are no special offers, no introductory discounts and no on-time payment discounts or late penalties.

    I have a suspicion that we are in a fortunate minority not having had our distribution privatised but I would be interested to know how our charges compare with other regions around Australia.

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