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Australia Energy Market Report - April 2018



​Market Changes in April

Australia’s energy industry is venturing significant disruptions and transformations as it transitions from a substantial reliance on traditional fossil fuel sources to a new energy environment.

Recently, the market had settled down since the gigantic hike in 2017 due to closure of Hazelwood coal fired generator in Victoria. Wholesale electricity prices in Victoria and South Australia have risen since the closure of the Hazelwood power station according to the Australian Energy Regulator (AER), with other states in the National Electricity Market (NEM) also affected. With the substitution of Hazelwood’s low cost brown coal generation by higher cost black coal, gas and hydro generation whilst overlapping with rising black coal and gas fuel prices during the period, this has been the underlying driver of the price increase that had hit the electricity market.

Although prices have been trending downwards in all states for April 2018 as seen on the charts in this report (Table A), the volatility still remains within the market.

Electricity Trading Summary for the Week Ending Monday: 23/04/2018

The CY 19 forward curve was mixed over the week. NSW gained $0.23 to $70.15, VIC lost $0.88 to $75.95, QLD rose $0.55 and SA lost $1.71 to $87.87.

Likewise, the spot quarter was mixed over the week. NSW lowered $0.15 to $74.85, VIC dropped $1 to $78.25, QLD gained $1.75 to $64.75 and SA declined by $3.00 to $90.00.

Looking forward to Q2 2018, the curve followed the same mixed trend. NSW lost $0.49 to $70.01, VIC fell $1.25 to $72.25, QLD prices moved up $0.59 to $60.19 and SA dropped $1 to $82.

Factors to watch for Q2 2018 per state:

QLD: Expecting significant solar PV to come on line in the second quarter of 2018. Spot prices in the middle of the day

are expected to be lower when solar generation is at its highest.

NSW: There is more than 650MW of new wind power in coming months. This increase in renewables and is expected to lead to lower average spot price outcomes in the future.

VIC: With a tighter supply/demand balance, the performance of remaining brown-coal generators will be a key influence on spot price levels.

SA: New renewable projects are expected to see an additional 210MW of wind and 220MW of solar capacity during 2018.

Current news on electricity market:

  • Technical work had commenced for the Turnbull government’s National Energy Guarantee (NEG), this undertakes the ageing Liddell power plant that will be out of the system by 2023; which aims at the emissions reduction requirements of the Coalition’s new energy policy.
  • It is suggested that the Liddell’s retirement will reduce supply, which will increase prices, but the implementation of government’s policy will ameliorate several consequences.
  • $250m cash offer for the Liddell power station & site from Alinta and its Hong Kong-based owner, Chow Tai Fook Enterprises. Alinta has said it is interested in a quick acquisition and it is interested in expanding its market share in NSW.
  • The government wants Liddell to keep downward pressure on power prices until the expanded Snowy Hydro project comes online.
  • AGL has committed to building a 252 megawatt gas-fired power station near Newcastle as part of its plan afterLiddell shuts at Muswellbrook in 2022. The plant consists of 14 reciprocating engines of 18MW each with a target startup date of 2022 calendar year. Conventionally, allocation of engines (4 strokes) made mainly by Wartsilla and in smaller sizes by Caterpillar in which have been used mostly in the off grid market in Australia and in smaller sizes.
  • Cooper Energy began drilling in the Gippsland Basin as part of its $335 million Sole gas field development, which previously owned by Santos. This 35 kilometres off the eastern Victorian coast is the first new offshore gas production wells will bring a new source of gas supply to Eastern Australia. Scheduled to produce gas by mid 2019.
  • The Turnbull government intends to lock into the policy a 26 per cent emissions reduction target by 2030, based on 2005 levels.
  • Maximum demand is forecast to remain flat until the mid-2020s, and then to start to increase as the time of maximum demand moves later in the day when rooftop PV output is small or zero.
  • The Australian Energy Market Operator (AEMO) is working with industry to implement changes arising from an Australian Energy Market Commission (AEMC). AEMO is planning on consulting on the required procedure changes; Major component of this project is changes to market systems, including: Meter Data Management – to be able to receive five-minute metering data and facilitate new profiling calculations.

Settlement – settlement based on five-minute energy data and distribution of appropriate data for reconciliation. Bidding – receipt of bids/offers with finer details.

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