Australia Energy Market Report – January 2018

Market changes in January

Although some volatility remains, prices have trended downwards in January in all states. The markets are slowly normalizing after the dramatic rise in 2017 due to the closure of the Hazelwood coal fired generator. Speculative fears that the system may struggle to cope with the reduced generation capacity and high temperatures over summer seem to have been dispelled. However, prices remain far higher than their historical average as there remains uncertainty over the impacts of government legislation and how new technologies will alter the make-up of the industry. This is further exacerbated by limited competitive pressure within the market, primarily among energy generators.

The changing composition of the Australian Energy Market

Coal will remain a key fixture of the energy mix for the near future, though it is in the process of being phased out as existing infrastructure reaches its life expectancy. AGL has indicated they will not follow the government’s request to extend the life of the Liddell Generator and banks have indicated they will no longer invest in new coal-fired generators.

The success of Elon Musk’s lithium-ion battery in South Australia may precipitate more investment towards renewable generation, energy storage and dispatchable energy in the coming year. However, this investment may be curtailed by lingering legislative uncertainty. There is only limited modelling on what effect the proposed National Energy Guarantee will have on the market. Preliminary analysis indicates that it may incur additional costs for renewables due to the intermittent nature of their generation. Additionally, as there is no current bi-partisan support for the plan, it may well not survive the next federal election.

Taking advantage of higher prices in 2017, AGL posted a 91% increase in net profit (along with increased dividends). Despite this strong result, the share price of AGL actually dropped reflecting concerns about the company’s ability to remain profitable with developments shaping the energy market.

Metering Reform effective from 1 December 2017

Power of Choice is a government-led, industry wide reform program, which seeks to provide consumers with more information about how they use electricity. Power of Choice came into effect on 1 December 2017 and has opened up the availability of advanced metering.

Under these reforms, if your site requires a new or replacement meter for any reason, your metering provider must arrange to install an advanced meter for you. NUS’s customers, will be contacted by their metering provider in advance if changes to your metering are required.

Transition Arrangements

Industry wide transition arrangements are being implemented for the introduction of Power of Choice on 1 December 2017. This might result in reduced or delayed services by Distributors and Metering Service Providers in the week prior to and after 1 December 2017.

What to expect from 1 December 2017

You shouldn’t notice any immediate change.

There will be no immediate impact to your business from the changes that come into effect on 1 December 2017. Your existing metering arrangements will continue, and there will be no interruption to your electricity supply because of the introduction of Power of Choice. In future, if you request or require a change to your metering, your current metering provider will arrange this for you, and advise you of any costs, interruptions or impacts in advance.

As you have already a Direct Metering Agreement (DMA) in place with, you will be contacted directly by your DMA metering provider regarding appointment of a metering coordinator. They will advise you if any changes to your DMA are needed.