Australia Energy Market Report - March 2018

Market Changes in March

Although prices have been trending downwards in all states for March 2018 as seen on the charts below, volatility still remains within the market. Market is slowly settling down since the gigantic hike in 2017 due to closure of Hazelwood coal fired generator in Victoria. Anticipated fears that the system may struggle to sustain the demand with reduced generation capacity and high temperatures during summer seems to have slowly diminished. However, prices remain far higher than their historical average as there remains uncertainty of the impacts of government legislation and how new technologies will reshape the development of the industry. This is further elaborated due to lack of pressure within the market primarily among energy generators.

The charts above from the Australian Energy Market Operator reflects a mixture of current and developing generation in Australia. Coal Fired Generators will remain as a key source although they are in the process of being phased out as current infrastructure reaches its life expectancy. Many investors such as banks have indicated that they will no longer invest in coal fired generators given the uncertainty with lack of clear government policies and a lengthy payback.

  • Consumption met by grid supplied electricity is forecast to remain relatively flat for the next 20 years despite projected 30% growth in population and projected growth in the Australian economy. Towards the end of the period consumption is forecast to increase backed up by a fast hike of electric vehicle sales with forecast 19% of light vehicles projected to be Electric powered by 2036-2037.
  • Over summer renewables supplied more power than brown coal, gas or oil fueled generators and was second only to black coal across Australia’s main east and west-coast grids. The 9,880 gigawatt-hours (GWh) from renewables during the summer months which exceeded that from brown coal by 8% and gas by 40%.
  • AGL confirmed it would close Liddell in 2022 and replace the coal plant with a mix of renewables, gas power for peak periods and battery storage.
  • Australia’s energy market operator says an additional 850 megawatts of dispatchable generation capacity will be needed in New South Wales after the closure of the ageing Liddell power plant if AGL Energy fails to complete all three stages of its transition plan. The company’s decision to retire the coal plant defied extraordinary public pressure from the Turnbull government. The Coalition wanted AGL to prolong the operating life of Liddell a further five years.
  • AGL confirmed they will invest $200 million to upgrade the Bayswater coal fired power station in New South Wales to replace the power it will lose when it closes the Liddell power station. The upgrade will add another 100 megawatts in capacity to the Bayswater power station by improving its operational efficiency.

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