Australia Energy Market Report – May 2018

​Market changes in May

Australia’s electricity grid survived the second-hottest summer on record without load-shedding blackouts, despite the closure of a major coal-fired power station in Victoria.

Recently, the market had settled down since the gigantic hike in 2017 due to closure of Hazelwood coal fired generator in Victoria. Hazelwood’s closure in March 2017 saw 1,600 megawatts of power supply capacity (more than half SA’s peak demand) sucked out of the national grid.

But when supply tightened, other power stations helped fill the void. Gas-fired power stations in SA, Victoria and Queensland were brought out of mothballs, adding 83 megawatts of additional capacity. There was also a big reduction in the number of unplanned outages on transmission lines, making it easier for the market operator to make sure power was where it need to be when we needed it most.

Although prices have been trending downwards in all states for May 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: 28/05/2018

The market was slightly lower over the week in Calendar 2019. NSW dropped $0.51 to $70.21, VIC dropped $0.67 to $76.03, QLD lost $1.39 to $63.58 and SA increased by $0.20 to $87.98.

The spot quarter was mostly up last week. NSW gained $2.00 to $76, VIC fell $0.50 to $78.00, QLD increased by $0.50 to $64.50 but SA remained unchanged at $94.37.

Looking forward to Q3 2018, prices were mainly up. NSW increased $0.65 to $76.00, VIC dropped $0.20 to $78.10, QLD increased $0.35 to $67.75 and SA increased $0.25 to $87.00.

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 is expected to lend 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:

Energy Company AGL has knocked back an unsolicited offer for its ageing Liddell coal-fired power plant in the New South Wales Hunter Valley.

  • The Turnbull Government has been pressuring AGL to keep the plant open beyond its scheduled closure date of 2022, or sell the facility.
  • Alinta made an offer of $250 million last month
  • But AGL says that offer is not in the best interests of its shareholders
  • Alinta, and its Hong Kong-based parent company Chow Tai Fook, made an offer for the plant of $250 million last month
  • Alinta said it would also invest in upgrading the facility, believed to take the total spends to around $1 billion
  • In a statement to the share market, AGL said it would not accept the offer

Whyalla steelworkers boss Sanjeev Gupta, who wants to turn his company GFG Alliance into one of the nation’s biggest energy providers.

  • The British billionaire outlined plans for a massive 10 gigawatts of solar energy, saying the proposal would be backed up by a huge grid-scale battery and pumped hydro dams
  • The latest announcement is for 10 times as much power production as previously flagged
  • “Our last investments will be in solar. We have stated 1,000 megawatts in South Australia,” he said
The latest in alternative renewable energy is the 800MW Clarke Creek wind farm in central Queensland, which has received development approval from the state government, and could be built alongside a 400MW solar farm that has also received planning approval, and battery storage:
  • The $1 billion project (that’s for the wind component) is located around half way between Rock Hampton and Mackey, in the Isaac regional council, and is adjacent to major transmission lines
  • Mark Rayner, the director of development Lacour Energy, says there is still strong demand for renewable energy in a number of regions, from retailers and other corporate buyers
  • The Queensland market is also being underpinned by the government’s stated target of 50 per cent renewable energy by 2030, although it has yet to outline exactly what mechanisms, if any, it will use to reach the target
  • Rayner says Lacour is conducting a feasibility study that will be complete by the end of the year, and construction could begin early in 2019. The entire project could account for around 3 per cent of the state’s total electricity demand
  • Clarke Creek is just one of a number of major projects that propose to marry wind, solar and storage
  • Wind lab is building the first stage of the Kennedy renewable energy hub, that could combine 1200MW of wind and solar plus batteries
  • French renewable energy developer Neoen has unveiled plans for another renewable energy hub combining 180MW of wind and battery storage near Cairns, and a 500MW solar and battery storage project in the Western Downs