Australia Energy Market Report - September 2017

Pricing: Pricing went up in all states except South Australia during the month. Pricing in New South Wales increased by 1.7%, 4.2% and 3.2% respectively for calendar years 2018, 2019 and 2020 in New South Wales. In Victoria, pricing increased by 3.1%, 5.9% and 1.8% respectively for 2018, 2019 and 2020. In Queensland there was an increase of 1.90%, 0.2% and 3.8% respectively for 2018, 2019 and 2020. South Australian pricing increased by 0.9% for 2018 and declined 3.6% and 5.2% for 2019 and 2020 respectively.

National Energy Guarantee: The Federal Government has made the decision not to take up the Clean Energy Target recommended in the Finkel Report. The Clean Energy Target was seen as a crucial measure to establish more certainty in the market during the transition to new forms of generation. The alternative proposal is the National Energy Guarantee. This puts the onus on retailers to guarantee the security of supply and emissions reductions.

The retailers would be obliged to use a certain percentage of generation from coal, gas, batteries or pumped hydro. This would mean that at times of shortages, the electricity could be sourced under long term contract pricing with these generators rather than at volatile spot prices.

The retailers would become responsible for meeting Australia’s emissions targets and the renewable energy subsidies would be scrapped.

The Federal Government would need the backing of the states and territories for this legislation and this will be difficult to obtain.

Whatever policy is adopted, it is clear that bi-partisan support is required to create more investment certainty for the building of new generation.

The policy is effectively an intervention in the market and would most likely result in much less renewable generation and the prolonged life of old coal fired plants. It would most likely become more difficult to meet emission reduction targets. Coal fired plants are becoming unreliable because of their age and it is likely more use of gas fired generation would be required. Gas prices are historically high and this would not help electricity pricing.

ACCC Report on Power Prices: Power prices have increased by more than 60 per cent in the last 10 years, according to the latest report from the ACCC. The ACC found that while retail prices for electricity were reasonably stable between 1990-91 and 2007-08, there has been a dramatic spike in the past decade.

The report showed that “gold plating” of the networks was the biggest factor behind the power price increases.

Gold plating led to substantial hikes in network prices but these have stabilized in recent years.

Solar Generation in New South Wales: New South Wales is increasingly relying on renewables for its electricity and it is now contributing one fifth of the state’s power needs.

In 2016, renewables made up a contribution of 19.6% to the state’s electricity mix from hydro, solar, wind, bioenergy and small hydro.

Coal-fired power generation now accounts for 75.8 per cent of the state’s electricity, with gas accounting for 4.6 per cent.

The biggest renewables contributors were the Snowy Hydro scheme followed by solar from large industrial-sized projects and roofs producing a large amount of renewable energy.

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