The new Q3 Quarterly report from the Australian Energy Market Operator found that wholesale electricity prices increased slightly in both New South Wales and Queensland over the last quarter. Prices did fall slightly in both Victoria and South Australia, and declined substantially in Tasmania due to extra hydropower.
Quarterly emissions were at their lowest on record from the east coast’s National Electricity Market, and the renewable energy output was at its highest ever recorded level.
Highlights for Q3 2018 include:
Mixed results for wholesale electricity prices, while wholesale gas prices increased across all markets
• Wholesale gas prices increased across all markets compared to Q3 2017 despite a year-on-year reduction in demand (largely due to reduced gas-powered generation (GPG) demand). Average quarterly gas prices in the Declared Wholesale Gas Market (DWGM) in Victoria and Brisbane’s Short-Term Trading Market (STTM) were the second highest on record.
The price changes have coincided with: reduced supply from Longford compared to Q3 2017 (-19%); an increase in
pipeline deliveries to Curtis Island for LNG export (+2.3%); and increasing international oil and gas prices. These changes were manifested in a shift in the price of gas injection offers across the DWGM and STTMs in Sydney, Adelaide and Brisbane: the quantity priced below $8/GJ fell by 20% compared to Q3 2017.
• Mixed results for wholesale electricity prices compared to Q2 2018, with small increases in New South Wales, Queensland and Western Australia, and small decreases in Victoria and South Australia.
• 2019 electricity futures prices rallied over the quarter, particularly in Victoria and New South Wales. This coincided with: a reduction in hydro dam levels in mainland Australia; relatively high gas prices (coupled with some expectation of this continuing into 2019); forecasts of a hot and dry start to 2019; 1 and concerns over the potential delays to the connection of new renewable projects to the grid.
Record quarterly hydro output from Hydro Tasmania
The quarter recorded the highest NEM hydro generation since 2013, underpinned by record quarterly hydro output from Hydro Tasmania, which contributed to:
Tasmania’s wholesale electricity price reducing substantially (to $43/MWh) as Hydro Tasmania changed its market offers to increase output. Practically, the change in bidding translated to an additional 1,000 MW offered below $50/MWh compared to previous quarters – an 88% increase.
Comparatively high levels of inter-regional transfers north on Basslink and the Victoria to New South Wales
interconnector. Total inter-regional transfers during the quarter were 18% higher than in Q2 2018, and were at their
highest level since Q4 2016.
Increased penetration of variable renewable energy
• Over 1,200 MW of new large-scale solar and wind capacity began generating during the quarter. The amount of large-scale solar capacity that commenced generation during the quarter is higher than the NEM’s entire large-scale solar capacity at the start of the year. This, coupled with favourable wind conditions, led to record quarterly variable renewable energy (VRE) output which contributed to:
GPG continuing its downward trend in 2018: year-to-date GPG at the end of Q3 2018 was at its lowest level since 2006 and 21% lower than in 2017. Q3 2018 was the first quarter on record in which wind output has exceeded GPG.
Quarterly NEM emissions reaching their lowest level on record, both in terms of total emissions and average emissions intensity.
An increased requirement for AEMO to intervene in the South Australian market in order to maintain the power system in a secure operating state, with around 10% of VRE output in the region curtailed over the quarter.
Other highlights included:
• NEM operational demand was flat compared to Q3 2017, with small shifts in industrial loads as well as significant small-scale PV capacity additions (which are increasingly influencing the demand profile).
• Separation of Queensland and South Australia from the rest of the NEM following a trip of the Queensland to New South Wales interconnector (QNI) on 25 August 2018. This event resulted in: approximately 1,110 MW of under-frequency load shedding in New South Wales, Victoria and Tasmania; and more than $10 million in Frequency Control Ancillary Service (FCAS) costs on a single day, which was a key contributor to the highest quarterly FCAS costs since 2008.
• Record volumes were traded through the Gas Support Hub (HSH) during the quarter – an increase of 100% compared to the same period last year and a 61% increase on the next highest quarter.
• The South West Interconnected System (SWIS) reached over 1 GW of rooftop PV and solar farm capacity installed. High amounts of small-scale PV are resulting in falling minimum daytime demands as well as an increase in the occurrence of negative prices.