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Glossary

A-C

Ancillary services

Services to ensure the reliability and safety of the electricity supply system.

Average Rate Option

Is an automatically exercised product where the payout is determined based on a specified averaging period. The payoff is calculated on a specified averaging period that places a ceiling on the price the customer pays for electricity. The difference between an Average Rate cap and a standard cap is that the payouts are based on average prices across the contract period rather than each interval. The longer the period the lower the premium because the protection is against average prices rather than single price events.

It places a ceiling on your power price protecting you against a possible increase in market price, while allowing you to take full advantage of a lower market outcome should it occur. This is different to a swap where in the event of the lower market outcome you would still pay the swap contract value.

Base load

A base load generator provides power at a more-or-less constant output level to the electricity system outside of temporary shut down for maintenance. These generators take a long time to start up but are relatively cost effective to run.

Caps

Caps are automatically exercised half-hourly call options. They activate when the spot price goes over the strike price – normally $300/MWh. A premium is paid during the period when the cap is activated. By securing a Cap you can ensure you won’t pay over the $300/MWh price if an event occurs.

Captions

Is an option to enter a cap in the future at a predetermined premium and fixed price. Where swaptions provide the right, but not the obligation to buy or sell a swap, a caption provides the same right to buy or sell a cap at a predetermined price when exercised.

Captions give the customer the ability to protect against possibly higher future prices while allowing you take advantage of a low price should it eventuate.

Ceiling

Gives you access to the lows of the market while putting a roof over your price. This means we set a maximum average price you’ll pay in the quarter ensuring you never pay more.

Contestable

Refers to a situation where customers are legally entitled to choose their energy retailer. Across Victoria, Tasmania, NSW, SA and southern Queensland, most customers can choose their electricity retailer.

Contract for difference

A financial hedging arrangement on the wholesale market, where two parties agree to trade a certain volume of a product for a set price. This is the same as what happens in the financial markets but with energy trading.

The product is purchased in a separate ‘physical market’ (e.g. wholesale electricity market). If the price is higher or lower than the agreed price, then the parties settle the difference between the ‘hedge contract’ and ‘physical market’ prices.

Contract maximum demand

The maximum level of demand specified in a network connection agreement or energy supply contract, for which a distribution network service provider will levy a charge.

The network sets a maximum amount of energy that a customer can draw from the grid at any one point. If the customer exceeds this point then the customer is put on a higher tariff. Flow Power works with businesses to install the controller to manage this demand as it often happens over a short period of time, usually around 10 minutes.

The charge is linked to an increment of network system capacity or load (demand). Penalties may apply should the end user exceed this maximum demand, and the distribution network service provider may increase the contract maximum demand for a forthcoming period of up to 12 months.

Cost-reflective pricing

An approach that seeks to align prices with an estimate of actual costs to deliver power to a customer at that point in time rather than aggregated across the system. That means power delivery costs to regional areas can be more expensive than in cities because there is less volume. However, power to homes situated near a power station can be delivered cheaper because of the less distance it needs to travel.

Customer load variation charge

When retailers provide customers with a fixed rate, they need to project the total amount of power that customer is going to use. That means they can secure contracts in the ASX Futures market or allow for the energy in their wholesale strategy. Therefore when a customer’s energy use varies significantly, it can have major impact on a retailer’s profitability. This isn’t an issue for Flow Power customers because you have control and flexibility over how your power is bought.

D-F

Demand-side response

A mechanism where end users can benefit by changing their use in response to real-time electricity prices or short-term network constraints. Depending on how end users set up their demand-side response, it can provide them with additional revenue or a saving on their electricity bill that is substantially more than the cost of providing demand-side response. For wholesale electricity customers, this occurs automatically as they respond to the market signals. The result is a much more efficient working market.

Dispatch price

The price for electricity in a wholesale electricity market that is necessary to provide the energy capacity needed to match demand in a five-minute ‘dispatch period’. This is the price that the generators are being paid for the set five minutes.

Electricity distribution

This refers to the poles and wires of the electricity delivery system – the low voltage movement of energy. Distribution networks take power from the transmission networks to homes and businesses across Australia. Sometimes businesses will operate both transmission and distribution networks. There are many distributors across the National Electricity Market:

  • NSW: Ausgrid, Essential Energy and Endeavor Energy
  • SA: SA Power Networks
  • VIC: Powercor, United Energy, Citipower and Jemena
  • QLD: Ergon Energy and Energex
  • ACT: ActewAGL
Electricity futures contract

A standardised exchange-based contract for difference that specifies the price and quantity of electricity that will be traded at a specified point in the future. These contracts are used to hedge financial risk rather than physically trade power. They are bought and sold on the ASX Futures market and can help you understand the future costs of energy. See also Contracts for Difference.

Electricity transmission

The bulk transport of electricity through extra high voltage power lines. These lines take power from large scale electricity generators to distribution networks. Then the distribution networks transport low voltage power to homes and businesses. Transmission accounts for approximately 10% of the average electricity bill however this differs from state to state.

Embedded network

An electricity network, not owned by an electricity distributor, that is part of a multi-tenanted or strata titled building. The local distributor has an obligation to install meters that allow individual tenants and/or owners to select their own energy retailer and assign a network tariff to each meter. Where feasible, a single end-user can arrange for the individual meters to be consolidated to a single metering point within the building, thereby benefiting from lower network tariff costs than would apply to all the individual meters.

Freedom (Flow Power power plan)

Freedom is an energy plan that gives businesses the flexibility to reduce load or transfer to an onsite generator when prices rise. It gives businesses direct access to the wholesale market price, and puts them in complete control of energy costs. Flow Power keeps a close eye on wholesale market activity on a business’ behalf and shares expert predictions. Freedom also comes with SMS and email alerts backed by 24/7 online and telephone support.

G-I

Gentailers

A generic term for entities that own and operate major electricity generating facilities and are active in the retail market. Examples include AGL, Energy Australia and Origin Energy.

Gross pool market

An electricity trading arrangement used in the National Electricity Market where generators are required to sell the energy they produce. A gross pool market differs from a net pool market where generators only sell energy that they have not already sold through bilateral contracts. See also Net Pool Market.

Hedges

Just like fixing sections of your home loan, you can look at different hedges for your electricity. Such as, ceilings or CAPS to manage the price you are paying for power.

Inter-regional loss factor

A factor applied to electricity transported between National Electricity Market regions that accounts for the energy loss incurred when transporting electricity between two regions’ Regional Reference Nodes (RRNs). See also Regional Reference Node (RRN) and Loss factors.

Intermediaries

Entities that offer a range of services to end users such as providing information and advice on energy use and procurement, supporting negotiations with retailers, and facilitating demand-side response measures. This includes energy brokers and metering providers. Often they will bundle services into ongoing electricity contracts.

Intermittent generation

Forms of generation that cannot control when they supply energy into the electricity grid. Intermittent generation include wind power, solar power, and wave and tidal power. Often these sources are inexpensive to operate. Intermittent generators can only supply energy into the electricity grid when their primary energy source (i.e. wind, sun, wave or tide) is available. See also Base load generation.

J-L

Kilovolt-ampere

The kilovolt-ampere (kVA) unit refers to components of electrical energy which are metered separately to take account of variations in Power Factor between individual connection points. One kVA will be precisely equal to one kilowatt (kW) when the Power Factor is 1.0. End users get less usable energy (kW) than they pay for if the Power Factor is higher or lower than 1.0.

kWatch™ Intelligent Controller

Designed by our experts, the controller is the best match for wholesale. Installed on your site it gives you live data, alerts and automation.

Large-scale generation certificates

Certificates created under the Large-scale Renewable Energy Target (LRET) scheme in the online REC Registry administered by the Office of the Renewable Energy Regulator (ORER) by renewable energy power stations. One LGC is equivalent to 1 MWh (megawatt hour) of eligible renewable electricity generated above the power station’s baseline. End users may be able to benefit from creation of LGCs (e.g. if they operate an eligible biomass cogeneration facility). See also Small-scale technology certificates.

Large-scale renewable energy target scheme (LRET)

An Australian government scheme designed to increase the proportion of energy produced by prescribed large-scale renewable energy technologies. The LRET places an obligation on liable parties (wholesale purchasers of electricity – primarily, energy retailers) to source a specified proportion of their energy purchases from large-scale renewable energy generators each year. See also Large-scale generation certificates and Small-scale technology certificates.

Liquefied natural gas

Natural gas that has been converted into liquid form making it more cost-effective to store and transport.

Load profile

Refers to how an individual end user’s electricity demand changes throughout the day and year. The load profile is one of the main factors that determines what retailers will charge end users for their electricity supply. All else being equal, the more variable and less predictable the load profile, the more fixed rate electricity retailers will charge end users for energy supply. This doesn’t happen with customers who buy wholesale because they are buying exactly what they need. See also Customer Load Variation Charge and ‘Peakiness’ of demand.

Load shifting

A form of demand-side response where an energy user can shift energy consumption from one time of day (or week) to another. Wholesale customers can benefit from this when power prices drop because they are paying the market price. At times when the price goes into the negative – Flow Power customers can be paid to use power. See also Demand-side response.

Load weighted average

A method for calculating an average market price that weights the price in each trading period by the level of demand or volume for that period. This is the price that Flow Power customers pay for their power. It helps customers control their energy costs over time. See also Time Weighted Average.

Loss factors

An amount included in power bills to account for losses that occur in transmission and distribution lines as electricity flows from generators to end users’ sites. These losses have a financial effect on energy retailers because they buy ‘wholesale’ electricity as it enters the transmission system at generator connection points but can only sell the ‘retail’ electricity that is delivered to end users; and the volume delivered is reduced by the losses. Wholesale electricity market rules allow energy retailers to recover the cost of these losses from energy users.

M-O

Market customer

A party that purchases electricity directly from the wholesale market – such as Flow Power. Flow Power enables businesses who use more than 160MWh of power to become market customers.

Market design

The concepts determining the rules that govern how a product is traded.

Market generator

An electricity generator that participates directly in the wholesale market. For each trading period, market generators submit offers for the volume of energy they are willing to supply at specified prices. All grid-connected generators with a nameplate rating of 30MW or more are required to register as market generators.

Market Monitoring

We monitor the spot market for you. Letting you know about changes so that you get the most out of wholesale.

Market price cap

The highest wholesale market price allowed for wholesale market bids or offers. The wholesale market price cannot be greater than the price cap. At the moment, this is set at $14/kWh. See also Market price floor.

Market price floor

The lowest wholesale market price allowed for wholesale market bids and offers. The wholesale market price cannot be lower than the price floor. The price floor can be negative and go to $-1/kWh. See also Market price cap.

Mastery (Flow Power power plan)

Mastery gives businesses certainty in energy by opening access to the wholesale market. Businesses get direct access to the wholesale market price – without the risk of being charged above a set ‘ceiling’ for that quarter. You get access to the floor market price, which can be as low as -$1kWh. If a site is larger than 5GWh, Flow Power looks at a business’ usage profile to tailor Mastery with extra tools to help the business get even more out of the wholesale market.

Maximum demand

The actual highest level of demand within a specified period, also called ‘peak load’.

MWh

Megawatt hour, a unit of electrical energy equal to the work done by one million watts acting for one hour, and is equivalent to 3.6 gigajoules (GJ).

National Electricity Law

The statutory basis for the rules that govern the operation of the National Electricity Market.

National Electricity Market

The electricity market that extends across the interconnected electricity network covering Queensland, New South Wales, Australian Capital Territory, Victoria, South Australia and Tasmania. Flow Power works with businesses from across the NEM.

National Electricity Rules

The rules governing operation of the National Electricity Market. The rules are made under the National Electricity Law and are maintained by the Australian Energy Market Commission. Separate Rules govern operation of the Western Australian Electricity Market. See also National Electricity Law.

National Greenhouse Accounts factors

Prepared by the Department of Climate Change the National Greenhouse Accounts factors are designed for use by companies and individuals to estimate greenhouse gas emissions associated with the consumption of various fuel types.

Natural monopoly

A condition whereby the lowest long-run average cost of production (usually referred to as the ‘efficient’ cost) can be achieved by a single firm through economies of scale; and where entry of a second producer would involve significant and unnecessary duplication of facilities.

Network service provider

An entity that owns and operates a network that transports energy long distances or distributes energy to end users’ premises. These include transmission networks and distribution networks.

Office of the Renewable Energy Regulator

The regulatory authority that oversees implementation and operation of the Large-Scale Renewable Energy Target and the Small-Scale Renewable Energy Scheme. See also Large-Scale Renewable Energy Target and Small-Scale Renewable Energy Scheme.

Options

Options are an actively traded financial product in the NEM managing forward price risk. They give a customer the option to enter a derivative on a future date and at a predetermined fixed price.

P-R

Payback period

Payback period (in yrs) = Includes both energy and non-energy quantifiable costs and benefits. No discounting of future costs and benefits is done when calculating a simple payback period.

Peak demand

The maximum demand on the electricity system at any time during the year. The underlying cost of supplying electricity, and the wholesale market energy price, is typically the highest at peak periods because system reliability requires the dispatch of high cost flexible ‘peaking’ generation such as Open Cycle Gas Turbine (OCGT) and because electricity transmission and distribution networks must be built to withstand peak demand. The price that end users pay for energy is indirectly affected by peak demand, because ‘market sentiment’ engendered by high wholesale market prices may affect the contract price that a retailer is prepared to offer or accept. Flow Power customers can manage the system peak demand by reacting to market signals as they normally would. This helps manage costs throughout the year as well as during the times of the peak demand.

Peak load

The highest level of demand within a specified period.

Peak shaving

A form of demand-side response where an energy user can reduce energy consumption (and demand) during peak periods. Flow Power customers actively peak shave by reaction to the wholesale market signals. We let customers know about peaks through our . See also Demand-side response and Load shifting.

Peakiness of demand

An expression that refers to a particular characteristic of a load profile, which is considered ‘peaky’ if it is particularly variable or volatile. All else being equal, retailers will charge individual end users more for peaky demand. See also Load profile.

PJ

Petajoule (1015 Joules).

Price duration curve

A curve that shows the distribution of trading interval wholesale energy prices over a year in descending order.

Price efficiency factor

All customers who choose Flow Power’s Ceiling Price Power Tool are given a price efficiency factor. This factor is a ratio that represents how they are maximizing the market. Based on whether they use power during the highs or lows of the market, we calculate a ratio against the average price in the market.  So if they take advantage of the lows of the market and ramp up during those times, their price efficiency factor will be low, but if they happen to be using power during peaks it may rise.

For customers, the price efficiency factor gives them a simple picture of how they are tracking against the wholesale market and can be used to modify their ceiling price.

Price signalling

An indirect signal provided by a market price to existing generators and potential new entrants indicating that there may be value in providing additional capacity.

Regional Reference Nodes

A notional reference point in each region of the National Electricity Market where the Regional Reference Price is set for every half-hourly trading interval. Regional Reference Nodes are also used for calculating inter-regional loss factors, which are the loss incurred when transmitting electricity between two regions using regional interconnectors. See also Inter-Regional Loss Factors, Loss Factors and Regional Reference Price.

Regional Reference Price

The wholesale pool price for a particular half-hourly trading interval. See also Dispatch Price, Regional Reference Node and Spot Price.

Representative Assessments

Where corporations conduct energy assessments of sample sites, fleets, technologies or processes that can be shown to be reasonably representative of other sites, fleets, technologies or processes.

Reserve Capacity

Relating to the Western Australian Electricity Market: The amount of reserve capacity required in the Western Australian Electricity Market that is deemed necessary (by the Independent Market Operator (IMO)) to cover expected system peak demand. See also Independent market Operator and South West Interconnected System.

Risk premium

The minimum incremental financial benefit a party requires to compensate them for taking on a certain level of risk.

S-U

Scope 2 emissions

The component of indirect greenhouse gas emissions attributable to the consumption of electricity.

Scope factors

The factors presented through such medium as the National Greenhouse Accounts, that outline the scope 1, 2 and 3 carbon dioxide equivalent emissions, per unit of energy, for various fuel types.

Short-Term Energy Market

The element of the Western Australian Wholesale Electricity Market that provides a mechanism for market participants to ‘balance’ already contracted positions, also referred to as a ‘net pool’. See also Gross pool market, Net pool market and South West Interconnected System.

Small-Scale Renewable Energy Scheme

An Australian Government scheme designed to increase the proportion of energy produced from prescribed small-scale renewable energy systems. The Small-Scale Renewable Energy Scheme places an obligation on liable parties (wholesale purchasers of electricity – primarily, energy retailers) to purchase a required amount of Small-Scale Technology Certificates from providers or owners of prescribed technologies each year.

Small-scale technology certificates

Certificates created under the Small-scale Renewable Energy Scheme in the online REC Registry administered by the Office of the Renewable Energy Regulator. Technologies covered include correctly installed eligible solar water heaters, heat pumps, and small-scale solar panels, wind, and hydro systems. End users may be able to benefit from creation of Small-scale technology certificates (e.g. if they install eligible technologies). One certificate is equivalent to 1 MWh (megawatt hour) of:

  • renewable electricity generated by the solar panel, small-scale wind or small-scale hydro system (unless a Solar Credits multiplier applies); or
  • electricity displaced by the installation of a solar water heater or heat pump.

See also Small-scale Renewable Energy Scheme.

South West Interconnected System

The primary electricity grid of Western Australia. It supplies the majority of the South West region from Albany in the South, to Kalgoorlie in the East and Kalbarri in the North.

Spot market

A market where products or commodities are traded for immediate delivery. This contrasts with forward or future markets where the trade is for delivery of the product or commodity at some time in the future.

Spot price

The wholesale market clearing price for a specific trading interval. It is based on bids that generators or gas traders have submitted detailing the quantity of energy they will supply for a given price, and ranked in order from lowest to highest price. See also Regional Reference Price and Dispatch Price.

Strike price

The price parties agree to in a forward contract.

Telematics

The process of long-distance transmission of computer-based information. Vehicle telematics are systems which use remote devices to help road freight operators by using information and communications technology (ICT) to control or monitor vehicles, drivers, trailers and other mobile assets. Some of these systems can monitor the location of vehicles and their activity at any given time as well as driver performance and personal security.

Time Weighted Average

A method for calculating an average market price that weights the price in each trading period equally without regard to the level of demand or volume for that period. See also Volume Weighted Average.

TJ

Terajoule (1012 Joules).

V-Z

Volume Weighted Average

A method for calculating an average market price that weights the price in each trading period by the level of demand or volume for that period. See also Time Weighted Average.

Western Australian Wholesale Electricity Market

The electricity market within Western Australia that includes the South West Interconnected System and the North West Interconnected System. See also National Electricity Market.

Whole of business evaluation

Whole of business evaluation is the financial evaluation of an energy efficiency opportunity considering all relevant and quantifiable financial costs and benefits (e.g. energy savings and costs, avoided capital investment, OH&S costs and benefits, reduced maintenance, reduced or increased waste and water usage costs and improved productivity). Whole of business evaluations are used to calculate payback periods.

Wholesale price

The price of electricity or gas set through the dynamics of supply and demand by producers and consumers participating in a traded market. The wholesale price fluctuates from period to period and can take on extreme (and sometimes negative) values.