Power Demand across the NEM

The first half of April 2018, saw abnormally warm conditions across Australia. It was unprecedented in intensity and persistence and did not break down until the end of the month. This continued through May and June, with both months recording above average temperatures across most regions. In New South Wales, Sydney experienced one of its warmest Autumns.

On the back of these higher temperatures, all regions recorded higher average quarterly demand when compared to the same period last year. In fact, some regions observed an average daily increase of 250MW. The only exception was South Australia, which remained relatively similar to Autumn 2017.

Increased demand was during daylight and peak hours, while milder nights kept demand softer than in previous years. By the end of May, demand switched from a typical Autumn demand curve to a winter shape, characterised by morning and evening peaks. Pricing impacts followed, with corresponding strong morning and evening prices.

Supply side factors

There were several planned large generator outages for black coal generators in NSW and Queensland, as well as forced outages for Victoria’s Loy Yang A and Yallourn power stations. These outages, coupled with increased demand, could have impacted prices but higher amounts of wind and hydro generation kept prices under control.

This Autumn, there was close to 1000GWh more available wind generation and 1500GWh more hydro generation than the same time last year.

We saw an increase in utility-scale solar generation coming online, however, its contribution to meeting demand is still small (0.2%). Gas prices also eased over this quarter, with generation down more than 1000GWh when compared to Autumn 2017. In addition to this, Victorians and South Australians benefitted from lower overnight power prices due to an unplanned extended Basslink outage. An issue with the planned 14-day outage resulted in the Basslink interconnector being kept offline for an additional 45 days. This kept overnight power prices lower than what would have otherwise been the case, particularly under high wind conditions because the power couldn’t be transmitted to Tasmania. South Australia’s 100MW Hornsdale Power Reserve continued to provide significant FCAS to the market, helping keep downward pressure on FCAS prices – even under network outage conditions.

Spot Price Outcomes

Coal-fired generators in NSW and Queensland maintained their influence over spot power price outcomes in the NEM, setting a floor in their bidding around 5.5-6c/kWh, with additional capacity bid progressively up to 10c/kWh. In NSW, Snowy Hydro influenced spot outcomes by conserving the state’s water storages with modest capacity bid at 7c/kWh, and significant volume protecting the 30c/kWh cap, which would not have been required to generate unless demand was strong.

On some occasions, gas generation across the NEM has set prices, particularly during peaks, and also supported spot prices at the 6-7c/kWh range.

Across the NEM, the bidding pattern to resulted average daily spot price outcomes of 5-8c/kWh on days of moderate demand.

High wind farm output, particularly during low power demand periods overnight and on weekends resulted in lower spot prices in Victoria and South Australia. In these instances, prices averaged 2-4c/kWh with the occasional negative spot price making an appearance. The system strength constraint in South Australia continued to bind wind farm generation this quarter, with the number of market interventions by AEMO at an all time high.

April 20186.37c/kWh7.51c/kWh7.40c/kWh9.84c/kWh
May 20186.51c/kWh7.73c/kWh7.98c/kWh8.85c/kWh
June 20188.04c/kWh10.07c/kWh9.37c/kWh10.59c/kWh

Source: AEMO

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