Is “Shake-Up” too strong a phrase to describe the pending changes underway in Australia’s energy markets?
Let’s look at 10 changes beginning with the electricity market, followed by gas market:
1
ISP: AEMO has struggled to deliver the Integrated System Plan (ISP) for 2019 and consequently re-named the delayed document to ISP 2019/20 with a draft delivery due in December 2019.
a – This delay reflects the complexity of forecasting the NEM given the wide-ranging changes in technology, falling cost structures, increasing penetration of renewable generation – all set amid the consumer led behind-the-meter ‘energy revolution’
b – AEMO has released the ISP 2019/20 assumptions following industry consultation and they significantly differ from the previous ISP 2018, only released last year. How things have changed?
2
Solar Farms Stress: Solar Farms have had an unexpected early arrival of unfavourable changes to the Marginal Loss Factors, shaving profits from the bottom line, distressing owners. Furthermore, some solar farms have been restricted by AEMO due to concerns of voltage fluctuations in the local area cutting their permissible output by up-to half the capacity. Off-takers to these projects have been adversely impacted. These changes have shaken new project developers, as well as potential lenders to large scale solar projects
3
Hybrid Energy Projects Emerging: Developing hybrid renewable parks is fast becoming the industry’s project development preferred business model. Single technologies are being exposed to highly correlated competitive generation (including roof-top solar), and therefore a better risk managed strategy is to diversify and manage the value of the asset amidst the growing ‘duck curve’ phenomena. The emerging projects include:
a – Kennedy Energy Park in Qld, due to come online soon and consists of 43MW wind, 20MW solar and a 2MW battery
b – Goyder South in SA is being developed by Neoen and is proposing 1,200MW wind, 600MW solar and 900MW battery
c – Barossa Valley in SA is being developed by RES Australia and is proposing 183MW wind with 215MW battery
d – Golden Plains in Vic is being developed by WestWind Energy and is proposing about a 1,000MW wind farm with potentially a large battery
4
Marinus Link Acceleration: TasNetworks have just released a plan to upgrade the proposed Marinus Link to 2 x 750MW (1,500 MW) with an earlier commissioning target date of 2027. Originally, the project was planned to align with the retirement of Yallourn Power Station Energy in 2032. The Business Case Assessment in due to be released next month.
5
CleanCo Queensland: CleanCo Queensland has commenced trading forming Queensland’s newest energy company charged with delivering electricity affordability and contributing to the achievement of Queensland’s 50% renewable target by 2030. Effective from 31 October 2019, CleanCo has taken ownership of the critical renewable asset of Wivenhoe Power Station, Swanbank E gas power station and three far north hydro power stations (Barron Gorge, Kareeya and Koombooloomba). These assets were transferred from CS Energy and Stanwell Corporation, with a combined capacity of 1,120MW.
6
Wind Farm Owners Acquiring Gas Power Stations: Renewable players such as Tilt Renewables and Infigen Energy have broadened their portfolios through the acquisition of gas power stations. Infigen has acquired the Smithfield Power Station from Visy Industries, as well as the one of the emergency diesel powered gas turbines in SA. Tilt Renewables acquired the other SA emergency diesel gas turbines. The plan is to re-locate and use these units to firm their renewable generation portfolio. Such a move improves their retailing credentials and enhances their portfolio management capabilities
7
Shell Energy Australia acquiring ERM Power: The second largest Commercial and Industrial retailer in the NEM, ERM Power, is being acquired by Shell Energy Australia. The transaction is set to be completed this month, with the acquisition aligning with Shell’s global ambition to expand their integrated business, and build upon Shell Energy Australia’s existing gas marketing and trading capability. ERM is planned to become Shell’s core power and energy solutions platform.
8
“Big Stick” Energy Legislation: A Senate Committee has endorsed the so-called Big-Stick legislation that would force the break-up of large energy companies. The amendments include any divestment would be taken as the last resort measure. The forced divestment would be ordered by the Federal Court following a recommendation of the ACCC, with the legislation having a sunset clause in 2024. The legislation is expected to be passed this month and will have a 6-month delay before becoming effective.
9
Hydrogen Strategy Group: Our Chief Scientist, Dr Alan Finkel is due to release the long-awaited Hydrogen Strategy study in December. The insights already shared by Dr Finkel outline the argument that a high-density transportable form of energy is required, and the best candidate is hydrogen. In the near term, Hydrogen could be introduced into Australia’s existing gas network for heating and cooking, and as low emissions alternative to diesel for long-distance heavy transport. In 20 or 30-years, Australia could be exporting 30 mega tonnes of hydrogen annually which would match the 70 Mt of LNG Australia shipped in 2018; noting Hydrogen processing requires a material amount of electricity.
Gas Market Shake-Up: Changes in the landscape of the Australian gas market include:
a – Santos has acquired ConocoPhillips interests in the:
– Darwin LNG processing facility (57%)Bayu-Undan offshore gas field
– Barossa offshore gas project (37.5%)
– Poseidon field (40%), and
– Athena field (50%)
b – ExxonMobil is seeking a buyer for their 50% stake in the Bass Strait oil and gas joint venture with BHP
