Oct-20 Energy Market Wrap

Introduction

During the month of October there have been significant market developments with prices rising, numerous project developments and renewables continuing to impact the grid

Market Prices

The strengthening of market prices was evident in:

1. Spot electricity prices across all regions and in particular SA rebounded from the record low in September
2. Gas spot prices strengthened pushing above $5.00/GJ
3. Forward prices generally rallied, particularly in the Cal-22 and Cal-23 periods
4. Nearer term LGC prices softened such as the spot, Cal-21 and Cal-22, although Cal-23 and Cal-24 strengthened

Price Trends

Intraday spot electricity prices continue with the trend of overnight prices strengthening, daytime price softening and the evening peak strengthening and becoming more volatile.

Impact of Renewables

Renewables (including Hydro) continue to have a profound impact on the market with more than 30% market share, as coal-fired generation share decreases. For many half hours of the month in SA, renewables represented more than 90% of the generation in the State and often the State was exporting to Vic at the time.

Scheduled demand continues to be impacted by the renewable sector, particularly on sunny and windy days. SA set a new low record of 295MW on Sunday 11 October.
Coal fired generation had the second lowest monthly generation on record largely due to outages.

Market News

Key news items for the month have been classified for ease of reading and contain:

1. Renewable
   a) Solar PV installations have been strong, except for Vic
   b) WA released an energy transition blueprint featuring Solar PV and batteries
   c) Generation projects:
   i. New projects were committed in SA and Qld
   ii. Dundonnell (Vic) wind farm powers up after turbine fault
   iii. Warradarge wind farm (WA) is set to be fully operational by month end and Granville Harbour (Tas) last turbine is installed
   iv. Crookwell 3 project gets planning approval
   v. The Asian Renewable Energy Hub deemed as a major project and Oven Mountain pumped hydro is given critical status by NSW Government
   vi. About 1,500MW of solar and wind projects are for sale
2. Storage
   a) Projects progressing include the Vic 300MW Big Battery project and TransGrid’s 50MW facility
   b) A new hydrogen based energy storage system is released at 3 times the cost and power of a Tesla Powerwall
3. Transmission
   a) Project Energy Connect cost increases from $1.5bn to $2.5bn, while ElectraNet and TransGrid are seeking a regulation change to receive lower cost funding
   b) Powerlink is proposing to build a synchronous condenser and then sell as a service to future wind and solar projects

Special Features

This month we look at:

1. Future Gas Prices – in what direction are they heading?
2. Gas powered generation continuing to be bumped in the queue
3. Solar farms and Solar PV price performances
4. Batteries – the Lithium Decade
5. AEMO Statement of Opportunities comparison between 2019 and 2020