TTEG COMMENTARY
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Given the recent supply disruptions and shifts in generation, it's important to keep a close eye on your Energy Procurement Plan. As previously discussed, our strong recommendation is you have a plan that starts at least 18 months out from your current contract end date.
It is all about managing your pricing risk. This includes monitoring the market including the operational status of key power stations and other variables and adjust your energy strategies accordingly.
To assist, we have provided market insights in the Wholesale Market Update of this newsletter.
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With futures pricing easing due to increased wind generation and lower demand, you can monitor the market to secure favourable long-term energy contracts. But when should you act?
In navigating the energy minefield, timing is critical because if you are nearing your contract end date and prices rise, this you will be stuck with these higher prices.
If you don’t have an Energy Procurement Plan, or are unsure how effective it is, or simply want some advice, then we can help.
WHOLESALE MARKET UPDATE
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Outlook
Price volatility is likely to continue, driven by the variability of renewable generation. However, increased storage capacity and improved demand management strategies are expected to mitigate some of these fluctuations.
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Futures pricing has eased across all states and future years, attributed to lower national demand, increased wind generation, and easing hydro and gas costs.
The market is expected to see further integration of renewable energy sources, with several large-scale battery projects set to come online in the coming months. This is anticipated to enhance grid stability and provide more opportunities for price arbitrage.
Supply and Generation
Increased Wind Generation: In August, we observed a continued rise in wind generation across Australia, particularly in the southern states. This increase contributed to a decrease in wholesale electricity prices during certain periods, as wind farms produced significant output, especially on windy days.
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Solar and Hydro Performance: Solar generation remained strong, particularly in the middle of the day, while hydro generation played a crucial role in balancing supply during evening peaks.
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Regulatory and Policy Developments: The ongoing transition to renewable energy continues to be a focal point in policy discussions, with several new projects in wind, solar, and battery storage announced or progressed during August.
Debates around the introduction of a capacity market in the National Electricity Market (NEM) gained traction, with stakeholders discussing its potential to enhance reliability and incentivize new generation capacity.
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Current Supply Disruptions:
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NSW: Two units at Eraring are down for unplanned maintenance with estimated return-to-service dates of August 22nd and 25th.
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QLD: The return to service of the Callide C3 unit in Queensland, which was anticipated earlier, was rescheduled to August 26, 2024, due to the need for critical repairs. The delay had a moderate impact on supply in Queensland, leading to tighter market conditions during peak demand periods​. Additionally, Tarong North Power Station experienced an overnight trip, although it appears there were no load deratings.
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VIC: Loy Yang tripped last Thursday but has since been restored. This caused a temporary drop in grid system frequency
Market Prices
August marks the tail end of winter in Australia, typically leading to high energy demand for heating, especially in the southern states. Despite this, overall demand was slightly lower compared to the same period in previous years, partly due to milder weather and energy efficiency improvements across the residential and commercial sectors.
Wholesale electricity prices continue to fluctuate, with lower prices driven by increased wind and solar generation. However, during periods of low renewable output and higher demand, prices spiked, particularly in regions reliant on fossil fuel generation.
Regulatory interventions and the use of demand response mechanisms helped mitigate some of the extreme price spikes. The Australian Energy Market Operator (AEMO) continued to monitor and manage supply-demand imbalances effectively.
ELECTRICITY FUTURE PRICING CHARTS
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The Australian Energy Market Commission (AEMC) has introduced new rules to improve how customers manage their energy use and maximise value from their consumer energy resources (CER), which include solar panels, batteries, and electric vehicles.
With predictions that by 2030, one in eight households will have a battery or electric vehicle, and one in four by 2050, these rules aim to enhance the integration of CER into the energy system.
Requested by the Australian Energy Market Operator (AEMO), the changes will simplify how large customers interact with multiple energy service providers, enable the separate management of flexible CER (like EV chargers and batteries) from passive loads (such as fridges and lights), and use built-in measurement in technologies like EV chargers.
This approach is expected to drive innovation, increase competition, and streamline CER integration, potentially saving up to $6.3 billion by 2040 and generating benefits of up to $100 million over 20 years.
Additionally, the reforms include speeding up the rollout of smart meters and improving access to real-time energy data, supporting a more efficient and low-emissions energy system.
QLD Energy Developments
Major Qld wind farm enters construction phase
CS Energy has acquired the 285MW Lotus Creek Wind Farm for $1.3 billion, Queensland’s first fully public wind project to enter construction. Featuring 46 turbines, it will power 150,000 homes, create 400 construction jobs, and 15 ongoing roles. Backed by $924.3 million in government support, construction begins in late 2024 and the farm is expected to be operational by 2027.
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Qld gas project expansion
In related news, Arrow Energy is expanding its Surat Gas Project with the $4 billion SGP North development in Queensland's Western Downs. The expansion will add 130TJ of gas per day, include 450 new wells, a compression station, pipeline, and infrastructure upgrades, and create around 400 local jobs. Construction starts late 2024, with first gas expected in 2026.
AEMO Unveils Updated Roadmaps to Tackle Technical Challenges of Renewables Transition
The Australian Energy Market Operator (AEMO) has released two updated engineering roadmaps for the National Electricity Market (NEM) and Western Australia's SWIS. These reports tackle the technical challenges of transitioning from coal generators to renewable technologies like solar, wind, hydro, and batteries.
AEMO CEO Daniel Westerman noted that renewable energy currently meets 40% of Australia’s electricity needs, with peaks of 72% on the east coast and 84% on the west coast. The updates aim to address technical issues and maximise the use of renewables. Key achievements include new standards for inverters and rooftop solar systems. The SWIS Engineering Roadmap builds on previous work to support more renewables in Western Australia's main grid.
These efforts are part of a broader push to ensure a secure and reliable power supply while increasing the role of renewables in the energy mix.
South Australia Achieves World-First with Rooftop Solar Meeting Entire State's Electricity Demand
On December 31 last year, South Australia achieved a historic milestone when rooftop solar power briefly met 101.7% of the state’s electricity demand. For a short period, solar energy alone surpassed the total electricity needs of the entire state, setting a world record for a grid of its size. This remarkable achievement demonstrates the significant potential of renewable energy to power entire regions and marks a crucial step towards a grid that could eventually operate without fossil fuels.
During this milestone event, the excess solar power—amounting to 26 MW—was exported to Victoria, showcasing the capacity of South Australia’s solar infrastructure. This achievement underscores the progress made in integrating distributed solar energy into the grid and offers a glimpse into the future possibilities of renewable energy dominance.
AEMO’s updated engineering roadmap highlights this achievement and outlines plans to address technical challenges, aiming to enable more frequent high-renewable periods and eventually a grid with no fossil fuels.
AGL Celebrates Success of First Big Battery and Renewables Shift
AGL has celebrated the success of its first big battery at Torrens Island, South Australia, which achieved $28 million in profits within nine months. This 250 MW, 250 MWh battery marks AGL's move from coal to renewable energy, with plans to boost battery capacity 20-fold by 2030.
The company is also developing larger batteries at Liddell and other sites across NSW, Queensland, and South Australia. Despite federal interest in nuclear power, AGL has no plans to invest in it and will close its coal generators by 2035. AGL's recent profits, up to $812 million, reflect higher wholesale prices and coal output, but the company is focusing on expanding its renewable energy assets and reinvesting in the energy transition.
East Coast Gas Market Forecasts Surplus for 2025 Amid Price Declines and Potential Shortfalls
Australia’s east coast gas market is projected to have a 69 to 110 petajoule surplus in 2025 if Queensland LNG producers export all uncontracted gas, according to the ACCC.
However, there may be a shortfall in the third quarter due to high winter demand, though the risk is lower with Eraring Power Station's extended operation. Additional gas might be needed domestically, and Queensland gas will need to be sent to southern states to prevent shortages.
Gas prices have been falling, with producer prices down 2% and retail prices down 16% for 2024 supply. The impact of recent changes in the Gas Market Code on prices is still unclear.