AEMO considers options for better load management in VIC and SA

The Australia Energy Market Operator (AEMO) continues to estimate there could be a lack of reserve in both Victoria and South Australia for the 2017/18 summer. The latest projections show reserve shortfalls above 800 MW for Victoria and up to 330 MW for South Australia.

The reserve shortfalls have been present for long enough that AEMO no longer believes there will be a sufficient market response unless they intervene.

AEMO has used provisions under the Reliability and Emergency Reserve Trader (RERT) rules to ask for expressions of interest for additional generation to be brought on-line, or for a reduction in demand. AEMO is looking for a RERT Panel which can provide short notice (between three hours and seven-day notice) and medium notice (seven days to ten weeks) support. Members of the panel either agree terms upfront (for short notice) or agree to negotiate (for medium notice) should AEMO require their services. The market operator has also started a long notice tender for RERT which is a full tender for the services.

Any facility which can reduce consumption by at least 10 MW either on its own or across multiple sites during summer can participate if they can maintain their reduction for at least 30 minutes. AEMO is willing to consider relaxing some of these requirements. It is also worth noting the scheme is open to participants from other regions if it supports reliability in Victoria or South Australia.

AEMO is offering to provide payment in return for participation in the RERT. Payments can be for availability usage or early termination.

Submissions for the RERT Panel or long notice RERT is due 7 July 2017.

For more information on the RERT, please visit AEMO’s website.

If you’re concerned about your energy needs in Victoria, South Australia, or elsewhere in Australia – contact us to discuss how we can help.

CEOs concerned about energy price rises

The CEO Business Prospects Survey conducted by The Australian Industry Group (AI Group) has identified a concern among CEOs about a rise in energy prices in 2017.

The annual survey received responses from 285 CEOs representing all major non-primary private-sector industries Australia-wide. The industries were grouped into mining services, manufacturing, construction, and services. Edge was particularly interested in the results as our core business is supporting clients from these industries in managing their energy costs and portfolios.

Many respondents are cautiously optimistic about business conditions in 2017 but maintain an almost neutral position when it comes to business investment and employment. There are several positive factors that contribute to this optimism including; low interest rates, low inflation, low unemployment, and a lower trading range for the Australian dollar.

Data from the survey identified several key areas CEOs were concerned about for 2017. One of these was the expectation that energy prices would negatively impact their business throughout the year. 51 per cent of CEOs expect their energy costs to rise in 2017. This is in addition to some reporting a doubling or tripling of their energy costs in 2016. These are real concerns, and ones we have seen first-hand.

It was interesting to note that businesses involved in this survey were more in favour of increasing sales or developing new products rather than managing operational costs. Although sales and product development are important, prudent management of operational costs should be an ongoing priority for businesses.  Especially the costs that can be structured in a way to reduce risk and exposure to changeable markets.

Edge understands the effect energy prices can have on a business. With the benefit of extensive experience and daily immersion in the market, we have a depth of knowledge in the energy industry that can’t be matched. It has enabled us to develop procurement strategies and reporting that are focused on mitigating risk and reducing energy costs. Our clients get the benefit of years of experience when they work with us. Working closely with our clients and tailoring solutions for their energy portfolios has resulted in savings of millions of dollars for them over the last decade.

Read the full report at http://cdn.aigroup.com.au/Reports/2017/Business_prospects_Jan2017.pdf

How are energy prices affecting your business in 2017?  Contact us to see how we can help. 

ARENA launches new investment plan

The Australian Renewable Energy Agency (ARENA) has this month launched its new Investment Plan outlining the priorities which will guide funding from their Advanced Renewables Program. Funding is expected to reach $800 million over the next few years.

The Investment Plan is part of ARENA’s commitment to demonstrate how renewable energy can contribute to a reliable, secure, and affordable energy system for Australians.  ARENA will address these and other challenges as Australia moves towards a low emission economy.

“We are looking for new ways to adapt our electricity grid to increase productivity, make the grid more flexible and better integrate renewable energy so it can be stored and shared when and where it is needed,” ARENA CEO Ivor Frischknecht said.

“As part of this focus, we will be looking at a range of flexible capacity technologies and mechanisms from storage to demand response that will allow us to match electricity supply and demand at all times,” Mr Frischknecht said.

ARENA says that big ideas are the key to transforming Australia’s renewable energy future and their job is to bring these ideas to life.  Their funding, knowledge, and network can assist in bringing projects from innovation stage through to commercialisation.

They have unveiled four investment priorities as part of their Innovating Energy plan.

Delivering a secure and reliable electricity system

  • Investment in innovation
  • Deliver affordable low emission solutions
  • Improve grid stability
  • Better integrate renewable energy so it can be stored and shared when needed
  • Real-time detection and response to power issues
  • Show that renewable energy can add value to the electricity system

Accelerating solar PHOTOVOLTAIC (pv) innovation

  • ARENA is seeking new technologies and tools to reduce costs of PV systems, improve reliability and develop materials
  • Solar could produce up to 30 per cent of Australia’s electricity within 20 years
  • Contribute to research and development to make solar PV more efficient and affordable

Improving energy productivity

  • Reduce energy costs and emissions in the transport, building and industry sectors
  • Wants to help Australia meet and exceed national energy productivity plan goal
  • Wants to invest in innovation to improve energy productivity
  • Value chain optimisation

Exporting renewable energy

  • Create new, scalable export value chains in renewable energy
  • Make sure Australia is at the forefront of exporting renewables in the future
  • Will create jobs and contribute to a global transition to low emissions

ARENA is looking for proposals that align with these objectives. All funding applications from 1 May 2017 will be considered with these priorities in mind.

You can find example proposals and more information about ARENA’s investment plan here.

ARENA has outlined the application process and conditions of their Advanced Renewable Program here.

We have helped several companies achieve success with their ARENA applications because of our renewable energy expertise. How can we help you? Call us on 07 3232 1115.

Planning Assessment Commission (PAC) to determine Springvale Mine future

The NSW Government Planning Assessment Commission (PAC) met yesterday to discuss licence conditions for EnergyAustralia and Centennial Coal’s Springvale Water Treatment Project. The Water Treatment Project was proposed to meet conditions as part of a 2015 approval for the expansion of Springvale Mine.

The approval condition requires the mine to reduce its release water salinity from 1,200 microSiemens per centimetre (µS/cm) to 1,000 µS/cm by June 2017, and 500 µS/cm by 2019. Failure to meet the condition could result in a loss of licence for the Springvale Mine. This closure would mean there is no coal available for EnergyAustralia’s Mount Piper Power Station which could result in a shut down.

The proposed Water Treatment Project is for waste water to be pumped to Mount Piper Power Station for treatment and then reused. The companies say this will eliminate any need to release water into the catchment. Environmental groups are concerned that excess water not used by the station would still be released.

EnergyAustralia is hopeful that an amended plan which includes storage of excess water in Thompsons Creek Reservoir will be acceptable.

EnergyAustralia and Centennial Coal are also asking to suspend water quality consent conditions until the Water Treatment Project is complete.

The outcome of the PAC meeting is not yet known.

Have forward prices peaked?

Following the closure of Hazelwood Power Station in March 2017, forward prices quoted on the Australian Stock Exchange (ASX) increased across all regions and time periods. However more recently, forward prices were starting to soften until threat of industrial action at Loy Yang A and associated mine caused concern over energy security and availability of supply. The proposed industrial action was called off by the Fair Work Commission and the reduced prices have continued. The price changes are particularly pronounced in Victoria, though the northern states of New South Wales and Queensland have also been affected.

There has been issues at the Loy Yang A plant, with three of the four units being out at various stages last week. This has caused spot prices to increase in Victoria and continues to put upwards pressure on forward prices. Snowy Hydro’s Murray unit has increased its generation to cover the loss of the Loy Yang A units, however this has meant that storage of water at Snowy Hydro has reduced. To date, Snowy Hydro has been conserving water and once all the Loy Yang A units are back online it is expected that they will continue to try and conserve water.

Q3 and Q417 forward prices in Victoria have not reduced by as much as would otherwise be expected, and 2018 forward prices have increased.  This is due to the increased spot prices that we have been experiencing.

The last base load unit (Eraring unit 2, 660 MW coal) has returned to service in New South Wales. This helped to prevent the high spot prices in Victoria from affecting New South Wales and Queensland. The forward curve in New South Wales for Q3 and Q417 has reduced over the last week. The 2018 prices are less clear with some increases and some decreases. The overall trend appears to be lower prices however, the market is concerned over losing additional generation in Victoria. This is keeping forward prices higher than they otherwise would be in 2018. If there is further loss of base load generation, then forward prices could increase again. If base load generation comes back on and continues to run without further interruptions, the 2018 prices are likely to soften further.

Budget 2017: Morrison reveals Energy for the Future package

Scott Morrison last night delivered his 2017-18 federal budget which included a commitment from the government to deliver affordable and reliable energy through its energy security plan.

He reiterated a number of prior announcements including; Snowy Mountains Scheme 2.0, expansion of pumped hydro storage schemes in Tasmania, and a $110m equity investment in a solar thermal project in Port Augusta, South Australia.

The Federal Government announced it’s in negotiations with New South Wales and Victorian State Governments to buy Snowy Hydro outright. The government currently owns 13% and experts are quoting a price around $6 billion to purchase the remaining share.

Unfortunately, there was no certainty given to any future policies around carbon or renewable projects beyond 2020.

The Energy for the Future Package included the following expense measures under Environment and Energy:

  • $19.6 million over four years from 2017-18 for the Gas Market Reform Group to accelerate reforms to improve transparency and efficiency in the gas markets;
  • $28.7 million over four years from 2017-18 to encourage and accelerate the responsible development of onshore gas for the domestic market;
  • $7.6 million in 2017-18 for pre-feasibility studies and cost-benefit analyses of constructing pipelines to link Northern and Western Australia gas reserves to the east coast, through Moomba in South Australia. Australian Energy Market Operator (AEMO) will receive funds from this allocation to study potential improvements to the National Gas Services Bulletin Board to improve publication of real-time gas availability. This will allow the market operator, businesses, and investors to make informed decisions about gas market operations;
  • $30.4 million over four years from 2017-18 for new combined geological and bioregional resource assessments to assess the potential impacts on waterways and aquifers in three prospective onshore unconventional gas sites;
  • $13.4 million over four years to support an Energy Use Data Model to improve forecasting and planning for energy markets – a critical measure to ensure the future energy market is more responsive to the needs of all consumers. The Model is an online data platform which links existing and new energy use datasets to deliver improved market forecasting and research outcomes.

Treasury expense measures for the Energy for the Future package included figures for previously released policy on gas and electricity monitoring by the Australian Competition and Consumer Commission (ACCC), which included:

  • $6.6 million over three years from 2017-18 to the ACCC to establish a monitoring regime for the gas market. The ACCC will use its inquiry powers to compel the gas industry to provide greater transparency of transactions in the gas market, including factors affecting supply and pricing;
  • $7.9 million in 2017-18 to the ACCC to review retail electricity prices. The ACCC’s inquiry will consider the competitiveness of offers available to larger business customers and consider wholesale electricity market conduct, price, and cost issues where relevant amongst other key components;
  • $8.0 million in 2017-18 to extend funding support for the Australian Energy Regulator (AER), a constituent part of the Australian Competition and Consumer Commission, for a further year. This funding will ensure the AER is sufficiently resourced to undertake its legislated functions pending the outcome of an independent review of the AER’s resourcing requirements.

Update: Loy Yang A Industrial action cancelled

The Fair Work Commission (FWC) today ruled to terminate proposed industrial action at Loy Yang A power station and associated mine.

The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) had voted to take strike action due to a dispute with AGL over pay and conditions for its members.

AGL determined that the mine and power station couldn’t be operated safely if the strike went ahead and notified the union it would conduct a lock out.

The market operator (AEMO) was informed of AGL’s decision and determined that the loss of the power station and mine would present difficulties for the market. AEMO is concerned a reduction in generation could result in a period of involuntary load shedding.

The Victorian Government made a submission to the FWC to have the industrial action overturned. FWC found it likely that the lockout would be necessary, and the power station and mine shutdown would have a severe economic impact and could put health at risk. It ordered both the union and AGL to terminate industrial action.

The market reacted with prices reducing in Victoria. Other regions are also generally trading lower.

There is still no solution to the two-year standoff between AGL and the union, however the immediate crisis has been averted.

FWC order can be found on its website: https://www.fwc.gov.au/documents/decisionssigned/html/pdf/2017fwc2533.pdf

You can read our previous news on this action here 

Update: Potential shut down of Loy Yang A Power Station

Updates have been received following yesterday’s announcement about proposed industrial action at the Loy Yang A power station and associated mine. The market operator (AEMO) has received updated information on the availability of Loy Yang A and the capacity of Engie’s Loy Yang B which takes coal from the mine.

Prior to the announcement and these further updates,  the supply / demand balance was already tight particularly during summer.

Figure 1: Medium term outlook 4 May 2017

Source: AEMO

The updates received from the Loy Yang A and Loy Yang B power stations show reserve shortfalls increasing and a lack of reserve almost every day starting May 10, 2017.

Figure 2: Medium term outlook 5 May 2017

Source: AEMO

The lack of reserves have not flowed into other regions but trading will be affected by the loss of supply in Victoria. At this stage, AEMO is still seeking a market solution to the reserve shortfall which could happen as early as next week. It has said in a statement that it is working with AGL, Engie and the Victorian Government to find a solution.

The Victorian Government has also released a statement advising they will make an application to the Fair Work Commission to seek termination of the industrial action. The negotiations between AGL and the unions have been running for two years and the Victorian Government is urging both parties to resolve outstanding issues.

It is expected that trading across all regions will be affected. The risk of power shortages is likely to increase prices until the dispute is finalised. The last time industrial action was announced, it was called off the next day. It is hoped that the parties can resolve their issues as soon as possible so that normal operation of the market can continue.

Proposed shut down of Loy Yang A could put energy security at risk

Earlier today, AGL announced their intention to take industrial action against the workers at the Loy Yang A power station and associated mine.

AGL informed workers they would be locked out from May 15, 2017. The lock out is in response to the Electricity Trades Union (ETU) announcing industrial action. The disagreement stems from an ongoing dispute over pay and conditions at the Loy Yang A facility.

This is not the first time that AGL has threatened to lock out workers over this dispute. A similar announcement was made in December 2016. However, the union decided to cancel its industrial action at that time, and AGL didn’t go ahead with the lock out.

A closure of Loy Yang A would be devastating to the market at a time when Hazelwood has just been closed. Loy Yang A has a capacity of 2,300 MW and is often operating near its capacity.

Victoria’s total coal generation fleet is 5,055 MW and the market would struggle to cope with the loss of Loy Yang A. The medium term supply / demand outlook from the market operator (AEMO) shows that there is insufficient reserves to meet demand if Loy Yang A comes offline. There is roughly 1,000 MW of spare capacity on May 15 when the lock out is proposed.

Figure 1: Medium Term Outlook for Victoria

Source: AEMO

At this stage AEMO is seeking advice from AGL on the duration of the outage and will update the outlook as soon as they get more information.

Clean Energy Regulator Releases Report on 2016 Renewable Generation

The Clean Energy Regulator last month released their report into the current status of renewable energy in Australia. The report titled ‘Tracking towards 2020: Encouraging renewable energy in Australia’, reviews operations in 2016 and presents information regarding progress towards the Federal Government’s renewable energy target.

2016 was always going to be a key year in meeting the Government’s target of 33,000 GWh of new renewable generation by 2020. Although there was insufficient renewable generation built during 2014 and 2015, this report maintains an optimistic view that the target can be reached on the current trajectory.

Its fact sheet declares there were more than double the number of new renewable power stations accredited in 2016 than in 2015 and there was five times the amount of ‘committed and probable’ capacity.

These numbers, although correct, fail to deal with the actual needs of the scheme. Despite having twice as many power stations, capacity only increased by 65 per cent (from 300 to 494 MW). This represents an impressive increase but will still need to ramped up. With more than 20,000 MW of potential projects currently listed, there is plenty of potential new generation. It is converting these potential projects into actual projects that is going to be the challenge.

Financiers are generally risk adverse and use highly pessimistic curves to mark the revenue of projects. Until recently, it has been difficult to fund merchant projects. In these instances, it has meant a power purchase agreement for most of the project has been needed before the project could be developed. Retailers can pass on costs to customers so their motivation to take on risk to bring down prices is questionable. Large customers are still not used to signing long-term (10+ year) contracts which make them an unlikely source of funding. But, there is a growing acceptance of merchant risk among international financiers, however, it is still emerging in Australia.

The report considers that 3,000 MW of new renewable generation will have to be committed to during 2017. There are more than enough projects available to meet this target but the question is how many new projects can be supported by the grid?

There are several changes to legislation on the way to support fast response frequency services which will support the integration of renewable generation. There is also federally supported investigations underway to explore pump-storage hydro in South Australia and expansion of current pump-storage hydro schemes in New South Wales and Tasmania. These storage facilities are considered renewable enabling technologies. Both the proposed change in legislation and the pump-storage hydros will have a positive impact on the future of renewable technologies. Neither is likely to have a significant impact in 2017 (or even before 2020). It is also important to consider if the industry can add this amount of new renewable generation without upgrades to the notoriously slow transmission network.

In the short term, the optimism from the Clean Energy Regulator has helped bring down the price of LGCs and even caused a reduction in the energy prices. In the medium and long term, it will depend on the ‘poles and wires’ to see if the interest in new renewable generation can be converted to action in reducing carbon pollution in Australia.

The full report from the Clean Energy Regulator can be found here: https://goo.gl/1LpcWU