Coopers Gap Wind Farm moving forward

AGL has received a development permit from the Queensland Government to build up to 115 turbines for the Coopers Gap Wind Farm. Located near Cooranga North, between Kingaroy and Dalby, the Coopers Gap Wind Farm (up to 460 MW) will be the second wind project offered to the Powering Australian Renewables Fund (PARF).

On 27 July 2016, AGL announced QIC as its equity partner in the $2-3 billion Powering Australian Renewables Fund (PARF). PARF was created by AGL to develop approximately 1,000 MW of large-scale renewable energy projects.

To date, PARF has reached financial close on two solar plants (Broken Hill 53MW and Nyngan 102MW) and Silverton Wind Farm (200MW).

SA Electricity Prices to be Highest in the World

Electricity retailers will increase their standard pricing from 1 July 2017 for all states in the National Electricity Market (NEM), with South Australia (SA) tipped to have the largest increase.

As part of their annual review of energy tariffs, the three biggest retailers have cited increased wholesale energy costs as the main reason for the significant increases.  The retailers say the increased wholesale costs have been caused by the closure of baseload coal-fired generation and the increased costs of gas.

Residential customers in SA will see an average increase of 19.9 per cent from EnergyAustralia, 18 per cent from AGL, and 16.1 per cent from Origin Energy.  Experts are concerned that household prices in SA are set to be the highest in the world, putting immense pressure on the household budget.

In today’s ever-increasing energy market, it is important to get to know your energy usage.  Edge’s tips for residential and small to medium business customers are:

  • Understand your consumption. E.g. Do you need smart metering?
  • Are you on the right tariff? Changing tariffs could save you hundreds of dollars per year.
  • Shop around. There are a number of retailers offering discounts of varying levels.  It’s important you are comparing apples with apples.

If you’re a small to medium business and want to take a proactive approach to your electricity contracts, contact Edge Utilities here.

Edge Utilities is the online service arm of Edge Energy Services helping SME leverage the strength, experience and influence of our energy experts.

 

QLD GOVT to recommission Swanbank E power station

A joint statement issued by Queensland Treasurer Curtis Pitt and Queensland Energy Minister Mark Bailey in early June announced that the Swanbank E Power Station (385 MW) would be recommissioned in the first quarter of 2018. Bringing the gas-powered station back online is part of a multi-faceted approach by the government to increase supply and reduce volatility in the energy market.

Stanwell Corporation withdrew Swanbank E from operation in late 2014 due to an over-supply of generation. Since then, Stanwell has been selling their gas to LNG exporters and the Brisbane Short Term Trading Market (STTM). Once back in operation Stanwell will no longer do this because the gas will be consumed by the power station. This will reduce the overall volumes sold to LNG exporters and the STTM. It is important to note that the Brisbane STTM is where gas powered generators buy gas from, particularly in periods of high electricity demand.

It will remain to be seen how effective the increased supply of electricity will be, considering the increased competition for gas in the Queensland market. If more gas becomes available from either increased gas production or government -imposed export restrictions, then we are likely to see prices and volatility reduce. Alternatively, the implications are likely to be modest if more gas isn’t made available.

Finkel Review – Impact on LGCs and investment

The recently released Finkel Review is a review into the future of the National Electricity Market conducted by Dr Alan Finkel.

The Finkel Review’s proposed removal of the Large Scale Renewable Target (LRET) scheme by 2020 has created uncertainty for renewable energy generators and electricity consumers.

Summary

From 2020 Large Generation Certificates (LGC) demand will no longer be a driver for new investment into renewable energy. The scheme is likely to be replaced by an alternative scheme being either the Energy Intensity Scheme (EIS) or the Clean Energy Target (CET).

The current LRET scheme allocates certificates to renewable energy generators in a ratio of 1 LGC to 1 MWh of electricity. Electricity retailers are obliged to surrender 1 certificate for every MWh of electricity sold to consumers. Therefore, the demand for these certificates comes from the retailers and their obligations under the LRET scheme.

LGCs are sold through the open large-scale generation certificate market, where the price varies depending on supply and demand along with other market factors.

How does this affect LGC holders?

Since the release of the Finkel review the prices of LGCs have modestly increased as liable parties seek to purchase enough certificates to meet their obligations. In the long run, increased certificate prices are passed on to the consumer through increased electricity costs.

How does this affect existing renewable generators?

The recommendations in the Finkel review have created uncertainty for renewable generators’ future income streams and their requirements for electricity storage (i.e. batteries). Increased uncertainty results in higher operating costs and reduced investment. This uncertainty will continue until the Federal Government implements a clear policy. It is also likely to result in stagnation within the industry.

How does this affect planned renewable generators?

Investors are likely to have one of two perspectives after they read the Finkel review. The first is that Australia will adopt either the EIS or CET scheme and is 100% committed to reducing emissions through the introduction of renewable generation and the phasing out of coal power. This perspective is encouraging for investors and they are likely to rely on the electricity price forecasts and benefits from the Finkel review to support their investment decision. For international investors, who have a limited understanding of the National Electricity Market this is an appealing investment and we have already seen increased enquiry rates.

The second perspective is that the assumptions used in the Finkel review modelling are unlikely to hold and that implementation of either EIS or the CET scheme will not produce the price forecast described in the report. If investors take this perspective they are unlikely to invest anytime soon. This perspective is shared by many existing industry participants.

The period between now and when the Federal Government makes a firm commitment to a scheme is likely to result in volatile LGC pricing and stagnation in investment.

 

 

PM Confirms Gas Export Restrictions

Gas Export Controls

The Prime Minister has this week announced he will take immediate action as part of his commitment to ensure a reliable and affordable energy supply for consumers.

Prime Minister Malcolm Turnbull, unveiled the Australian Domestic Gas Security Mechanism in April which allows the government to implement export controls and pass legislation as required to secure supply and put downward pressure on prices.

Mr Turnbull this week confirmed that gas export restrictions would be put in place from 1 January 2018.

The introduction of the LNG export market to Australia has created a complex situation where domestic gas consumers are paying more for gas than international buyers of the same product. The main driver behind this is the structure of the gas export contracts which are linked to the price of oil.

The specific mechanism that will be put in place by the government is yet to be determined and will need to be done carefully to ensure security of supply and fair treatment to consumers. Implications of intervention include; but won’t be limited to:

  •                 Reduced investment in upstream gas which will bring higher prices long term;
  •                 Uncertainty for domestic and international consumers;
  •                 Reduced gas prices not flowing through to the electricity prices.

The Federal government is currently in consultation with industry to understand how best to implement an export restriction.

Queensland Power Plan to Decrease Wholesale Electricity Prices

A statement released yesterday by the Queensland Government outlines its plan to put downward pressure on energy prices, generate jobs, and invest in renewables infrastructure.

The Queensland Premier, Treasurer, and Energy Minister jointly promoted the “Powering Queensland Plan” which will see the government invest $1.16 billion to ensure affordable, secure and sustainable energy supply for homes and businesses.

The plan shows several ways the government will put downward pressure on electricity prices. In the longer term, this includes:

  • Reverse Auction of 400 MW of renewable energy including 100 MW of energy storage
  • Improve project facilitation, planning, and network connections
  • Implement an action plan on gas including purchasing gas fields
  • Deliver a plan to improve generation in North Queensland

In the short term the plan will:

  • Invest $770m to cover the cost of the Solar Bonus Scheme
  • Restart Swanbank E power station
  • Direct Stanwell to undertake strategies to place downward pressure on wholesale price

Swanbank E is a 385 MW combined cycle gas turbine which was put into long term care-and-maintenance (cold storage) in 2014 due to the market being over-supplied with generation. A previous statement from Stanwell had announced it would be back online at the end of 2018 if Stanwell determined it was required.

In addition to restarting the Swanbank E power station, the government will also direct Stanwell to undertake strategies to place downward pressure on wholesale prices.  Stanwell is a large generation corporation which owns 3,689 MW of mainly baseload generation. This is without the additional capacity that Swanbank E will provide.

With the full details of the ‘Powering Queensland Plan’ delivered yesterday, there was immediate market movement.

The market reacted by reducing prices across the forward periods but particularly in the near term.

Queensland recorded the greatest reduction with a drop of $10.43/MWh followed by New South Wales which reduced $5.19/MWh. Victorian prices also reduced $3.40/MWh showing the importance of baseload generation in the current market.

If your business needs certainty around energy prices, please contact us on 07 3232 1115 to speak to one of our Senior Portfolio Managers.

QCA final determination on regulated retail electricity prices FY2017 – FY 2018

On the 31st May the QCA released its final determination on regulated retail electricity prices for financial year 2017-2018 for regional Queensland. Concerned that the price increases were too high, the Palaszczuk Government has intervened, directing the government-owned corporation Energy Queensland to reduce network charges. In order to do so, Energy Queensland has been directed to remove the costs associated with the Solar Bonus Scheme.  Energy Minister Mark Bailey made it clear in a statement that this change will not impact payments under the state’s solar bonus scheme, as the cost of the scheme will be met by the government instead of consumers over the next three years.  This reduction in network costs is worth approximately $40,000 per site, per year to large (ICC) consumers.  The revised prices will be published on 16th June 2017.