Energy deals cut costs

Edge Energy Services (Edge) provides expert advice to large energy consumers. Good advice starts with understanding the customers energy constraints, requirements and motivations. This means any identifying seasonal or daily trends in demand as well as risk appetite and any green commitments. Once Edge understands the critical information we will facilitate a tailored agreement with an energy provider. For more complex energy portfolio’s, customers may benefit from on-going management services particularly when progressively purchasing or taking spot exposure.

Over the past 18 months wholesale energy prices have increased. This has forced consumers to think more laterally about their energy costs. Most energy providers will base their pricing offers on the forward curve that day. If the customer wants to reduce exposure to the forward curve one option is to enter into an agreement directly with a generator through a Power Purchase Agreement (PPA). These agreements commit the customer to purchasing the offtake from a generator at a set price for a defined term, usually a minimum of 10 years. As technology continues to improve the cost of generating electricity declines and PPA’s become increasingly appealing.  You can read more about what Edge is doing in this space in todays Australian Financial Review.

High Resolution PDF – Energy Deals Cut Costs

Edge understands that your business may be at early stages when it comes your energy strategy. If you are in a planning stage and would like to understand your options Edge will be able to provide you the facts. If your organisation has a green energy commitment then Edge can tailor a product to suit your energy demand and corporate commitments. Alternatively you may benefit from onsite generation which can reduce both energy and transmission cost.

Whatever stage your organisation is at, there is potential value to be gained by entering into alternative supply agreements or taking a more sophisticated approach to managing your energy portfolio. Edge can help If you would like to learn more about Edge, please visit edge2020.com.au or alternatively you can call one of our team directly on 07 3232 1115.

 

 

Gas production gap grows wider

The Australian Energy Market Operator (AEMO) recently published an update to the Gas Statement of Opportunities. The sticking point of the publication is a forecasted 54 petajoule and 48 petajoule (PJ) shortfall in 2018 and 2019 respectively. The forecast shortfall is three times higher than the forecast earlier this year. The report estimates aggregate gas production in 2018 to be 1,891 PJs and a shortfall of 54 PJs, or as a percentage, 3% of total production. This is a very small margin and given the level of assumption contained in the report Edge believe it should be considered cautiously.

Putting aside the potential inaccuracies of the report, it is important to consider the wider implications of federal government intervening into the gas market and how this will be perceived by international investors. Australia is the second largest gas exporting country in the world, has close proximity to Asia and AAA credit rating. Political intervention into markets is viewed as a sovereign risk and may be the difference between investment here or abroad. The longer term outcome of less capital coming into the Australian gas market is that prices will eventually rise.

Malcolm Roberts the Chief Executive of the Australian Petroleum Production & Exploration Association said “Looking ahead to 2018, there is a large supply of uncontracted gas available for domestic customers. The industry has made it clear that it will ensure that sufficient gas is available for the domestic market”. These comments are in complete contrast to the AEMO update and suggest that there will not be shortfall of gas.

There are a broad range of stakeholders who will be impacted by the actions of the federal government whether that is intervening or not. The federal government has until 1 November to decide whether the Australian Domestic Gas Mechanism will be put in place. If it is actioned the mechanism will begin on 1 January 2018.

Edge will continue to monitor the actions of gas producers and the federal government in the coming weeks.

The AFR reports that the Federal Government is moving away from a CET

According to an article published by the Australian Financial Review earlier today, the Federal Government has given notice that it is moving away from a Clean Energy Target (CET). If the government chooses to move away from a CET, the market will continue to suffer from increased policy uncertainty. Policy uncertainty is having detrimental impacts on the development of new energy generating resources, particularly when securing capital. Without access to affordable capital new energy resources are less likely to be constructed and consumers are likely to incur further increases in energy prices.

In a timely release from the Australian Energy Market Commission (AEMC), today released a discussion paper on the strategic priorities for the Australian energy market. In this paper the AEMC outlines priority actions for governments and energy market bodies to support the delivery of secure and reliable electricity and gas to households and businesses at the lowest possible cost, while also meeting emissions reduction commitments. One of the key areas covered in the goals is “The integrations of energy and emissions policy, underpinned by a long-term national emissions reduction target”. The identification of emissions reductions policy by the AEMC further enforces how important long term policy commitment from the Federal Government is for the secure and reliable delivery of energy.

The Federal Government is yet to formally announce when it is planning on committing to an emissions reduction policy. Recent comments suggest that a commitment will not be made in the near future.

AEMO Request for Long Notice RERT – Second Round

On 13 July 2017, the Australian Energy Market Operator (AEMO) issued an Invitation to Tender to seek responses from potential providers for the Long Notice Reliability and Emergency Reserve Trader (RERT) contracts (“First Round ITT”). On 6 September, AEMO followed up the First Round ITT with a Second Round Request for Long Notice RERT after additional forecast reserve requirements for the period January to March 2018.

In accordance with the National Electricity Rules and the RERT Guidelines, AEMO is now issuing a second round invitation to Tender for Long Notice RERT (Second Round ITT) seeking offers for the provision of long notice reserve for January 2018 to March 2018 in Victoria and South Australia (combined requirement). These second round offers will be in addition to the reserve tenders received in the First Round ITT conducted earlier this year (refer to Edge News, AEMO Considers Options For Better Load Management in VIC and SA).

For long notice RERT, AEMO must enter into contracts prior to 31 October 2017. Consequently, the Second Round ITT announced there is likely to be a final opportunity for providers to tender for provisions of Long Notice RERT reserve.

AEMO (Audrey Zibelman CEO of AEMO) commented in the media yesterday, saying “I feel very comfortable we have done everything we can, and maybe then some; to make sure we are able to get through this summer without any load-shedding and that’s very important”. The comment suggests the commitment to participate in the RERT has been to the extent that there will be no involuntary load shedding, despite AEMO publishing in the Electricity Statement of Opportunity, released on 5 September, that described the VIC and SA markets as being “in a tight supply-demand balance” and could face involuntary load shedding.

If you would like to read more about what the outlook means for your business contact Edge on 07 3232 1115.

AEMO fears insufficient generation will cause load shedding

The Australian Energy Market Operator (AEMO) published their annual Electricity Statement of Opportunity (ESOO) on 5 September 2017. The report highlights that both Victoria and South Australia could face involuntary load shedding during the 2017-18 summer.

AEMO points to ‘radically changing dynamics of the power system’ which has resulted ‘in a tight supply-demand balance’. It also points out that the responsiveness and resilience of the system is under threat from plant closures and extreme weather event.

AEMO is concerned that both Victoria and South Australia could face enough involuntary load shedding that the reliability standard cannot be met. This means that AEMO is unable to dispatch the market to keep unserved energy under 0.002% for the financial year. The report also shows an increasing amount of potential load shedding for New South Wales starting in 2022-23 when Liddell Power Station is expected to retire.

Figure 1 Range of Unserved Energy Outcomes

Source: AEMO

If you would like to read more about what the outlook means for your business go to AEMO’s website.

If you would like to discuss the findings of the report, contact Edge on 07 3232 1115.