Nearly 30 million certificates to be surrendered to meet small scale renewable energy scheme obligations

The Clean Energy Regulator (CER) announced earlier today, the 2018 small-scale technology percentage (STP) as 17.08%. This means that liable entities (mainly electricity retailers) are required to surrender to the CER approximately 29.3 million STCs to meet their small scale renewable energy scheme obligations for 2018. This figure is derived by adding 7.2 million STCs to the estimated 22.1 million supply of STCs in 2018 (see below for how this is determined). The 7.2 million STC adjustment is the difference between previous years’ STC creations and the actual number of STCs surrendered in those years.

Last year the STP was 7.01%, therefore this year is an increase of 10.07%. The uplift was anticipated by the market due to information previously released by the CER regarding a surplus of certificates.

Surrendering certificates is a legal requirement for liable entities in accordance with the Renewable Energy (Electricity) Act 2000, and works to increase the portion of renewable energy generated and supplied to the Australian electricity market.

If you would like to know more about STCs or the impact this announcement has on your electricity portfolio, please contact Edge on (07) 3905 9220 or 1800 334 336.

Northern Territory Hydraulic Fracturing

After 15 months, 151 public hearings, 31 community updates and 1,257 submissions, Justice Rachel Pepper has presented the independent Scientific Inquiry into Hydraulic Fracturing of Onshore Unconventional Reservoirs to the Northern Territory Government. The inquiry makes 135 recommendations which mitigate the risks associated with onshore shale gas development to acceptable levels, and in some cases, eliminate the risks completely. The report clearly states that it is necessary for all the recommendations to be actioned in order for the risks to be reduced to acceptable levels.

The final report builds on the recommendations made in the Draft Final Report by including:

an implementation Chapter, which states clearly that all of the recommendations in the Final Report must be implemented;
greater clarity on the timing of the implementation of the recommendations; and
the inclusion of a requirement that there be no net increase in greenhouse gas emissions in Australia as a consequence of the development of any onshore shale gas industry in the Northern Territory.

The findings of the Inquiry have triggered the expected (opposing) responses from gas producers and environmentalists. The NT Government must now make their decision on whether or not the moratorium on fracking will be lifted. The Federal Government last year made their intentions clear, consistently pressuring the NT Government to lift the moratorium. The NT Government has indicated that the decision to lift the moratorium would be based on the findings of this inquiry however have said that they will not rush their decision. No indication has been given as to when a decision would be made.

It is the general consensus that a portion of the gas extracted from the Beetaloo Basin will be transported to the east coast through the under construction Northern Gas Pipeline. This is a key driver behind the Federal Government’s push to lift the moratorium as reducing gas prices has been high on the agenda. The impact that NT gas will have on the southern gas markets is likely to be minimal as transport costs remain high due to limited available capacity in key transmission pipelines.

If you would like to know more, please contact Edge on (07) 3905 9220 or 1800 334 336.

Softer forward electricity prices recorded on the Australian Stock Exchange

Quarterly forward contracts from Q118 to Q219 declined across all mainland regions in the National Electricity Market (NEM) yesterday. The largest decline was in the illiquid South Australian market where Q219 prices dropped by $9.75/MWh. Queensland contracts are currently the most affordable which is driven by the surplus of firm capacity in the region and a direction from the Queensland Government last year to Stanwell Corporation to lower wholesale prices. New South Wales contract prices have declined since the beginning of 2018 driven by lower than expected spot price outcomes in the region. Snowy Hydro corporation have been instrumental in reducing volatility in the region aggressively defending the $300.00/MWh cap price. VIC contracts have softened in the last week potentially raising interest for participants to hedge volume who have been on a hold.

The following prices are end of day closing prices from the ASX.

Table 1. QLD Forward Contracts ($/MWh)

Queensland	27/3/2018	26/3/2018	Daily Change	Daily Change (%)
Q118	$70.36	$70.67	-$0.31	-0.44
Q218	$67.50	$67.50	$0.00	0.00
Q318	$66.05	$67.73	-$1.68	-2.54
Q418	$67.02	$68.73	-$1.71	-2.55
Q119	$81.00	$82.70	-$1.70	-2.10

Table 2. NSW Forward Contracts ($/MWh)

New South Wales	27/3/2018	26/3/2018	Daily Change	Daily Change (%)
Q118	$71.80	$72.00	-$0.20	-0.28
Q218	$77.00	$77.50	-$0.50	-0.65
Q318	$77.00	$78.75	-$1.75	-2.27
Q418	$70.65	$71.60	-$0.95	-1.34
Q119	$81.81	$83.10	-$1.29	-1.58

Table 3. SA Forward Contracts ($/MWh)

South Australia	27/3/2018	26/3/2018	Daily Change	Daily Change (%)
Q118	$116.15	$116.15	$0.00	0.00
Q218	$98.25	$108.00	-$9.75	-9.92
Q318	$89.00	$91.00	-$2.00	-2.25
Q418	$84.00	$85.75	-$1.75	-2.08
Q119	$120.00	$120.00	$0.00	0.00

Table 2. VIC Forward Contracts ($/MWh)

Victoria	27/3/2018	26/3/2018	Daily Change	Daily Change (%)
Q118	$102.75	$103.00	-$0.25	-0.24
Q218	$83.50	$86.50	-$3.00	-3.59
Q318	$82.75	$84.76	-$2.01	-2.43
Q418	$76.00	$78.78	-$2.78	-3.66
Q119	$98.43	$100.85	-$2.42	-2.46

If you would like to know more about energy costs and the state of the energy market, please contact Edge on (07) 3905 9220 or 1800 334 336.

Concentrated Solar Thermal and the National Energy Guarantee

ARENA has released their public summary of the Request For Information (RFI) on Concentrated Solar Thermal (CST) projects. The RFI process was designed to examine the potential for a possible program supporting the deployment of CST systems in Australia. There were 31 respondents to the RFI. Respondents ranged from the most experienced in the world to relatively junior Australian companies. There were a couple of key takeaways from the exercise which included:

– That dispatchable and flexible generation coupled with synchronous generation was beneficial;

– Cost discovery was limited as pricing is commercially sensitive in nature. More junior developers offered low pricing;

– There are a number of regulatory, commercial and technical challenges to CST.

– Long development time relative to solar PV

Image 1 comes from Vast Solar and was included in the ARENA report. The image provides a summary of the generation capability of a CST. Noting that the profile is a function of the physical design.

Image 1. CST potential generation profile

Source: Synthesis of Responses to ARENA’s 2017 Request for Information on CST and Vast Solar

The information collected on pricing was limited however, ARENA did provide a Levelised Cost of Electricity (LCOE) estimate based on 12 of the respondents RFI’s. The lower estimate was $124.00/MWh and upper was $154.00/MWh. These numbers are significantly above the reported price of $78.00/MWh that the SA Government is paying for generation from the Port Augusta CST plant (noting there is a significantly discounted loan attached to that project).

Concentrated Solar Thermal and the National Energy Guarantee?

At a high-level CST appears to be the golden egg of generation assets if the NEG is implemented. The assets are renewable and dispatchable which positions itself to be able to write dispatchable and low emissions contracts (Image 2.). The question is will the incentives under the NEG be sufficient to warrant the price and risks associated with CST. Currently, the answer seems to be no. The answer is no because of the considerable uncertainty around how the NEG will function and the developers ability to forecast income.

The timeline for the NEG is tight, when asked earlier in the week the ESB Chair Kerry Schott referred to the time frame as “tight but doable”, an underwhelming response. Vague language of this nature does not signal confidence to the investment community nor the consumer. In addition to this, the Federal opposition has been quiet on where they stand in respect to the NEG. In the near term, we are unlikely to see investment in large-scale CST until further clarity is provided on the NEG.

Image 2.

Edge maintains strong relationships with developers of CST plants. If you are interested in understanding more, please get in contact with us. For further information on the National Energy Guarantee please follow the link to our recent submission.

If you would like to know more about energy costs and state-based subsidy, please get in contact with Edge on (07) 3905 9220 or 1800 334 336.

Edge makes submission regarding NEG

It is important that the National Electricity Market remains secure and Australia can be part of the international commitment to reducing climate change while remaining competitive.

The NEG seeks to achieve these objectives while trying to achieve support from both major federal parties. The importance of bipartisan support has been acknowledged, as the market struggles to self-adapt with uncertainty. Having a lasting framework which is flexible enough to allow for changes in a rapidly changing energy market whilst providing certainty to investors who need to recoup long term fixed charges is difficult. Ensuring the market remains efficient and effective is critical to achieving the objectives. It is in this context that Edge provides this initial Submission.

If you would like to learn more about the National Energy Guarantee or have any questions or concerns regarding our submission, please contact Edge on (07) 3905 9220 or 1800 334 336.

[pdf-embedder url=”https://edge2020.com.au/wp-content/uploads/2018/03/Edge-Energy-Services_ESB-NEG-Response_180308.pdf” title=”Edge Energy Services_ESB NEG Response”]

New SA liberal party leader focused on cutting energy costs

The new South Australian Premier, Steven Marshall, will be looking to reduce energy prices in the state.

Mr Marshall is not in favour of setting a state-based target for renewable energy and has noted that even without a target, the state is likely to reach 74% of all electricity being renewable in 2025 and 76% in 2030.

Mr Marshall is focusing on batteries and additional interconnection instead. He is aiming to establish a fund within his first 100 days in office to provide a $2,500 subsidy for up to 40,000 household to purchase a battery. The subsidy will be available to households that already have solar PV and will be means tested, however the exact details around qualifying for subsidy is yet to be released. ElectraNet is already exploring options for additional interconnection with the rest of the market. The State Liberal Party will assist with a $200 million inter-connection fund designed to speed up the process of making a final decision.

Finally, the new State Government is looking at options for the new fast-start gas plant which the previous government committed to. The Liberal Government is not in favour of adding it to the market however they admit that they are not sure what options they currently have.

If you would like to know more about energy costs and state based subsidy, please get in contact with Edge on (07) 3905 9220 or 1800 334 336.

ACCUs Surrendered under Safeguard Mechanism

Together with the National Greenhouse and Energy Reporting Act 2007, the safeguard mechanism provides a framework for Australia’s largest emitters to measure, report and manage their emissions. It gives businesses a legislated obligation to keep net emissions below their baseline. Baselines are intended to accommodate business growth and allow businesses to continue normal operations.

The Clean Energy Regulator recently released the first full year of data on 14 March 2018 under the safe guard mechanism.

The safeguard mechanism commenced on 1 July 2016, with the first reporting period ending 30 June 2017. Emissions were reported to the Clean Energy Regulator as part of the National Greenhouse and Energy Reporting scheme on 31 October 2017. Responsible emitters had until 28 February 2018 to surrender Australian carbon credit units (ACCUs) if their emissions were above their baseline.

The Clean Energy Regulator is required to publish information about all large facilities with emissions over 100,000 tonnes of carbon dioxide equivalent (CO₂-e) for each reporting year.

As at 31 October 2017, there were 154 responsible emitters identified with one or more large facilities, resulting in 203 facilities having legislated obligations under the safeguard mechanism for the 2016–17 reporting year.

Clean Energy Regulator Chair David Parker announced that all responsible emitters have met their requirements in the first full year of the safeguard mechanism. Of the 154 emitters there were 3 companies that withheld information which is allowable under section 25 of the National Greenhouse and Energy Reporting ACT 2007 if the organisation is protecting trade secrets or commercial information.

There were 16 companies that exceeded their baseline and were required to surrender carbon credit units.

If your company requires brokerage services for carbon units please get in contact with Edge on (07) 3905 9220 or 1800 334 336.

STAFF PROFILE – Melitta Springer

Melitta has spent over a decade working in the energy sector in roles including Retail Pricing Analyst, Account Manager and Customer Relationship Manager. As Portfolio Manager at Edge, she focuses on building and maintaining strong relationships with clients and key stakeholders. She’s unwavering in her commitment to using the Edge’s efficiencies and insights to deliver solutions that save clients time and money.

What is the best piece of advice you have ever received?

It’s not necessarily advice, but a quote from Winston Churchill has stuck with me over the years. “Continuous effort – not strength or intelligence – is the key to unlocking our potential”.

It is the little things that we do each day that add up to big changes.

Name a place you have never been to and would like to visit. Why?

I would really love to travel through South America. The culture, the food and the history all entice me to travel there. Highlights would certainly be trekking through the Amazon and seeing Machu Picchu.

Who or What inspires you?

Communities and social enterprises that are working for the improvement of the environment and society inspire me. I have made many changes in my life that impact both myself and my daughter and I hope to encourage others to make changes by having conversations and sharing my personal experiences. If we all could make one positive change towards the environment every day, imagine the global impact. The actions of individuals can have far-reaching effects.

What is one of the biggest challenges facing energy customers today?

In such a volatile energy market, reducing energy costs is a serious challenge for businesses. With pricing in both the gas and electricity markets doubling in recent years, costs that would have generally been low percentage OPEX are now being highlighted by management as critical areas to review.

Energy efficiencies, renewables, Power Purchase Agreements and on-site generation (including solar PV and battery storage) all tend to be at the forefront of conversations with clients and prospective clients as they try to navigate the best path forward for reducing energy costs for their businesses.

What does a typical day look like for you at Edge?

On any given day I will have a number of scheduled client deliverables which could include weekly and monthly market reporting, site specific accruals and reconciliation reporting. Beyond this, I work through queries from my clients that may include contract reviews, data analysis or third-party communication with Network Providers and Retailers.

RSPCA ADOPT A PET!

For the 50,342 animals that arrived at the RSPCA Queensland centre over the past year, it was a second chance at life. One of those lives belonged to 3 year old ‘Roger’, a domestic short hair ginger tabby cat. Roger had been surrendered by a family that no longer wanted him and after spending 4 months in the Wacol RSPCA shelter, was re homed. Roger was given another chance of life after being adopted by Kristy McGrath, our Head of Operations & Client Delivery, at the recent RSPCA Pop Up Adoption Day in South Brisbane. Already having two dogs and two horses, adopting Roger from the RSPCA was an easy decision when it came to adding to her animal family.

Edge has always been a big supporter of the animal community and charity foundations. And whilst choosing the right pet is fun and exciting, it takes time, planning and lots of research. To make the process easier, the RSPCA has introduced Adopt a Pet, a national website that lets you view some of the animals waiting to be adopted at RSPCA locations across Australia.

Join Edge in giving these animals another chance of life. Visit their website, and give a dog, puppy, cat or kitten a second chance to find their loving home!

STATE OF THE ELECTRICITY MARKET – Q118 MARKET OVERVIEW

By Thomas Dargue, Edge Manager of Markets & Advisory

In this summer edition of the market update we look at some of the issues which is causing price differences in wholesale prices across the east coast of Australia. Since the start of summer, the divide has mainly been across the Murray river with QLD and NSW to the north and VIC, SA and TAS sitting to the South.

The summer started in December with modest spot prices across all the regions. The region with the highest price was TAS at $90.96/MWh with the lowest price being QLD at $76.56/MWh. The interconnectedness of the market means that prices in NSW was similar to QLD while SA and VIC were closer to TAS. The prices in NSW started deviating from the southern market as the interconnector with VIC became increasingly constrained. Throughout January there were large price spikes in SA and VIC increasing the average price south of the Murray. The constrained interconnector meant that the prices never travel north and both QLD and NSW had modest prices.

Tasmania had similar prices throughout the three months however these seem to be too high for the State Liberal Government. There is an election in Tasmania 3 March 2018 and one of the policies put forward by the State Liberal Government would be a split from the NEM. TAS would still be physically connected through Basslink however would not be subject to the price setting mechanism set out for the NEM. The State Liberal Party is expecting this to result in lower wholesale prices for TAS.

Prices for summer to date has been higher in SA than any other state however there haven’t been any black outs. This is in part due to the operation of a new 100 MW battery installed by Tesla which provides energy during peak times as well as support for frequency. With an election in SA 17 March 2018 the incumbent State Labor party made its own electricity policy announcement. It would seek to further partner with Tesla to install 50,000 rooftop solar panels and batteries. When combined this would create a virtual 250 MW power station.

The Energy Security Board (ESB) realised its Draft Design Consultation Paper on the National Energy Guarantee (NEG). The NEG seek to find a balance between affordability, reliability and carbon reduction which could be politically acceptable. With the number of schemes already rejected by the Federal Government, the ESB has managed to come up with a scheme which could get bi-partisan support. At this stage there is quiet optimism however there are large concerns over the effect on contracting going forward. The ESB is looking for written submissions by 8 March 2018 and have the final design by the second half of 2018.

The forward prices generally reduced for 2019 as spot prices were less volatile than seen in previous years over summer. The exception was SA where there is still uncertainty around security of supply.

Table 1: ASX prices for Calendar Year 2019

	NSW	QLD	SA	VIC
1 DEC 2017	80.75	68.11	92.94	86.55
28 FEB 2018	76.38	64.03	94.36	82.90

The forward prices were lowest in QLD where we expect a large amount of new renewable generation to be built. Concerns over sufficient supply in other regions kept prices higher.

Despite higher forward prices and the highest average spot prices in the NEM, a hydrogen electrolyser will be built in Port Lincoln, South Australia. This will produce hydrogen using excess wind and solar (i.e. when prices are low) to produce hydrogen both to power a 10 MW gas turbine but also for export purposes. By using power intermittently, it is able to ramp up during low prices and not run during high spot prices which will also stabilise the grid and allow more wind generation to be dispatched in the region (wind in SA is currently being curtailed by AEMO to avoid frequency issues). It seems counterintuitive to put an energy intensive industry in SA however for very flexible consumption of electricity who are able to take advantage of low, or even negative, spot prices there is opportunity in the state.

If you would like to discuss the electricity market outlook and potential impact to your electricity portfolio, please contact Thomas on 07 3905 9226 or on 1800 EDGE ENERGY.