New Firming Product released to market

As more and more large energy consumers look to contract directly with renewable generators, and renewable generators seek price certainty, a new product referred to as the “clean energy derivative” has hit the market.

In the last few weeks, AGL and ERM have released a somewhat standardised product which is built on generation from a renewable source and then “firmed”. AGL’s  “Wind Product Firming Unit” was described as being firmed through physical gas generation whilst also allowing the renewable generator to access the spot market (available in SA and VIC). ERM announced a similar product which is based on generation from solar. These are great initiatives from the retailers who are working to create liquidity in a new market, though keep in mind that there must be profit there for them as well.

Last year Clean Energy Derivatives Corporation featured in the AFR indicating that they would be raising $250m to develop CFD products bundled with generation from wind, solar, battery and storage. Little has been heard since regarding the capital raise or any successful deals.

There are existing generators, such as Snowy Hydro who are in a good position to provide ‘clean energy derivatives’.  However, there hasn’t been any news of Snowy partnering with a renewable generator to provide a firmed product as yet. Unsurprisingly, providing a firmed product would potentially cannibalise potential future earnings for Snowy Hydro. The absence of Snowy in this market could be a result of the change to a five minute settlement market. Fast start technology such as batteries will be one of the few technologies that will be able to capture (mitigate) spikes in spot prices within a 5 minute period, assuming that they are not part of central dispatch.

This product is still in infancy stage, however with strong interest from buyers and sellers we anticipate that it will develop quickly. Tradition Financial Services are soon launching a new wholesale “Renewable Energy Hub” which is described as a platform to firm, standardise and transact between wholesale renewables and energy buyers.

If you would like to understand Clean Energy Derivatives in more detail, please contact Edge on (07) 3905 9220 or 1800 334 336.

Northern Territory Government lifts moratorium on fracking

The Chief Minister of the Northern Terriroty (NT) Michael Gunner has announced that the 135 recommendations made in the recent inquiry into fracking in the NT would be implemented, allowing on-shore fracking to take place in the territory. The 135 recommendations made in the inquiry mitigate the risks associated with onshore gas development to acceptable levels, and in some cases claim to eliminate the risks completely.

New gas developments will require environmental management plans which will be assessed by the NT Environment Protection Authority and signed off by the environment minister.

There will also be area’s where fracking will not be allowed. These include indigenous protected areas, special environmental areas, cultural and agricultural areas of significance to the Northern Territory.

There is a number of studies to be completed before fracking production can begin including strategic environmental and baseline assessments. At this stage it is estimated exploration will begin in 2019 and production in 2021.

If you would like to understand how these changes will affect your gas portfolio please contact Edge on (07) 3905 9220 or 1800 334 336.

AEMC sets maximum price for power

The Australian Energy Market Commission (AEMC) has released its schedule of reliability settings which outlines the maximum price for electricity for both an individual dispatch interval as well as the maximum cumulative price.  The current maximum price of $14,200/MWh will increase to $14,500/MWh and the cumulative price threshold will increase from $212.800 to $216,900.

The maximum price sets the highest cost a generator can be paid in any period and consequently what a consumer can be exposed to. It is escalated each year in line with CPI to encourage new peaking plant to enter the market if needed.

The cumulative price threshold aggregates the trading intervals over the last seven days. If they add up to more than the cumulative price threshold, the prices received by a generator and paid by a retailer will be $300.00/MWh, until the day after the aggregate of the last seven days drop back below the cumulative price threshold. This is put in place to ensure retailers are not exposed to unlimited price risk if there are local issues in a region.

The market floor price (minimum price a generator can receive) has not been escalated and is staying the same at -$1,000/MWh.

All changes take effect 1 July 2018 and more details can be found on the AEMC’s website here.

If you would like to understand how these changes will affect your energy prices please contact Edge on (07) 3905 9220 or 1800 334 336.