HIGH TEMPERATURES AND HIGH PRICES IN SOUTHERN STATES

25 Jan HIGH TEMPERATURES AND HIGH PRICES IN SOUTHERN STATES

Edge Energy Services recently published an article on the 16th of January outlining what happens in the market when high prices and a lack of reserves are published in pre-dispatch. On the 24th January, it was a different story, where extreme temperatures and high demand in South Australia (SA) lead to load shedding, activation of RERT and operation of the emergency generators in SA. This resulted in the maximum price reaching $14,500/MWh with an average of $3,388/MW.

At the start of the week the Bureau of Meteorology forecast high temperatures across SA and Victoria (VIC) for the coming week. On the morning of the 23rd January, AEMO flagged extreme temperatures for SA and VIC and requested participants to update generation levels inline with expected conditions.

High temperatures and humidity have significant impacts on:

  1. Performance of gas-powered generation and;
  2. Energy usage of end users resulting in high demand levels.

In addition to extreme temperatures driving high demand, the loss of a Loy Yang A unit earlier in the week due to a tube leak. The reserve levels within VIC then fell to a point where LOR3 (Lack of Reserve 3) was activated. When LOR3 is activated, load shedding occurs.

At 15:00 an IRPM (Instantaneous Reserve Plant Margin) of 8% for the SA and VIC economic island was calculated. This indicated there was only 881MW of spare capacity in the islanded region. This information formed part of a report published by Global-Roam.

At 16:14 AEMO published a market notice stating a LOR3 had occurred and load shedding had commenced at 16:10. Changes in demand indicated 266MW of load was shed. The supply / demand balance changed during the day and reached levels where the LOR3 could be cancelled at 20:00.

Sourced from AEMO Market Notices

Prior to load shedding, AEMO activated RERT (Reliability and Emergency Reserve Trader) at 14:24 which involves a combination of voluntary load shedding and demand side management. RERT was activated from 16:30 until 19:00.


Sourced from AEMO Market Notices

During high price periods, most generators were operating at close to maximum capacity. The SA Emergency generators also ran between 17:00 and 21:15 adding 200MW to the grid. This volume assisted VIC via the interconnector flows. Wind resources were low in VIC and neighbouring regions, resulting in less than expected generation

The constraint N^^V_NIL_1, which effects the limit of capability through the NSW-VIC interconnector also bound resulting in a limit of supply to the region from Queensland (QLD) and New South Wales (NSW).

As a result of all the factors mentioned above, the spot price in VIC stayed at close to $14,500/MWh from 15:00 to 21:30. The diagram below highlights the resulting price, flows and regional prices for a 5 min interval of the day.

Sourced from NEOmobile

As a result of the high prices in VIC, the spot price for the quarter to date is currently $276.77/MWh compared with $119/MWh before Thursday.

Current contract prices for VIC are around $140/MWh for quarter 1 of 2019. Given these higher prices, users with existing exposure to the spot price would have been significantly better off if they were highly contracted. End users with the ability to change their exposure via demand side management would also have benefited from reducing demand.

As a result of the volatility yesterday the administrative price cap has been activated from 11:30am today. This will apply until prices decline below the price administered threshold.

If you have any questions regarding this article or the electricity market in general, call Edge on 07 3905 9220 or 1800 334 336.