Can A Capacity Market Secure Supply

On the 12^th September COAG Energy Council met and discussed the approach of the Energy Security Board is proposing to resolve the long-term solution to the NEMs security of supply assumed issues in an increasing variable renewable energy grid.

One possible future scenario that has been considered and offered for market feedback was implementing a Capacity Market. Incentivising existing generation to not mothball early and give new assets return certainty encouraging investment. In a standard model it would provide payments to build new, extend the life of generation assets or possibly to those able to reduce their demand, providing they guarantee capacity to the system at periods of stress.

The idea behind using a Capacity Market is to ensure security of supply to the grid at the cheapest cost to consumers with increased renewables in the system; especially wind which creates greater uncertainty. A generator who can provide the capacity certainty or a user who has the ability to turn down their demand, offers these flexibilities to the system operator in auctions up to 4 years in advance. Payments are made by end users to these providers to “guarantee” access to this facility over periods of high system stress. This payment is made regardless of the capacity being required or not.

There is no real case that on a high renewable grid a capacity market is required to provide security of supply. In the UK following the introduction of the Capacity Market (pre its suspension) there have been no new assets built. It was designed to incentivise investment in new Gas plants which have not emerged and existing plant in the scheme have already curtailed hours. This leaves many to question its merit.

How this is received by stakeholders in Australia is yet to be seen, however it is assumed that the discussion around security of supply post 2025 has only just begun with the workstreams being run across the regulator agencies and organisations.

If you would like to know more about a Capacity Market, please contact Edge Energy Services on 07 3905 9220 or 1800 334 336.

Queensland Government direction to Stanwell lifted

The CEO of Stanwell was quoted yesterday in Reneweconomy.com.au stating that “bidding direction ended on 30 June 2019” in reference to the direction given to Stanwell form the Queensland Government in May 2017 to lower wholesale prices.

Spot prices have been soft since 1 July 2019 across the NEM and there is currently no evidence to suggest that Stanwell (and CS Energy) have immediately reacted to the lift of the direction.

When the direction was first given by the Queensland Government in 2017 to Stanwell, energy prices materially came down and generally speaking have been less volatile. Key assets such as Swanbank E and Wivenhoe have been utilised by Stanwell and CS Energy to stop prices spikes above $300.00/MWh.

There is now the potential for Stanwell and CS Energy to utilise their large generation portfolios to potentially increase earnings through higher energy prices.

If you would like to know more about the potential impact that the lifting of the direction may have on Australian energy prices, please contact Edge Energy Services on 07 3905 9220 or 1800 334 336.

LNP Inertia Continues

In a surprise outcome the LNP maintained leadership over the weekend noting that it remains unknown whether or not the LNP will form a majority government. Energy and climate were at the heart of this election with Labor putting forward material initiatives that would increase investment in renewable energy generation (increased funding to the CEFC) and reduce emissions through the extension of the safeguard mechanism, amongst a number of other initiatives. The LNP are less ambitious and maintain the emissions reduction target of 26-28% below 2005 levels by 2030. The LNP will extend the Climate Solutions Fund by providing additional funding to the Emissions Reduction Fund which is the reverse auction of ACCU’s managed by the Clean Energy Regulator.

In terms of energy generation and transmission the LNP has pledged support for Snowy Hydro 2.0, the Underwriting New Generation Investment program and Marinus Link (Interconnector between TAS and VIC, part of the Battery of the Nation plan).

The futures markets (energy and environmental certificates) had priced in a Labor victory. The result over the weekend may put upward pressure on forward prices (energy & Enviro) as there will be less new renewable generation invested in over the coming years. That being said, state based renewable energy targets remain in place as per the following:

QLD – 50% Renewable by 2030

NSW – No target

VIC – 25% by 2020 and 40% by 2025

SA – No target

Tas – 100% by 2022

The larger demand states are QLD, NSW and VIC who are still heavily reliant on coal powered generation. NSW is the only state of these three whereby there is no target. Given that QLD and VICs renewable energy targets remain in place there should not be a material decline in new renewable generation development in these regions. For NSW, at least for the time being, new renewable generation will be a function of price. Currently NSW prices are at a level whereby a solar or wind developer should be able to secure funding and a PPA.

If you would like to know more about the potential impact that our LNP government may have on Australian energy prices, please contact Edge Energy Services on 07 3905 9220 or 1800 334 336.

Clean Energy Regulator confirms 2019 RRP and STP

On 12 March 2019, the Clean Energy Regulator (CER) has confirmed the 2019 renewable power percentage (RPP) and small-scale technology percentage (STP) has been set by legislative amendment.

The 2019 RRP has been set at 18.6% and the 2019 STP has been set at 21.73%.

As explained by the CER, the RRP and STP set the annual statutory demand for large-scale generation certificates and small-scale technology certificates in the Renewable Energy Target.

If you have any questions regarding the 2019 RRP or STP or any other matter relating to energy, please contact Edge Energy Services on 07 3905 9220 or 1800 334 336.

Update from COAG Energy Council meeting

The COAG Energy Council met today for their 21^st meeting. On the agenda was AEMO addressing their work in preparing the grid for summer, bringing down electricity costs and ensuring long term grid reliability and security.

AEMO highlighted the priority of work being undertaken to ensure that there is enough dispatchable generation in the NEM and integration of renewable and distributed energy resources. The Ministers agreed to a work program for the ESB to develop advice on a long term, fit for purpose market framework to support reliability that could apply from the mid-2020s. There was very little detail on this framework, however Edge will look to discover more.

Reliability

Ministers agreed to the final draft bill which gives effect to the Retail Reliability Obligation. The final package of rules will be brought to Council for approval in the first half of 2019, with a target commencement date of 1 July 2019.

Transmission upgrades

Ministers agreed on an approach to deliver the Group 1 transmission network projects. Group 1 projects include:

• Increasing transfer capacity between New South Wales, Queensland, and Victoria by 170-460 MW;

• Reducing congestion for existing and committed renewable energy developments in western and north-western Victoria; and

• Remedy system strength in South Australia.

In the Base plan, these initial transmission developments for Group 1 are costed at between $450 million and $650 million, and the assets will continue to benefit consumers well beyond the 20-year ISP forecast period. More cost benefit analysis work is to be conducted on Group 2 and 3 projects.

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

Ergon Retail offer ‘EasyPay Rewards’ to help alleviate rising costs in energy

On Tuesday 24 October, Queensland Treasurer Curtis Pitt and Energy Minister Mark Baily announced a new suite of measures to create electricity savings for Queenslanders under the Palaszczuk Government’s Affordable Energy Plan.

One of the initiatives announced will be the removal of Ergon’s non-reversion policy. The non-reversion policy prevented customers who transferred away from Ergon Retail from returning. The Government believes that removing this policy will give customers in regional Queensland more choice when selecting a retailer. Not only will regional customers be able to shop around, but they will now have the ability to test the water and return to Ergon Retail should they wish to do so. Coupled with this announcement, Ergon Retail are now offering ‘EasyPay Rewards’ whereby regional customers could earn discounts of up to $75 for residential households and $120 for small businesses every year.

Other initiatives under the Affordable Energy Plan included:

Rebates of up to $300 to purchase an energy efficient fridge, washing machines or air conditioner, providing bill savings of up to $50 a year for an energy efficient washing machine or fridge or $135 a year for an air conditioner. Up to 100,000 Queensland households are expected to take up the offer.
An Asset Ownership Dividend of $50 a year for every household bill over the next two years, starting from January 2018 and evident on bills from the second quarter of 2018.
Another 4000 regional households can save up to $200 through the expansion of the Energy Savvy program.
Support for primary producers by delivering an additional 200 energy audits to agricultural customers through an expanded Energy Savers Plus program in partnership with the Queensland Farmers’ Federation, as well as providing a 50% co-contribution (up to $20,000) to implement audit recommendations.
Support for Queensland jobs and industry by providing energy audits for large customers including manufacturers, with a 50% co-contribution to implement recommendations (up to $250,000 per customer). This is expected to deliver savings of 10% to 40% for large industrial customers.
No-interest loans to help those Queenslanders who don’t have access to the upfront capital required to invest in solar and battery technologies to help reduce their bills and be part of a clean energy future. Queenslanders will be able to apply from March 2018, with savings of up to $700 per year expected for those who take up solar.

The initiatives are planned to be available from 1 January 2018, with calls for applications for Ergon’s EasyPay Rewards open now.