Electricity Report
6 to 12 July 2014
Introduction
The AER is required to publish the reasons for significant variations between forecast and actual price and
is responsible for monitoring activity and behaviour in the National Electricity Market. The Electricity Report
forms an important part of this work. The report contains information on significant price variations,
movements in the contract market, together with analysis of spot market outcomes and rebidding behaviour.
By monitoring activity in these markets, the AER is able to keep up to date with market conditions and
identify compliance issues.
Weekly Spotlight
The increase in the level of capacity offered at prices just below zero from June, as observed in the
previous weekly from 1 July, has continued this week. Weekly spotlight Figure 1 shows the average change
in capacity in price thresholds in Queensland and by CS Energy in the last two weeks in June and until 13
July.
Spotlight Figure 1: Average change in Queensland capacity in price thresholds ($/MWh)
1000
800
600
400
MW
200
0
-200
-400
-600
-800
< $-900 < $-100
< $-50
< $0
< $30
< $50
< $100
< $200
< $500 < $1000 < $2000 < $5000 < $10000< $12500> $12500
Qld
© Commonwealth of Australia
CS Energy
AER reference: 39220 – D14/95052
As can be seen form the figure, the majority of the increase in capacity in Queensland in prices between
zero and $-50/MWh (around 900 MW) can be attributed to changes by CS Energy and came from prices
between zero and $100/MWh. The increase in the level of low priced capacity has had an impact on the
average volume weighted spot price, which has fallen from $55/MWh during the last two weeks of June to
$37/MWh in July.
Spot market prices
Figure 1 shows the spot prices that occurred in each region during the week 6 to 12 July 2014. The spot
price reached $2276/MWh in South Australia on 6 July.
Figure 1: Spot price by region ($/MWh)
250
$/MWh
200
150
100
50
0
12 Jul
11 Jul
10 Jul
9 Jul
8 Jul
7 Jul
6 Jul
Figure 2 shows the volume weighted average (VWA) prices for the current week (with prices shown in
Table 1) and the preceding 12 weeks, as well as the VWA price over the previous 3 financial years.
2
Figure 2: Volume weighted average spot price by region ($/MWh)
80
70
60
$/MWh
50
40
30
20
10
0
Current week
Tas
Previous week
22 Jun
15 Jun
SA
8 Jun
Vic
1 Jun
25 May
NSW
18 May
11 May
4 May
27 Apr
20 Apr
13 Apr
13/14 FY
12/13 FY
11/12 FY
Qld
Table 1: Volume weighted average spot prices by region ($/MWh)
Region
Qld
NSW
Vic
SA
Tas
Current week
41
47
40
50
35
13-14 financial YTD
62
61
61
75
48
14-15 financial YTD
37
50
44
55
35
Longer-term statistics tracking average spot market prices are available on the AER website.
Spot market price forecast variations
The AER is required under the National Electricity Rules to determine whether there is a significant variation
between the forecast spot price published by the Australian Energy Market Operator (AEMO) and the actual
spot price and, if there is a variation, state why the AER considers the significant price variation occurred. It
is not unusual for there to be significant variations as demand forecasts vary and participants react to
changing market conditions. A key focus is whether the actual price differs significantly from the forecast
price either four or 12 hours ahead. These timeframes have been chosen as indicative of the time frames
within which different technology types may be able to commit (intermediate plant within four hours and
slow start plant within 12 hours).
There were 43 trading intervals throughout the week where actual prices varied significantly from forecasts.
This compares to the weekly average in 2013 of 97 counts and the average in 2012 of 60. Reasons for the
3
variations for this week are summarised in Table 2. Based on AER analysis, the table summarises (as a
percentage) the number of times when the actual price differs significantly from the forecast price four or 12
hours ahead and the major reason for that variation. The reasons are classified as availability (which means
that there is a change in the total quantity or price offered for generation), demand forecast inaccuracy,
changes to network capability or as a combination of factors (when there is not one dominant reason). An
instance where both four and 12 hour ahead forecasts differ significantly from the actual price will be
counted as two variations.
Table 2: Reasons for variations between forecast and actual prices
Availability
Demand
Network
Combination
% of total above forecast
3
5
0
0
% of total below forecast
43
42
0
8
Note: Due to rounding, the total may not be 100 per cent.
Generation and bidding patterns
The AER reviews generator bidding as part of its market monitoring to better understand the drivers behind
price variations. Figures 3 to 7 show, the total generation dispatched and the amounts of capacity offered
within certain price bands for each 30 minute trading interval in each region.
The red ellipse on Figure 6 highlights a period where there was little or no capacity offered in the $50$500/MWh band, which coincides with a high price in South Australia and is further discussed in the
analysis section.
4
Figure 3: Queensland generation and bidding patterns
12000
10000
MW
8000
6000
4000
2000
0
12 noon - 12 Jul
$0/MWh to $50/MWh
$500/MWh to $5000/MWh
12 noon - 11 Jul
12 noon - 10 Jul
12 noon - 9 Jul
12 noon - 8 Jul
12 noon - 7 Jul
12 noon - 6 Jul
<$0/MWh
$100/MWh to $500/MWh
Total generation (MW)
$50/MWh to $100/MWh
Above $5000/MWh
Figure 4: New South Wales generation and bidding patterns
14000
12000
10000
MW
8000
6000
4000
2000
0
12 noon - 12 Jul
5
12 noon - 11 Jul
$0/MWh to $50/MWh
$500/MWh to $5000/MWh
12 noon - 10 Jul
12 noon - 9 Jul
12 noon - 8 Jul
12 noon - 7 Jul
12 noon - 6 Jul
<$0/MWh
$100/MWh to $500/MWh
Total generation (MW)
$50/MWh to $100/MWh
Above $5000/MWh
Figure 5: Victoria generation and bidding patterns
12000
10000
MW
8000
6000
4000
2000
0
12 noon - 12 Jul
$0/MWh to $50/MWh
$500/MWh to $5000/MWh
12 noon - 11 Jul
12 noon - 10 Jul
12 noon - 9 Jul
12 noon - 8 Jul
12 noon - 7 Jul
12 noon - 6 Jul
<$0/MWh
$100/MWh to $500/MWh
Total generation (MW)
$50/MWh to $100/MWh
Above $5000/MWh
Figure 6: South Australia generation and bidding patterns
3500
3000
2500
MW
2000
1500
1000
500
0
$50/MWh to $100/MWh
Above $5000/MWh
12 noon - 12 Jul
6
12 noon - 11 Jul
$0/MWh to $50/MWh
$500/MWh to $5000/MWh
12 noon - 10 Jul
12 noon - 9 Jul
12 noon - 8 Jul
12 noon - 7 Jul
12 noon - 6 Jul
<$0/MWh
$100/MWh to $500/MWh
Total generation (MW)
Figure 7: Tasmania generation and bidding patterns
2500
2000
MW
1500
1000
500
0
12 noon - 12 Jul
12 noon - 11 Jul
$0/MWh to $50/MWh
$500/MWh to $5000/MWh
12 noon - 10 Jul
12 noon - 9 Jul
12 noon - 8 Jul
12 noon - 7 Jul
12 noon - 6 Jul
<$0/MWh
$100/MWh to $500/MWh
Total generation (MW)
$50/MWh to $100/MWh
Above $5000/MWh
Frequency control ancillary services markets
Frequency control ancillary services (FCAS) are required to maintain the frequency of the power system
within the frequency operating standards. Raise and lower regulation services are used to address small
fluctuations in frequency, while raise and lower contingency services are used to address larger frequency
deviations. There are six contingency services:

fast services, which arrest a frequency deviation within the first 6 seconds of a contingent event (raise
and lower 6 second)

slow services, which stabilise frequency deviations within 60 seconds of the event (raise and lower
60 second)

delayed services, which return the frequency to the normal operating band within 5 minutes (raise and
lower 5 minute) at which time the five minute dispatch process will take effect.
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The Electricity Rules stipulate that generators pay for raise contingency services and customers pay for
lower contingency services. Regulation services are paid for on a “causer pays” basis determined every four
weeks by AEMO.
The total cost of FCAS on the mainland for the week was $427 000 or less than 1 per cent of energy
turnover on the mainland.
The total cost of FCAS in Tasmania for the week was $149 000 or 2 per cent of energy turnover in
Tasmania. A majority of this cost, $112 000, was accrued on 8 July in lower 6 second services. On 8 July
at 1.25 am, after Basslink entered the no-go zone triggering a constraint which sets local requirements for
FCAS lower 6 second services in Tasmania, violated. The requirement for lower 6 second services
increased from zero at 1.20 am to 188 MW at 1.25 am. The co-optimisation between energy and FCAS
markets resulted in the price reaching $7183/MW at 1.25 am.
Figure 8 shows the daily breakdown of cost for each FCAS for the NEM, as well as the average cost since
the beginning of the previous financial year.
Figure 8: Daily frequency control ancillary service cost
180 000
160 000
140 000
120 000
$
100 000
80 000
60 000
40 000
20 000
0
Raise Reg
Lower Reg
12 Jul
Raise 5min
Lower 5min
11 Jul
8
10 Jul
Raise 60sec
Lower 60sec
9 Jul
8 Jul
7 Jul
6 Jul
Average cost
Raise 6sec
Lower 6sec
Detailed market analysis of significant price events
We provide more detailed analysis of events where the spot price was greater than three times the weekly
average price in a region and above $250/MWh or was below -$100/MWh.
There was one occasion where the spot price in South Australia was greater than three times the South
Australia weekly average price of $50/MWh and above $250/MWh.
Table 3: South Australia, Sunday 6 July
Time
Price ($/MWh)
Actual
7.30 PM
2275.88
Demand (MW)
4 hr
12 hr
forecast
forecast
85.04
87.48
Actual
1812
Availability (MW)
4 hr
12 hr
forecast
forecast
1862
1916
Actual
1988
4 hr
12 hr
forecast
forecast
2160
2094
Conditions at the time saw demand and available capacity close to that forecast.
At 6.57 pm, effective from 7.05 pm, AGL rebid a total of 140 MW of available capacity at Torrens B 2 and
3 from the price floor to the price cap. The reason given was “18:55A chg in dispatch::price increase vs PD
SA $292 vs $74”.
Also at 6.57 pm, effective from 7.05 pm, Energy Australia rebid 130 MW of available capacity at Hallett
from prices between $296/MWh and $11 000/MWh to $13 090/MWh. The reason given was “18:56 A
adj bands mat chg $SA and 5MPD @ 1900,1910,1915”.
At 7.20 pm there was a 77 MW increase in demand (mainly due to Angaston and Pt Stanvac reducing
output). And the five minute price increased from $77/MWh at 7.15 pm to $13 090/MWh at 7.20 pm (set
by Hallett). At 7.25 pm there was a 120 MW decrease in demand (mainly due to Angaston and Pt Stanvac
increasing their output) which saw the five minute price return to previous levels.
Financial markets
Figure 9 shows for all mainland regions the prices for base contracts (and total traded quantities for the
week) for each quarter for the next four financial years.
9
120
900
100
750
80
600
60
450
40
300
20
150
0
Number of contracts traded
$/MWh
Figure 9: Quarterly base future prices Q3 2014 – Q2 2018
0
Q2 2018
Q1 2018
Vic volume
Vic
Q4 2017
Q3 2017
Q2 2017
Q1 2017
NSW volume
NSW
Q4 2016
Q3 2016
Q2 2016
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
Q4 2014
Q3 2014
Qld volume
Qld
SA volume
SA
Source: ASXEnergy.com.au
Figure 10 shows how the price for each regional Quarter 1 2015 base contract has changed over the last 10
weeks (as well as the total number of trades each week). The closing quarter 1 2013 and quarter 1 2014
prices are also shown. The AER notes that data for South Australia is less reliable due to very low numbers
of trades.
120
1200
100
1000
80
800
60
600
40
400
20
200
0
Number of contracts traded
$/MWh
Figure 10: Price of Q1 2015 base contracts over the past 10 weeks (and the past 2 years)
0
Current
29 Jun
Vic volume
Vic
22 Jun
15 Jun
NSW volume
NSW
08 Jun
01 Jun
25 May
18 May
11 May
04 May
Q1 2014
Q1 2013
Qld volume
Qld
SA volume
SA
Note: Base contract prices are shown for each of the current week and the previous 9 weeks, with average prices shown for yearly
periods 1 and 2 years prior to the current year
Source: ASXEnergy.com.au
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Prices of other financial products (including longer-term price trends) are available in the Performance of
the Energy Sector section of our website.
Figure 11 shows how the price for each regional Quarter 1 2015 cap contract has changed over the last 10
weeks (as well as the total number of trades each week). The closing quarter 1 2013 and quarter 1 2014
prices are also shown.
25
250
20
200
15
150
10
100
5
50
0
0
11
SA volume
SA
Current
July 2014
29 Jun
Australian Energy Regulator
Vic volume
Vic
22 Jun
Source: ASXEnergy.com.au
15 Jun
NSW volume
NSW
08 Jun
01 Jun
25 May
18 May
11 May
04 May
Q1 2014
Q1 2013
Qld volume
Qld
Number of contracts traded
$/MWh
Figure 11: Price of Q1 2015 cap contracts over the past 10 weeks (and the past 2 years)