This note shows that on average hydro and gas get higher half hourly prices than coal. Wind & solar PV take a discount. In South Australia over recent weeks (and this changes all the time), the evening peak price premium is much higher than in other States, driving up the overall South Australian Average.
We also show charts, courtesy of NEM Review, of average generation by fuel by state by time of day. Wind continues to have only a minor impact outside of South Australia despite recent startups and better conditions.
Recent fuel mix
After a very poor six months leading up to June wind conditions have picked up. Also we have had start up of Hornsdale 1 and 2 (Sth Australia) and some early production from Arafat (Victoria), Hornsdale 3 and Whiterock (NSW) wind farms. Despite this increased production spot prices have remained high, typically round $100/MWh. (Ed: AEMO’s new rules requiring a certain amount of gas will have played to this).
Our first figure shows the average price received by fuel over the past six weeks in selected regions.
In reality, solar PV only gets a spot price in NSW where the Moree, Nygan and Broken Hill plants produce. However we have calculated a “shadow price” for PV in the other States by assuming rooftop PV participated in the spot market and received the spot price at the time of production.
Where hydro is used it gets the highest price, closely followed by gas. Wind and PV, and we only have utility scale PV in NSW to date, invariably are price takers and get a significant discount.
The good news for wind is that the absolute spot prices in each region have been excellent by historic standards $94/MWh in NSW, $85/MWh in Sth Australia and $93/MWh in Victoria. The squeeze in Victoria can be seen from the fact that the price for gas fired generation is higher in Victoria than South Australia.
This is only six weeks data, and we are heading into the seasonally softest part of annual demand. There is every likelihood that when summer hits things will be different and spot prices will jump particularly as we rely on hydro and gas for more marginal hours.
Turning to the average daily patterns of fuel generation.
Even in Winter rooftop PV clearly impacts pool prices, particularly in Qld Wind shaves on average a small amount off coal demand in NSW, and PV even more. but gas and hydro manage the evening peaks on average (together with imports not shown)
In South Australia on Average the impact of gas around the evening peak is the key price driver. Again interconnects have been ignored
Finally, in Victoria, on average gas has been nearly eliminated from the AM peak. The way to reduce average prices in Victoria is to get the hydro and the gas share to fall.
Utility solar PV may have some impact on the morning peak but at this time of year the evening peak still looks like it will have high prices into the foreseeable future.
It’s the evening peak in South Australia that has an impact on average prices relative to other States (at this time of year)
In this shoulder season we can see that Qld is keeping average price down relative to other States mainly by keeping prices down in the middle of the day. In South Australia prices are broadly in line with NSW and Victoria except for the evening peak. At that time there isn’t any PV and on average not enough wind.
David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.
David Leitch is a regular contributor to Renew Economy. He is principal at ITK, specialising in analysis of electricity, gas and decarbonisation drawn from 33 years experience in stockbroking research & analysis for UBS, JPMorgan and predecessor firms.