Know your NEM: Still cooking as grid consumption soars

• Volumes in week ended February 10 soared: The hot weather caused a spike in NSW and QLD electricity volumes. NSW consumption is up 20%  over the past week compared to same period last year, and QLD up 17%. NEM wide volumes are up 5% for the year so far. Last year, the “Indian Summer” meant that volumes remained seasonally high to the end of March (see Fig 5).
• Future prices: FY18 and FY19 futures prices rose once again and are basically up another 10% over the past month. As we predicted, increasing concern is being raised at all levels about the impact that the closure of Hazelwood will have not just on Victoria but on NSW and South Australia and indirectly even on QLD. Price is one thing but energy security is another. The demonstration in the past week of how low “energy” as opposed to “power” reserve margins are getting may yet lead to a more bipartisan approach. That notwithstanding the obviously absurd Scott Morrison coal stunt. By showing his true colours in a way that could never achieve nothing beyond political spectacle Mr Morrison has laid bare the paucity of the Federal debate at this point.. Figs 6-9 show how the curves have moved up over the past month and year.
• Spot electricity prices were basically 9X-10X higher than for the same week last year averaging $108 MWh inVictoria and $483 MWh in Qld for the entire week. This week we are starting publication of CYTD spot prices. Recall that consumers big and small don’t normally see any impact of spot prices in the short term as they are virtually all hedged by the retailers. The spot prices indicate the relative tightness of supply and demand and about 20% of spot market sales (as a guess) are unhedged. Average spot prices generally flow through to consumer prices with a lag as hedge books are repriced. In any event it would be political point scoring only to note that QLD with no renewable energy is seeing a CYTD spot price of $260 MWh almost double the South Australian level.
• REC prices were unchanged
• Gas prices : reflecting the demand for gas fired electricity during the heat wave gas prices rose to average $14 GJ in QLD and $12 GJ in Sydney. At least for this week these prices are around the LNG import parity price.
• Utility share prices: There was no great utility share price action during the week. We note that Redflow has seen a bounce in its shareprice following recent announcements and that AGL shares were up 5% for the week consistent with advice to the market that FY17 profit would be in the upper half of the guidance range despite a big hit to gas gross profits.

Figure 2: Summary

Share Prices

Figure 3 Selected utility share prices

 

Figure 4: Weekly and monthly share price performance

Volumes

Figure 5: electricity volumes

Base Load Futures

Figure 10: Baseload futures financial year time weighted average

Gas Prices

Figure 11: STTM gas prices

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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.