Know your NEM: We survived a few days without Hazelwood

Figure 11: Baseload futures financial year time weighted average

Despite the closure of Hazelwood the lights stayed on, other than for places impacted by flooding. Pool prices were high though, despite moderate demand, and futures prices increased again.

A new wind farm was confirmed, taking the total wind under construction to 1.9 GW.  Once again we had haphazard thought bubble style policy with Nick Xenophon, the world’s new electricity expert, getting the Federal Govt. to agree to provide a concessional loan to a proposed solar thermal plant in South Australia. As if South Australia wasn’t getting enough submarine subsidies already.

A summary of recent Federal Govt. policy, and I’m not joking, these are the actual facts, is:

  1. A $1 bn proposed subsidy for developing a Qld coal basin.
  2. The CEFC to provide assistance to an associated coal fired generation unit in Queensland to be owned by ‘Foreign investors’. Presumably the same investors that weren’t allowed to buy an electricity network in Sydney.
  3. Announcement of unfunded, not modelled Snowy 2 despite only owning 13% of the Snowy.
  4. Announcement of concessional loan to a proposed solar thermal plant in South Australia. A PPA would be far more useful than a loan but a PPA with strict performance guarantees by the proponent. The jury is very firmly out on the reliability, and LCOE of solar thermal and the prospect of a white, or should it be yellow elephant has to be considered.
  5. Blaming the States policies for high electricity prices, when the only new supply in 2017 is coming from those same policies.
  6. Moaning about the terror of renewables when their share of electricity production in Australia is small in both absolute terms and relative to the rest of the world.
  7. Committing to COP 21 targets but having at present zero plans or policies to deliver them. And one suspects no intention of developing real plans or policies.
  8. Commissioning a review but making policy announcements before the review is concluded including ruling out the policy option its chief policy advisor (the AEMC, not Nick Xenophon) and the thermal generation industry was in favour of.

I leave open to readers to form a view on whether this is the right way to go about things. Or indeed whether a satire writer could write such a stupid script.

What has the thermal industry to be scared of? It dominates production in Australia.

Figure 1 Generation by fuel 12 months ended March 31, 2017 includes rooftop PV. Source: NEM Review
Figure 1 Generation by fuel 12 months ended March 31, 2017 includes rooftop PV. Source: NEM Review

Turning to the weekly action

Volumes were soft this week with QLD production down 2% on the week. We suspect this is flooding of the CSG gas fields. We haven’t read about this but its know the wells are susceptible to lower production when the area floods. NSW consumption was well up and Victoria remains down.

  • Future prices. Rose again with FY18 up a bit and FY19 up 2%. FY19 prices are now around $100 MWh except in Qld and despite a flat demand outlook.
  • Spot electricity prices. These averaged over $100 MWh across the board. Electricity flowed from Qld to NSW and from NSW to Victoria. Victoria sent power to South Australia and Tasmania at time. We will revisit the expected change in the flow pattern in a couple of weeks.
  • REC Unchanged
  • Gas prices drifted further South but still  remain around the $10 GJ mark in NSW
  • Utility share prices. Utility shares have recovered somewhat and over the past month have typically outperformed the ASX200 Perhpaps the main share price news was IFN’s raising of $151 m equity accompanied by a 5% lift in earnings guidance to $147 m for FY17.
Figure 2: Summary
Figure 2: Summary

Share Prices

Figure 3 Selected utility share prices.
Figure 3 Selected utility share prices.

 

Figure 4: Weekly and monthly share price performance
Figure 4: Weekly and monthly share price performance

 

Volumes

Figure 5: electricity volumes
Figure 5: electricity volumes

 

Figure 6 7 Day moving avg year on year temp change. Source: BOM
Figure 6: 7 Day moving avg year on year temp change. Source: BOM

Base Load Futures

rsz_screen_shot_2017-04-03_at_15809_pm

Figure 11: Baseload futures financial year time weighted average
Figure 11: Baseload futures financial year time weighted average

Gas Prices

Figure 12: STTM gas prices
Figure 12: STTM gas prices

 

Figure 13 30 day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO
Figure 13 30 day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO

 

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 and co-host of the weekly Energy Insiders Podcast. 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.

Comments

6 responses to “Know your NEM: We survived a few days without Hazelwood”

  1. Ray Miller Avatar
    Ray Miller

    My I suggest a new season of ABC’s ‘Utopia’ this time with a focus on energy policy, we need to distract the masses urgently and with the script already written it would be cheap for the cash strapped ABC to make.

  2. Chris Fraser Avatar
    Chris Fraser

    Between dog whistling and making policy, dog whistling for some is a rather more finely honed skill …

  3. Gary Rowbottom Avatar
    Gary Rowbottom

    Very much have a lot of respect for your analyses David, but take some objection to your statement “The jury is very firmly out on the reliability, and LCOE of solar thermal and the prospect of a white, or should it be yellow elephant has to be considered”. In the case of the project proposing a virtual clone of Crescent Dunes, operating now for well over 12 months, and exceeding it’s production targets (noting these are I understand not set at the actual full capability of the plant in the first operation year), I think your statement above is a little harsh. I will concede an element of doubt may exist with some of the other technology variants that don’t yet have the technology, or the commercialityyet proven at a decently large scale however, so maybe that prompted your comment. Or indeed possibly Ivanpah, a direct steam, no storage – wasn’t a great idea compared to what could have been done, but I’m pretty sure you won’t see that type of CST plant built again (any type without storage actually).

    1. David leitch Avatar
      David leitch

      Gary

      Your comment is fair and mine overstated. That said Crescent Dune has been off line for three months due to a leak in its salt storage and in no month to date achieved better than 39% capacity utilization. Ground was turned in 2011 and it’s still not at design capacity.

      It’s an expensive piece of kit in the small SA market.

      It’s early days. Ill say no more about solar thermal until there is some more evidence.

      1. Gary Rowbottom Avatar
        Gary Rowbottom

        Thanks David. My only info was it was 2% ahead of production targets, info which came in an article surrounding the Crescent Dunes project Platt’s award for best commercial plant. I would think awards wouldn’t of that type wouldn’t be given out to dud performers. I know CD was being run to ramp up to full ability but nothing more detailed as to how long or steep the ramp was. First I’d heard of a salt leak. 3 months seems a long outage for that, but depends on details. I know the commissioning phase was long, understandable for a first of that type at that scale plant. If I recall correctly, when Alinta ran a community session at the release of its Milestone 3 report of its feasibility study, which was in April 2015, the Solar Reserve reps in attendance from the USA indicated the plant was “weeks away” from commissioning, and was announced online Feb 22 2016, but had I understand been actually been online since November 2015. May be wrong but possibly recall news of start of commissioning in early/mid 2014. I am interested in its daily operating profile, esp. accompanied by reasons for any production gaps but probably can’t get that level of info. Nevada possibly has some sort of AEMO equivalent that some level of data may be available from. Of course the 20 MW Gemasolar plant in Spain is very similar technology as best as I can tell from my Internet window and thus perhaps a better view of the technology. It is a little on the expensive side, but to some degree I like that because that expense is due to the jobs to build them, extract raw materials and fashion the components needed to construct such a plant. Perhaps a tad communist of me but hey, I care about Australian jobs.

        1. David leitch Avatar
          David leitch

          Actually Gary I’ve worked out the shut down is 5 months. I’m told its due to restart in a couple of weeks. If you look it up on wikipedia you can see the monthly production and a link will take you to the EIA site where the latest is January. But since it is still down in early April that is where we are. Its not a technology issue but neither do we have data to finally validate performance.

          On the more positive side I’m told the capital costs have come down from the US $ 1bn for Cresent Dunes to about A$750 m for Port Augusta. Certainly a very big improvement.

          Opex of A$8 m per year.

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