Know your NEM: Wind output and “baseload” renewables

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Are Australia’s wind farms living up to expectations? Why the market preferred Origin’s results to AGL’s; and a dive into the Windlab prospectus and its “busload” wind and solar plant.

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Figure 11: Baseload futures financial year time weighted average
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Wind capacity factors

With so much new wind being built we thought it worth having a quick check on achieved wind capacity factors. This isn’t completely straightforward because lots of wind farms have more than one name and sometimes the “Portland wind farm” can be 3 separate stages. In this quick head line look we don’t adjust for “vintage”, that is when the wind farm is built.

Three factors drive wind farm capacity factors: (1) the expected wind on the site (2) the age (newer windfarms have “better” technology) and (3) the seasonal conditions.

As is well known the June half 2017 was poor for wind. The worst capacity factor was Australia’s current largest site Macarthur and on our numbers Snowtown Stage 1 has the highest cap use in the NEM.

We calculated monthly average output using NEM Review from Jan 2014 and then took the average of all those months. The overall weighted average is around 32%. We expect that to increase as the current vintage comes on line. Capacity is in MW.

Figure 1: windfarms by size and capacity factor. Source NEM Review and ITK
Figure 1: windfarms by size and capacity factor. Source: NEM Review and ITK

Turning to the weekly action to August 18.

  • Future prices This marked the third nothing week for futures. Prices didn’t move. Federal Govt policy is stalled and the futures markets are likely unclear as to how things will go
  • Spot electricity prices .  Spot prices broadly fell over the week but remain  double last year’s level.
  • REC. Prices were unchanged. Uncertainty on the post 2020 REC outlook remains key. Our working hypothesis is that the REC scheme will be rolled into a CET for administrative simplicity.

Gas prices  Gas prices were a bit above last year but there is no sense of crisis or panic. Should AGL build its Cribb Point terminal there’s the possibility of another 100 PJ of gas coming into Victoria each year. Not cheap gas but enough to support process gas demand at the very least.

  • Utility share prices. Origin’s (ORG)result in the end was welcomed more than AGL’s by the sharemarket. Yield related names have fallen somewhat from favour. During the week it was confirmed that the IPO of Windlab has been successful. A reading of the Windlab prospectus demonstrated that:
    • Windlab has successfully identified a number of windfarms including Coopers Gap and Arafat for which it received development fees.
    • The PE ratio looks very low but that’s because the vast majority of fees are non recurring.
    • The value of the business is likely to depend on the success of the Kennedy Energy Park. Initial stage of Kennedy is 40 MW of wind, 15 MW AC of PV and 2 MW/4 MWh of storage. The question is whether to consider this a 40 MW plant or a 67 MW plant, but as we look at it the idea seems to be to run the unit as one facility. The figure below is from the IPO documents.
Figure 2: The almost "baseload" impact of wind & pv at Kennedy stage 1. Source: Company
Figure 2: The almost “baseload” impact of wind & pv at Kennedy stage 1. Source: Company

Average ouput of the plant on this basis is about say 24 MW (from eyeballing the graph). Relative to the wind capacity of 40 MW that’s a capacity factor 56%. However, the capital required is $156 million which relative to the wind farm is close to $4 m/MW, double that of a vanilla wind farm.

The prospectus states that Kennedy Phase 2, 80 km North of Hughenden can support 1200 MW of wind and allied PV and storage. That’s over $2 billion of capex.

We also note it requires the Qld Govt to go ahead with the North Qld transmission upgrade. The Genex Kidston pumped Hydro plant also requires that transmission.

As we have noted the Qld Govt has committed $150 million but what was surprising to read in the Windlab Prospectus is that the full cost of the transmission upgrade is actually $500 m.

Figure 3: Summary
Figure 3: Summary

Share Prices

Figure 4: Selected utility share prices
Figure 4: Selected utility share prices

 

Figure 5: Weekly and monthly share price performance
Figure 5: Weekly and monthly share price performance

Volumes

Figure 6: electricity volumes
Figure 6: electricity volumes

Base Load Futures

rsz_screen_shot_2017-08-22_at_21401_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: Thirty day moving average of Adelaide, Brisbane, Sydney STTM price. Source: AEMO
Figure 13: Thirty 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. 

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3 Comments
  1. Just_Chris 2 years ago

    Has anyone ever plotted wind speed against power output for the various wind farms? Clearly the should correlate perfectly but I am starting to wonder about wind numbers

  2. Tom 2 years ago

    Arafat wind farm eh?

  3. Cooma Doug 2 years ago

    It might seem like a strange comparison. If your car was to perform at a capacity factor of 40%, you would be lucky to have it for 2.5 years before its dead.
    Our largest and most valued hydro system has a capacity factor of 13%. Gas plant. A capacity factor of < 1%.
    The hydro number because of low rainfall average, the gas plant because of market rules.

    It is possible to combine wind and solar with load side action via load shifting and storage. This will lift the effectivness of the output to a much higher value.
    This gets better when rapid storage response comes into play.
    There is so much talk about batteries being small relative to plant output.. So much talk about system enertia. Point is, large 600 mw coal plant doesnt have much enertia. If the unit trips, all you have is the energy stored in
    the rotor. It is miniscule in terms of energy.
    So when we have a 20 Mwhr battery with s 200 mw wind farm
    It is relatively huge in terms of FCAS provision of synthetic spinning reserve.

    Wind and solar produce more energy than fossil fuels when you are talking about the efficiency of energy made available. The efficiency of fossil fuel generation is very low.

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