NSW progress in a bid to replace their last 5 coal-fired generators

NSW Waratah

AEMO Services recently conducted its first round of tenders for Long-Term Energy Service Agreements and Renewable Energy Zone Access Rights to support the transition to renewables in NSW. 16 projects were shortlisted, totaling 4.3 GW of generation and storage in its first auction.

To enable the transition from coal to renewables, investment in NSW is likely to be over $32B to allow renewables to fill the gap as the last 5 coal fired generators in the state retire over the next 10 years. AEMO Services will be running two auctions per year until 2030 to source a total of 14 GW. The next auction is likely in July 2023.

Replacing the last five coal generators with renewables and storage should lead to lower energy prices in the long run because:

  1. Renewable energy sources are plentiful in Australia, which should eventually lead to price stability and security of supply.
  2. The use of renewable energy reduces our dependence on fossil fuels, which are subject to price fluctuations and geopolitical tensions.
  3. The deployment of energy storage technologies such as batteries can help aggregate renewable energy sources better, making it easier to mix them to meet NSW’s energy needs.

The 16 selected projects will have to submit their financial bids to AEMO Services by 10th February, with unsuccessful projects able to resubmit in future rounds.

We are looking forward to seeing more projects reach financial close to bring more renewable energy to the grid as this will enable our Edge Utilities Power Portfolio to access renewables at more competitive prices for our customers.

If you would like a strategy to ensure your company procures energy to support sustainability and growth in renewables, please reach out to discuss your options.  To save on electricity spend, you can also join our Edge Utilities Power Portfolio, read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.  

When will businesses see the recent reduction in wholesale electricity prices?

Although wholesale electricity prices have reduced in recent months, it is unlikely that households and businesses will see these benefits in their electricity bills until 2024.

In late December the Federal government stepped into the energy market and intervened, placing a price cap on wholesale gas and the price of coal, essentially disconnecting the domestic energy market from the international energy market. Moreover, the Federal treasury analysed the wholesale electricity market in November 2022, comparing it with the prices we saw in December. After Federal intervention the price caps on coal and gas have dropped prices in QLD by 44% and 38% for NSW.

Following these caps being put in place, the domestic electricity market corrected and both spot and futures contracts dropped to match an underlying cost of production for electricity based on these new capped fuel prices.

However, does this mean electricity bills are going to drop a similar amount? Well, the bad news is no. Retail bills are normally locked in well in advance so many large users have locked in pricing for 2023. The underlying energy costs are only part of the retail bill as other costs include transmission, distribution and AEMO charges which unfortunately have not decreased and have the potential to increase as the market evolves.

While the underlying cost of electricity will drop with more renewable energy entering the market, the other costs on the electricity bills will now represent a higher proportion and are likely to increase.

Renewable energy requires more transmission lines to connect the generators to the grid, they require specialised services to maintain the security of the grid and will also require a higher cost generation or storage to provide firming for around the clock supply.

Edge Utilities offer market leading services for business and strata energy users. We help you navigate the ever-changing energy landscape, focus on renewables and save on your power bills through our Edge Utilities Power Portfolio (https://edgeutilities.com.au/edge-utilities-power-portfolio/). Reach out, we would love to assist you: info@edge2020.com.au or call on:1800 334 336

Hotels – how to reduce energy consumption and your rising power bill

Hotel dining and pool area

Rising energy costs are having a massive impact on hotel businesses and the travel industry across the world. A significant part of hotel operations management falls outside of filling beds and high electricity costs are a major contributor to soaring operating expenses. In addition to a price spotlight on energy there is also an important focus, and certainly customer pressure, to transition to energy supply from renewable resources. So, what can you do while the pressure is on?

Generating your own power through renewables sounds like a sensible idea but onsite renewable energy can be challenging to implement for many hotel sites, solar panels and batteries require significant investment and significant space.  It is challenging because in a post covid world priorities are changing and customers want to know hotels and restaurants are following sustainable practices, it influences their choices and this trend is continuing to grow. Millennials are particularly conscious consumers, and they are now the biggest market of all consumer age groups.

With all this in mind, “greenwashing” is not always the right path, and if generating your own power doesn’t make economic sense for your business then there are many other avenues you can take that will improve your sustainability rating, save energy and therefore reduce your hotel electricity costs.

So, what can hotels do to save on electricity?

Advances in technology now mean that there are several other solutions that can significantly reduce hotel energy outlay. In addition, energy brokers can help you buy energy more competitively. Not only can they negotiate on your behalf and buy at wholesale rates, but they can also build a power purchase portfolio that can support your sustainability goals as well as save you money.

A good place to start is to make sure that you have data on the energy use in your hotel. Keeping track of average energy usage, tracking peak times and patterns that lead to high energy bills is the most useful data you can have. Understanding your impacts will help you prioritise so you can take action in the areas which will have the highest impact. A hotel can cut its overall energy expenses 20 percent by using basic energy efficient measures, this is good for you and for the planet.

10 energy saving tips to bring electricity bills down:

  1. Tracking and processes, remembering the old saying of what is measured gets managed. Work with your team and encourage them to be aware, turn off lights, close fridges etc.
  2. Nudge your occupants to be more aware of energy consumption, even just with simple messaging. There’s an interesting study on this HERE
  3. Use LED light bulbs, they use less than a quarter of the energy of traditional bulbs and they last longer.
  4. Install smart climate and lighting control thermostats and sensors. These are real-time sensors that can adjust and detect changes in occupancy on a room-by-room basis. Clever technology that can save you money on lighting, ventilation, air conditioning and heating.
  5. Consider keycard managed power switches if you don’t already have them.
  6. Look at your equipment – modernising equipment can save. e.g., ventilation and extraction system in kitchens, refrigeration, dishwashing, your HVAC systems, pool equipment etc. There are some very interesting figures from Sustainability Victoria on equipment in the hospitality industry HERE.
  7. Retro-fit existing west (sun) facing windows with energy-saving furnishings or film.
  8. Regularly clean and service your air conditioning and ventilation systems and service your heating/hot water boilers, this can reduce the monthly energy costs by 10%.
  9. Plants and green walls help modify temperature and naturally purify the air.
  10. Definitely consider solar if it could be suitable for your premises.

Save money and the planet

With energy prices continuing to rise and customer opinion paramount, becoming energy efficient is now a necessity. Going green is no longer just a trend. 2030 and indeed 2050 is fast approaching, and we are all (thankfully!) becoming more environmentally conscious. You can reduce your operating costs and your carbon footprint with commitment and focus. Maximpact Ecosystems (a UK based advisory) estimate that in hotels:

“Energy costs amount to 5-8% of overall operational costs, and while this number might seem low or insignificant, the truth is that energy is often the second highest controllable portion of costs after labour. Energy efficient practices can provide energy savings of 20-35%, which over time can make a big impact on the bottom line.”

 

Hotel sign

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. Our customers’ most common goals are savings and sustainability, we are pragmatic in our approach and would love to help you reach your goals.
 If you feel you need more control of your hotel’s energy spend, please reach out to discuss joining our Edge Utilities Power Portfolio (EUPP) where we use the power of bulk purchasing to help Australian businesses of all sizes save on their energy bills. We’ll conduct a free no obligation comparison to show you how you can save. Read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on 1800 334 336 to discuss. 

 

Market operator develops road to renewables

Just a week after reporting on a slowing of renewable energy projects to an all-time low, this week the Australia Energy Market Operator (AEMO) has published the engineering roadmap that is required to get the NEM to 100% renewables. While the roadmap doesn’t guarantee the NEM will be powered by renewables 24 hours a day all year round, the roadmap is designed to allow the NEM to be powered by renewables for hours or days at a time.

The roadmap to 100% renewables raises new challenges including the variability of output from wind and solar generation and the change required to these technologies to work with a system designed for one-way electricity flow from large synchronous generators to firm the transition away from coal-fired generators.

For years the market has seen the potential for high levels of renewables to cause system problems, this is due to the variability of output causing large swings in spot prices and lower system strength leading to a less stable network.

South Australia is a world leader in renewable energy generation, and in order to maintain system security they use synchronous condensers which maintain inertia and in doing so improves system strength, allowing for higher levels of wind and solar to operate. The transition may require more synchronous condensers to maintain system security, however newer installations are integrating these technologies to provide a similar service which may mitigate the demand.

In addition, high levels of renewable energy puts pressure on coal generators. Forcing coal-fired generators to run at minimum load while they wait for anticipated higher prices over the evening and into the night. However, the longer the spot price remains lower during the day, coal-fired generators will need higher evening spot prices to break even. At some point, the economics will not add up, and the coal-fired units will be mothballed or permanently retired. The shutting down of coal-fired generators will require large amounts of storage for countries to achieve their renewable energy targets of 83% by 2030.

While coal-fired generation is the big loser in the new world, 100% renewables combined with storage will put a lower reliance on gas-fired generation for firming or covering the peak electricity needs during the day.

If you would like a strategy to ensure your company procures energy to support sustainability and growth in renewables  please reach out to discuss your options.  To save on electricity spend, you can also join our Edge Utilities Power Portfolio, read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.  

Overview of the National Electricity Market (NEM) – Quarter 3, 2022

The NEM has experienced an unprecedented year of high electricity spot prices, recently Q322 averaged $216/MWh across the (NEM) which was more than three times higher than the same quarter in the previous year and close to matching the all-time high during Q222 of $264/MWh.

Many factors influenced the volatility and elevated spot prices including:

  • A tight supply / demand balance resulting from gas flow restrictions in Europe associated with the war in Ukraine
  • Australian weather events
  • An increase in demand
  • Generator bidding behaviours
  • A reliance on thermal generation (coal and gas fired)

Coal and gas prices are at all-time highs due to international demand leading to a high cost of generation. In turn increasing the underlying fuel cost for generators, contributing to the increase in spot prices. As little energy storage is currently installed in Australia, large swings in the output from wind also contributed to the volatility in the market.

Generators who want to sell electricity to the NEM must submit a bid detailing how much energy they would like to offer in ten different price bands. Recently a lower volume of generation has been available from coal due to bidding behaviour with participants withdrawing thermal capacity and intermittent generation like solar and wind taking a larger market share.

A lower capacity factor for coal generation has resulted in coal fired availability to move higher up the bid stack, resulting in coal fired generation needing to dispatch at higher spot prices to meet their long run average costs.

Weather influences such as La Niña and a negative Indian Ocean Dipole (IOD) event increased the likelihood of rainfall across the east coast of Australia this year. With September’s rainfall being the fifth highest on record across Australia. The cloudy and wet conditions impacted solar generation and the supply of coal to power stations resulting in higher fuel prices.

Demand from the grid has increased for the first time in Q322 since 2015 as households and businesses require more electricity from the grid due to rooftop solar not generating as much as previous years due to cloudy conditions.

If you feel you need more control of your company’s energy spend, please reach out to discuss joining our Edge Utilities Power Portfolio (EUPP) where we use the power of bulk purchasing to help Australian businesses of all sizes save on their energy bills. Read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.  

Mojo and the market squeeze

Australia it seems is not immune to the Retailer of Last Resort (ROLR) process which has been plaguing the European energy market for the last few years. Germany is discussing bailouts for Uniper SE, the French Government is talking about fully nationalising Électricité de France SA. The UK has seen over 30 electricity providers go into Retailer of Last Resort in the past few years, a gas shipper backed by Glencore go under, and have put Bulb Energy under the government’s control.

The Australian market isn’t immune either with Mojo just the latest retailer to enact the Retailer of Last Resort mechanism for its 500 customers.

So, why are so many companies buckling under the current energy crisis and what can you do to avoid being wrapped up in the process?

The squeeze of the energy markets is due to many factors, including the war in Ukraine and sanctions on Russian Oil and Gas reducing availability, catastrophic flooding affecting the mines and rail tracks from our own domestic coal supply and in our opinion some generators ensuring they are well placed to benefit from any perceived shortness of supply. All these factors have pushed the price of our domestic electricity and gas to unprecedented levels, and we are not the only ones. With Europe at 6 to 8 times higher than the last 5 years average there is no easing of international fundamentals pressure.

This should lead to higher prices on our bills, however, if a retailer has not adequately protected their position and are exposed to these prices, they cannot simply pass them through to the end user. Some consumers are protected by the Default Market Offer, this is the maximum that you can be charged on your bill, and it applies to mums and dads and small businesses with solar installed.

That isn’t a problem, is it? Well, if these retailers have not ‘hedged’ or bought the electricity contracts for their customers, before prices went up 6 to 8-fold, and they cannot pass through these higher charges, then they are no longer in a viable position to continue as a business and must call in a Retailer of Last Resort to take their customers and close. The customers who are passed to a new retailer then risk being passed through on a more expensive tariffs or variable tariffs.

With increasing interest rates globally eating into all aspects of businesses profitability and further possible energy price spikes, as retailers look to pass through as much of their costs as they can, we do not believe Mojo will be the last to shut its doors.

So how can you protect yourself from being exposed to variable pricing or smaller retailers in this market? Well, there are several ways:

  • Ensure you have a reputable retailer, the EUPP only works with the top tier retailers who have sound strategies to hedge their longer-term positions, either through generation or trades.
  • We ensure that all costs are either agreed at the start of the contract or passed through with no uplifts, and the allocation of these pass-through costs is fair.
  • Finally, the EUPP puts you into a larger group of buyers of electricity, allowing your company to benefit from access to retailers and contracts usually only available to the larger market.

All this coupled with the expertise of the energy managers, who manage your energy portfolio to ensure it keeps up with the market and defend your portfolio in this volatility.

If you feel you need more control of your company’s energy spend, please reach out to discuss joining our Edge Utilities Power Portfolio (EUPP) where we use the power of bulk purchasing to help Australian businesses of all sizes save on their energy bills. Read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.  

Is unaccounted for energy (UFE) allocation affecting my company’s bottom line?

Energy meter costs

I find myself asking, is UFE the UIG of Australia? Anyone who knew me in my past life in the UK knows that I harped on about Unidentified Gas (UIG) A LOT!

The idea behind the UK’s UIG is simple, it is to allocate the gas which couldn’t be attributed to a meter in an area, across all end users in that area in which it was used (known as “off-taken”). Seems simple right. But when was the last time you actually gave a meter reading? Possibly six months to a year ago, right? Well that means your off-take (unless you are on a smart meter) is estimated and you will be either over or under on allocated unidentified gas.

Now although this seems sensible with everyone eventually giving a meter read and therefore it will all work out in the wash,  the issue is currently exacerbated by the extreme increase in the gas price. These high prices are now passed through to retailers and then in turn our bills.

Now what does understating this UK gas usage or allocation have to do with Australia? Well, quite a lot. The system is similar, but not the same.

Following Global Settlements being introduced by AEMO we have started seeing Australia’s version of these charges coming into our bills. We allocate the unidentified – called Unaccounted for Energy (UFE) within each region by the off-takers in that area.

What we are not doing yet, which in the UK’s defense they do there (through XOServe), is take into account those meters which are half hourly ready (smart(er) meters) and therefore their usage should be known. Currently in Australia, the offtake in a region will be directly linked to your proportion of energy being allocated to you and you literally have no say in these charges, despite having updated metering capability.

The sore point of it all is, that this is occurring at a time where our electricity market is extremely high and therefore there is a possibility of the combination of large UFEs at high prices being passed through to end users, whilst having no control over the volume or price it is passed through at. This is leading to significant shocks to companies’ outgoings, as there is little to no visibility on the charge on any given month, and no way to forecast them for a company’s budget.

I fear that UFE will become my new soap box issue, but I can guarantee this isn’t the last anyone will hear on this. I am pretty sure I won’t be the only one who will be making noise.

Is this happening to you? If you feel you need more control of your company’s energy spend, please reach out to discuss joining our Edge Utilities Power Portfolio (EUPP) where we use the power of bulk purchasing to help Australian businesses of all sizes save on their energy bills. Read more: https://edgeutilities.com.au/edge-utilities-power-portfolio/ or call us on: 1800 334 336 to discuss.  
 

Save money on business energy bills

Power Portfolio

Edge Utilities launch the Edge Utilities Power Portfolio to help Australian businesses save on energy costs

With energy prices at an all-time high and continuing to rise, the team at Edge Utilities are using the power of bulk purchasing to help Australian businesses of all sizes save on energy bills. We’ve developed the Edge Utilities Power Portfolio (EUPP) to give every Australian business access to the SAME savings as large energy users and shield them from rising energy prices.

Shield your business from rising energy costs:

By taking multiple energy users to market as one larger group, we can access bulk purchasing prices, saving on what you are currently paying for your energy. Joining the Edge Utilities Power Portfolio (EUPP) means you can access these savings AND have your energy portfolio managed by one of Australia’s leading energy management teams.

We do the hard work for you.

Through the EUPP you are joining a large power portfolio to which we apply portfolio optimisation analytics. You will be taking advantage of procurement strategies usually only available to really large users. We negotiate terms that you could never achieve on your own. With the right portfolio, we can even support your transition to renewable energy with minimal impact on your energy rates.

Who is Edge Utilities?

Under our parent company, Edge 2020, we have provided energy broker services for over 14 years, working with Australia’s largest energy users, including BHP, Glencore and SBS.

From the moment you join the EUPP, our energy team works for you. The sooner we start, the sooner you save. 

As a launch special, Edge Utilities is waiving the sign-up fee to join the EUPP. Even more savings for you.
For more information on the Edge Utilities Power Portfolio, visit: https://edgeutilities.com.au/edge-utilities-power-portfolio/ 

Let’s talk Energy Markets

 

In the past 2 years, the market has dropped from highs of over $75/MWh in August 2019 then following the events outlined on the chart below the market price dropped to historic lows of around $36/MWh. Following some volatility at the start of 2021 driven by a hot summer, the market firmed and increased further because of the catastrophic failure of Callide C4 and the tripping of many other power stations.

The chart below shows that the underlying spot price (light blue line) has continued to spike and trend up resulting in increases in the contract prices. Another interesting aspect of price curves is how market announcements such as the cost of coal and gas can impact the curve. In months, the curve softened but spiked due to conflicts in Ukraine causing coal and gas, a key input to thermal generation, to increase in price.

The spot price of these commodities is not directly linked to the fuel price used by generators in the next quarter, so the market has now softened.

Future years are also becoming cheaper year on year as renewable energy takes a larger share of the market and renewable energy is expected to continue to fall in price.

Having recently undertaken a few requests for proposals (RFP) for our clients, we are aware there is good value for companies willing to take up longer term renewable PPAs. More and more projects are becoming available post 2023/24.

Undertaking a renewable PPA will go towards meeting many companies’ sustainability targets through the procurement of renewable energy and environmental certificates.

Below are the contact details for Alex. He would be happy to discuss your company’s sustainability targets and how we can help the business reach them.

Alex Driscoll

Senior Manager Markets, Trading & Advisory

M: 0437 966 409

P: (07) 3905 9226

T: 1800 334 336

E: alex.driscoll@edge2020.com.au

POWER COSTS TO DROP

The Australian Energy Market Commission (AEMC) has released its annual residential electricity price trends report. The report provides governments and consumers with an understanding of the cost components across the electricity supply chain and provides transparency into the final price by consumers. It also provides a forecast of the costs for the next 3 years.

In the 12th version of the report, the AEMC found there is a general trend of residential bill reductions. Queensland is expected to see the largest drops, with a projected drop of 10% while the only region to increase is the ACT with an increase of 4%.

The 10% savings for Queenslanders are expected to translate on average to a savings of $126 which will see electricity bills the lowest since 2010/11.

The key drivers in an electricity bill are the wholesale, environmental and network costs. Wholesale costs are likely to fall by $36 over the 3 years, environmental costs will also drop by around $35 due to the increased reliance on renewable generation however the network costs are likely to increase by 3.4% or $21 over the 3 years due to the increased investment in the transmission and distribution networks.

AEMC Chair Anna Collyer said, “the report shows that, based on current trends, prices per kilowatt hour are likely to be under 26c p/kWh by June 2024, the first time since 2016/17”.

The report gives enough visibility into the future that claims that the cost of power delivered to consumers will drop and continue to trend down despite the closure of large thermal power stations.

Even though wholesale and environmental costs are trending down the cost of network investments will transfer into higher network costs as investments are made into the network to strengthen the grid and allow for the two way connection of distributed generation.

An interesting comment from the AEMC is that environmental costs are expected to drop by $16 out to FY23/24 due to a decrease in large-scale renewable energy costs. We are seeing a trend in the short term of environmental costs increasing due to delays in the construction and commissioning of new generators. We are also seeing an increase in the cost of LGC’s as more companies choose to buy extra certificates for voluntary surrender.

The head of the AEMC also said “While we have just under 2,500MW of generation expected to exit the grid over the next three years, there are almost 5,500MW of committed new large-scale generation and storage projects coming online over the same time period,”

With the addition of a further 4,130 MW of new rooftop PV capacity, this is likely to push prices down however until the network is reinforced it may have the opposite effect.

Edge has reported over the last couple of years that the cause of some of the market volatility has been because of the unconstrained rooftop PV lowering the operational consumption and disporting the scheduling of generation throughout the NEM.

The next 3 years may be the most crucial in the transition of the NEM from thermal generation to renewables and the investments in getting the network in place will be passed on to end users.

The question is, do consumers want the cheapest power in the short term or is a grid designed to provide the cheapest energy for the long term, the answer?

Article written by

Alex Driscoll

Senior Manager Markets, Trading & Advisory