AEMO’s MLF assessment reveals solar and wind farms as big losers

Solar Panel

The Australian Energy Market Operator (AEMO) recently released its final Marginal Loss Factors (MLFs) assessment, highlighting solar and wind farms as the big losers. The MLFs determine how much energy is lost between the generator and the region reference node in each state, and the changes in the new MLF forecasts were primarily driven by changes in availability due to the closure of Liddell, revised return to service dates for Callide C, revised demand forecasts, and the increased penetration of solar and wind generation into the grid.

The lower MLFs impact the amount of revenue generators can make, and many of the intermittent generators have been impacted by changes to the grid and the closure of thermal generators. The location of renewable generation is becoming increasingly important for the success of a project, with unfavourable MLFs potentially reducing the revenue for generators and impacting the renewable energy available to the market.

While a 3% drop in solar farm generation may not seem significant, some solar farms in the New England region have experienced drops that are greater than this. These changes can affect the success of a project and reduce the renewable energy available to the market, potentially leaving end-users with less renewable energy than they signed up for. The final MLF assessment from AEMO underscores the importance of carefully considering the location of renewable energy projects for successful implementation and revenue generation.

This is a summary article from Edge2020 – read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

Intergovernmental Panel on Climate Change Warning

plant in landscape suffering drought

The catastrophic impact caused by rising greenhouse gases

The Intergovernmental Panel on Climate Change (IPCC)’s 6th Assessment Report (AR6) has shocked the scientific world and beyond. More than 250 climate scientists worked on this eight-year assessment, which drew an alarming conclusion about the catastrophic impact caused by rising greenhouse gases.

The report highlights that we are already experiencing the effects of 1.1 degrees Celsius warming, including summer arctic ice coverage, ocean acidification, and rising carbon dioxide levels. Moreover, it discusses the irreversible effects that can occur at as low as a 1.5-degree overshoot, including species extinction and loss of life.

The UN’s Secretary-General, Antonio Guterres, has urged nations to abandon the 2050 net-zero target for stronger 2040 packs while calling for developed nations to phase out coal by 2030 and block new oil or gas extraction. This, he believes, could hold us at the 1.5-degree warming cap. The upcoming COP28 in the UAE in November and December will be a true test of the global commitment to tackling climate change. However, with the chair being the CEO of the 12th largest oil business, there are concerns about softening approaches.

The AR6 shows that we are close to the point of no return and that the impacts of climate change require immediate action.

This is a summary article from Edge2020read the original article.

The team Edge Utilities are passionate about renewables and sustainability, we are energy brokers with an eye on the planet. We are committed to helping councils and business communities reach their net zero goals through renewable power purchasing agreements (PPAs) and smart portfolio management.
To discuss options and plans for your community contact us at save@edgeutilities.com.au  or call us on 1800 334 336 to discuss. 

 

Forecasted gas supply “gaps” this winter

gas fireplace winter

A report by the Australian Energy Market Operator (AEMO) has warned of a potential gas supply gaps on the country’s east coast this winter unless the LNG exporters in Gladstone divert shipments from export to domestic customers.

The report estimated a supply “gap” of up to 33 petajoules assuming three Queensland LGN ventures exported all their uncontracted gas this year. However, Santos’ GLNG joint venture has spoken out against the forecast, saying that all three Queensland LNG ventures have committed to making all the domestic gas expected to be needed this year available. GLNG said it had already sold more than 15 petajoules of gas to wholesalers, retailers and power generators between May and September to alleviate critical peak winter demand in east coast gas and electricity markets.

Additionally, the other two Queensland LGN ventures had offered more than 20 petajoules of domestic gas for sale, and there had been no spot LNG export from Gladstone in 2023, the company said. Despite this, on April 1st, the Federal Resources Minister is due to decide whether to curb LGN exports from Gladstone on a quarterly basis if required to avoid shortfalls in the domestic market.

Industry gas executives are currently arguing for some relaxation of the rules to allow new projects to go ahead to meet demand and remove barriers to new gas supply investment on the east coast.

This is a summary article from Edge2020 – read the original article here: https://edge2020.com.au/edge-news/dispute-over-forecasted-supply-gap-in-east-coast-gas-market/

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. Reach out, we would love to assist you: info@edge2020.com.au or call on:1800 334 336

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

Coal and gas move to renewables and storage

renewables and battery storage

With Enel X announcing the installation of battery storage systems in shopping centres in Melbourne and on the NSW central coast, this year may see a shift in the energy market as we transition from coal and gas to renewables and storage.

AEMO has for many years been looking at a fundamental shift in generation, transmission and energy usage. AEMO is now focusing on firming electricity, electric vehicles and the regulatory framework to enable these changes to occur.

Key federal policies have underpinned the need to progress an increase in renewable energy. Growth in renewable energy is dependent on the growth of storage to be fully utilised and the need for greater transmission infrastructure is required to link the projects to the end users.

In recent years we regularly saw that the NEM had the potential to operate with very high levels of renewables, but the limiting factor still remained that thermal generation provided the firming, reliability and system security when the wind was not blowing or the sun is not shining. At the end of December, South Australia produced 104% of its demand with renewable energy and exported the extra electricity to the neighbouring region.

AEMO reports show there is currently 21GW of new projects undergoing connection assessment and they expect 5GW of new capacity to be added during FY2023 adding to the 4GW currently operating.

To assist this influx in renewable generation ARENA granted $176m in December 2022 to fast track 8 new battery projects bring in 2.0GW/4.2GWh of storage. The plan is to triple the battery storage across the NEM by 2025.

Over the next year we will also see more transmission lines connecting the nation as more renewable energy zones are connected to the load centres under the Rewiring the Nation policy. The first transmission projects to receive Rewiring the Nation funding were announced following the October 2022 Federal budget. Recently funded projects include the VNI NSW-Victoria interconnect, Marinus Link and various NSW transmission projects connecting the renewable energy zones. This funding will assist in building the transmission lines over the next 10 years.

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.  

Federal and State Government agree to power bill

Last Friday National Cabinet met and agreed on the states introducing a cap on wholesale gas and coal. The temporary cap will be set at $12/GJ for gas and $125/t on coal and will not be enforced on export contracts, therefore not limiting the opportunities for high international prices.

During the meeting it was agreed that the states would sort out the coal cap and the Federal Government would change laws to legislate the $12/GJ cap on domestic gas. As the caps are focused on the domestic market, they will only have a small impact on the profitability of producers. It is anticipated that only 4% of gas 10% of coal will be covered by the cap, the remaining volumes will be exposed to international markets. As the states have been tasked with implementing the cap it is likely they will go down different routes to achieve the same outcomes.

The simplest state to implement the changes will be Queensland as the government still owns and control 80% of the coal fired generation fleet. Queensland will likely use its direction powers and instruct its government owned corporations (GOCs) to dispatch the coal assets below specific prices, where NSW will likely use changes in law to cap the price.

As the cap mechanism will be used for uncontracted gas and coal, this may have limited impact on generators, as most of the coal and gas has already been produced under longer term contracts at a cost below the proposed caps. At this stage it is unlikely that the mechanism will be in place until February despite federal politicians being recalled to Canberra on Thursday to discuss the issue.

While the bill will get the support of the House of Representatives it is expected the Greens will put pressure on the government in the Senate to limit any compensation for the coal producers.

In line with the price caps, National Cabinet also discussed an assistance package to lower the impact on families and business as a result of high inflation and high commodity prices.

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.  

Why growth is slow in renewable energy

The Clean Energy Council (CEC) recently released to its members the quarterly renewable projects report, which showed only one renewable project, Stubbo solar farm, reached financial close in Q3 – 2022. Investment in renewables is at an all-time low where quarterly investment has dropped almost 60% to $418M. As well as project growth which has slowed by almost 30%, compared to Q2 -2022 and over 60% lower than Q3- 2021.

While politicians are talking up the prospects of a renewable energy driven industry to reduce the impact of climate change, the reality is, reaching the 44GW target outlined by the federal government may be hard to achieve at the current rate of growth.

A significant number of new wind, solar and storage projects need to come online. If these projects do not come online the retiring coal generators cannot be replaced and may be forced to remain in action.

While only one renewable project in Australia reached financial close last quarter, two projects completed commissioning and three new projects started construction during Q3- 2022. Currently there are 247 financially committed renewable projects in Australia, with 221 under construction and 169 undergoing commissioning.

The CEC notes that the desire to build new solar, wind, pumped hydro and transmission lines is meeting opposition from by local communities. Some examples being, Chalumbin wind farm in North Queensland is now reducing the number of planned wind turbines it is installing by half,due to the concerns from the local community. There are also concerns for the largest pump storage hydro project that the Queensland Government is planning to construct near Mackay, after locals have discovered the mega project has the potential to flood a local town.

With ambitious renewable targets being spruced by politicians and businesses actively seeking renewable energy to aid in the decarbonisation of their operations, the question of where and when these projects will be delivered need to be asked. The majority of people support the transition to renewables but obviously not in their own backyard.

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.  

The state of the market – rising energy costs in today’s budget explained.

Up and up

The budget handed down last night by the Albanese government really did show that there will be “hard days to come”. The treasurer, although acknowledging the international pressures and increases of electricity prices, did nothing to assist with this increasing cost on households and businesses bottom lines.

So why are international pressures a driver for the electricity we use when we turn on our lights?

Well let’s start with a breakdown of what goes into our bill, a large customer will see this split into each section, but smaller businesses and households don’t, they are just rolled into a flat tariff.

There are 4 main components of the energy we buy:

  1. The physical electrons / energy we purchase
  2. The environmental subsidies we all contribute into for a certain number of renewables to be underpinned
  3. The cost of running our electricity grid
  4. The cost of maintaining and running the infrastructure from the huge transmission lines coming across the state to the smaller distribution lines which bring the power to our business or home

The cost of the physical power we use has been on a rollercoaster the last few years. From unprecedented lows during the pandemic, when there was little global demand for our exports and lower demand from our domestic industry to the highs we are now experiencing. But to breakdown this huge shift we have to look abroad.

Let’s first address why we are looking outside of Australia. As a country our coal and gas is largely exported into Southern Asia. Their thirst for energy has increased dramatically over the last few decades and our abundance of natural resources and location made us a great partner to feed their demand. But we are not the only ones satisfying their thirst for energy, and therefore our price of export at is linked to the price other global countries will export at. Setting the ’Global price’. It is just like us going into Coles (China) and seeing Tim Tams for $20 and knowing they are $4 in Woollies (Australia), we would always shop at Woollies. Therefore, to ensure no company misses out the price is always about the same no matter where you shop.

So, if you are an exporter of coal and you know you can sell your Tim Tams to Coles for $20, why would you supply our domestic market (Woollies) at $4/pack. You wouldn’t, you would pile all the coal (Tim Tams) you could on a ship and send it away as quick as you can, and that is why we are linked to the international market. As we need the Tim Tams (or Coal) to ensure our domestic electricity demand is met. But, to do this, we also have to pay the $20/packet to make sure we can have enough here in Australia.

This international price has skyrocketed recently. Not only has demand come back from all the lockdowns caused by COVID19, but the Ukraine crisis has thrown global energy into a tailspin. Europe, who used to be nicely fed their Oil and Gas from Russia now cannot get their supply, as such they are telling everyone they will buy the Tim Tams for $25 even $30 per packet. So again, the circle of, if I can sell to them for $30 why would I sell to Woollies for the now $20 price re starts until Woollies (Australia) is now paying $30 per packet.

But as the cost of the Tim Tams go up we start thinking maybe I will have a Kingston (Gas) instead, it is easier to buy and no one has bought them all for the next 18 months at $30/pack. So, as we all start leaving behind the expensive Coal (Tim Tams) because they have all being bought and pre-ordered for 18 months and move to Gas (Kingston’s). In doing this, that price also increases, and so the spiral re-starts.

Now let’s add some spice. The delivery truck bringing those Tim Tams and Kingston’s to the shops (Power Stations) are flooded in, or the truck unloads but they all get soggy in the rain. Now they can’t be eaten (burned to make electricity). So, what happens? What was already a high price, gets higher. So, with a third La Nina forecast for Australia and flooding already affecting many regions, these deliveries are either delayed or just don’t make it. Meaning an already tight market becomes more sparce and therefore more expensive.

Now the cynical among us would say that the generators are taking advantage of this, and the market is pushing the price higher and higher because they have bought their Kingston’s and Tim Tams at $20/packet and could sell them to us at that price, but instead they know they could now charge $30 per packet so why not, they bank the $10 per packet and no one is wiser. But that is for the ACCC, and you would hope they are watching such behaviour with eagle eyes!

These are a handful of the drivers affecting our price at the moment, there are currently 7 to 10 of them all similar in their affect, that any fluctuation anywhere in the world is having huge repercussions to us at home.

But they aren’t the only changes. With huge pushes towards renewable energy and the certificates produced by them, this market is also increasing as the number of renewables is not increasing as quickly as the amount required. Therefore, again the costs go up and this is passed onto the end users in their bills. Now factor in this renewable energy is going to cost more not just now but in the future, as the cost of making the solar panels increases as the electricity price increases. Therefore, the cost of any of this de-carbonisation has just increased in price too.

But that isn’t the end of the story, finally, let’s consider the cost of bringing the power from the power station to our meter. This is a huge amount of infrastructure which is either older requiring it to be maintained or new requiring funding. Both costs are underpinned by debt. The higher the lending rate is, the higher this debt becomes and therefore the more we are charged to use their system. Further with the huge roll out in renewables this will require significant upgrades to the system as the power will be coming from less conventional areas to the load centres (think towns / cities). With the interest rates rising the cost of this debt or borrowing goes up, just like a mortgage on a house. Again, this only means one thing. An increase in pass through costs to our bills. With huge renewable ambitions and nowhere near enough funding passed down in this budget, that can only result in increases to our bills from our retailers.

Unfortunately, this means that without significant easing of many of these fundamentals, there is no relief in sight. Maybe for once the sensational headline of 35% increases in bills may turn out to hold some truth.

Edge Utilities can help:

If you feel you need to take more control of your company’s business 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.