Winds of Change An analysis of recent changes in the South - PowerPoint PPT Presentation

Winds of Change An analysis of recent changes in the South Australian electricity market Dylan McConnell Melbourne Energy Institute Australian-German Climate & Energy College 12 th August 2016

South Australia's changing supply mix 16000 14000 12000 Annual Supply (GWh) Wind 10000 Solar Brown coal 8000 Gas Thermal Gas CCGT 6000 Gas OCGT Distillate 4000 Interchange 2000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

South Australia's changing demand curve 3000 1065 MW 2500 Peak 2000 Demand (MW) Intermediate 1500 1115 MW 1000 Baseload 690 MW 500 0 −500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Duration

South Australia's changing demand curve 3000 Demand 1065 MW Demand net wind 2500 Peak 2000 Demand (MW) Intermediate 1500 1115 MW 1000 500 Baseload 690 MW 0 −500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Duration

South Australia's changing demand curve 3000 2500 1215 MW Peak 2000 Demand (MW) 1500 Intermediate 1590 MW 1000 500 -210 MW 0 −500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Duration

South Australia's changing demand curve 3000 2500 1215 MW Peak 2000 Demand (MW) 1500 Intermediate 1590 MW 1000 500 -210 MW 0 −500 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Duration

Electricity prices across the NEM 200 NSW QLD VIC SA No. of prices above $300 150 100 50 0 160 Vol. weighted price ($/MWh) NSW Drought Carbon 140 price affected QLD 120 period period VIC 100 SA 80 60 40 20 0 2002 2004 2006 2008 2010 2012 2014 2016

A gas linked electricity market Daily 300 30 Ex post gas price ($/GJ) Electricity Gas Daily VWP ($/MWh) 250 25 200 20 150 15 100 10 50 5 0 0 7 day moving average 300 30 Ex post gas price ($/GJ) Electricity Gas Daily VWP ($/MWh) 250 25 200 20 150 15 100 10 50 5 0 0 Jan Apr Jul Oct Jan Apr Jul 2015 2016

A gas linked electricity market Torrens Island fuel costs 20 18 16 14 Price ($/GJ) 12 10 8 AEMO scenario 6 High Previous cost ($4.40/GJ) Medium 4 Low 2 2015 2020 2025 2030 2035 2040 2045

Renewable energy and merit order dispatch $60 $60 $35 $/MWh $20 $20 $10 MW

Renewable energy and merit order dispatch $60 $60 $35 $/MWh $20 $20 $10 $0 MW

14 >$300 12 >$1000 10 No. events 8 6 4 2 0 60 Price ($/MWh) 50 40 30 Median Price 20 VWP Price 10 50% quantile 0 1200 Wind output (MW) 1000 800 600 400 200 0 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Duration

Capacity cycle

Competition and market power ● Herfindahl–Hirschman Index of the South Australia 3000 – 3400 ● Above the value of 2000 that the ACCC uses to flag competition issues 1.0 NSW QLD VIC SA 0.8 Pivotal Supply Index 0.6 0.4 0.2 0.0 2012 2013 2014 2015 2016

Competition and market power 400 Dispatch Price ($/MWh) 350 300 250 200 150 100 50 50 40 Output (MW) 30 20 10 0 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 2015-09-04

Competition and market power 14000 Dispatch Price ($/MWh) 12000 10000 8000 6000 4000 2000 50 0 40 Output (MW) 30 20 10 0 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 2015-08-27

Competition and market power Torrens Island A 480 460 440 420 400 380 360 340 320 Torrens Island B 600 550 500 450 400 17:00:00 18:00:00 19:00:00 20:00:00 21:00:00 22:00:00 23:00:00 7 July 2016

Competition and market power $14019 $13826 Torrens Island Offer Curve 800 Offer curve June 7 2016 700 July 7 2016 140 MW 600 500 Offer price ($/MWh) 400 300 200 100 0 (-1001.9) 100 0 200 400 600 800 1000 1200 Capacity (MW)

Competition and market power $14019 $13826 Torrens Island Offer Curve 800 Offer curve June 7 2016 700 July 7 2016 140 MW 600 500 Offer price ($/MWh) 400 300 200 100 0 (-1001.9) 100 0 200 400 600 800 1000 1200 Capacity (MW)

Options for South Australia

Summary ● Potential for market power to be concentrated as a consequence of transitional arrangements ● Diversification of low emission generation and storage portfolios ● Alignment of national energy policy across related sectors, specifically the intersection of gas export markets and the Renewable Energy Target ● Coordinated system planning of transitional arrangement

Thank you ‘When the wind of change blows some build walls while others build windmills’

Capacity cycle

Changing supply 9000 8000 7000 Annual Supply (GWh) Wind 6000 Solar 5000 Brown coal Gas 4000 Distillate 3000 Interchange 2000 1000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Changing supply 10000 8000 Annualised Supply (GWh) Wind 6000 Brown coal Gas 4000 Distillate Interchange 2000 0 2000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Gas demand 2500 ResidentialCommercial Industrial 2000 GPG LNG Demand (PJ) 1500 1000 500 0 2010 2015 2020 2025 2030 2035 Year

Gas demand 1200 FY08 Gas generators Monthly Emissions ('000 tonnes CO -eq) 9.8 MT Northern 1000 Playford B 2 800 FY16 5.5 MT 600 400 200 0