The Australian Energy Regulator (AER) has today published two reports into prices in the wholesale electricity market in New South Wales (NSW) on 16 and 20 November 2020.
The AER monitors and reports on the causes for wholesale electricity spot prices exceeding $5,000 per megawatt hour (MWh). The wholesale electricity spot price exceeding this threshold triggers the AER reporting, and there can be many reasons a high spot price occurs, including outages that adversely affected supply-demand conditions in the wholesale market.
During the 1.30pm trading interval on 16 November and the 2.30pm trading interval on 20 November, the spot price for electricity exceeded $5,000/MWh in NSW.
The AER’s analysis found the following factors contributed to the high prices.
On 16 November:
- NSW had limited access to capacity priced below $5,000/MWh, with at least 3,000 MW of baseload generation on both planned and unplanned outages.
- Constraints used to manage unplanned line outages in southern NSW and upgrades on the Queensland to NSW interconnector limited access to lower priced generation from neighbouring regions and from southern NSW.
On 20 November:
- NSW had limited access to capacity priced below $5,000/MWh, with at least 2,400 MW of baseload generation on both planned and unplanned outages.
- Constraints used to manage planned line outages in southern NSW and upgrades on the Queensland to NSW interconnector limited access to lower priced generation from neighbouring regions and from southern NSW.
- Actual demand was significantly higher than forecast four hours and half an hour ahead.
- Participants rebid capacity to the price cap, further reducing the amount of low-priced capacity available and contributing to the price exceeding $5,000/MWh.
More in-depth analysis of these events can be found in the AER’s 16 November 2020 and 20 November 2020 reports.
Most customers are not directly exposed to wholesale electricity prices. Energy retailers are the main purchasers in the wholesale electricity market. Retailers bundle electricity with network services for sale to their residential, commercial and industrial customers. Generators and retailers can manage their exposure to wholesale market price variations by entering hedge contracts that lock in prices for the electricity they intend to produce or buy and these instruments would have affected overall financial outcomes on the day.
The AER’s role in monitoring wholesale energy markets and reporting on high price events helps to enhance market transparency and compliance. Our analysis provides a foundation to detect non-compliance, market irregularities, inefficiencies and consumer harm. We draw on this work to advise stakeholders and market bodies on wholesale market issues.