The Australian Energy Regulator (AER) today published a report into energy prices exceeding $5,000 per megawatt hour (MWh) in the National Electricity Market (NEM) and Frequency Control Ancillary Services (FCAS) markets in New South Wales, Queensland, South Australia, Victoria and Tasmania during July, August, and September 2024.
During the quarter, 30-minute wholesale energy prices exceeded $5,000 per MWh 54 times, compared to 10 during the same period last year.
Half of these occurred in South Australia. Most of the high prices were forecast. There were also three high frequency control ancillary service (FCAS) prices in Tasmania.
The high prices and FCAS events in July, August, and September 2024 included:
- 18 July in South Australia for two 30-minute periods
- 28 July in South Australia for six 30-minute periods
- 30 July:
- New South Wales for one 30-minute period
- Queensland for one 30-minute period
- Victoria for one 30-minute period
- South Australia for five 30-minute periods
- Tasmania for one 30-minute period
- 5 August
- New South Wales for eight 30-minute periods
- Queensland for four 30-minute periods
- Victoria for eight 30-minute periods
- South Australia for five 30-minute periods
- Tasmania for three 30-minute periods
- 5 August FCAS in Tasmania for three 30-minute periods
- 6 August in South Australia for two 30-minute periods
- 22 August in South Australia for one 30-minute period
- 6 September in South Australia for one 30-minute period
- 23 September in South Australia for five 30-minute periods.
There were common drivers across most of the high price periods including network limitations, high demand and very low wind output which gave the opportunity for some participants to put upward pressure on prices.
Network limitations meant that at times regions with low-priced capacity were unable to export excess cheaper generation to high-priced neighbouring regions. This meant one region would have low prices while the rest of the NEM regions would have high prices.
Compared to the same quarter last year, wind generation was 21% higher which drove a record number of negative prices for the NEM. However, there were some periods of very low wind generation with output less than 7% of installed capacity. Wind generation was lower than forecast in all regions during the high price periods.
Multiple cold fronts in July and August meant cooler than average winter temperatures across most of the NEM. This increased demand for heating during the morning and evening peaks across multiple regions.
In some of the high-priced events, we observed rebidding both from high to low and low to high prices, which had a counter balancing effect on the price outcome. In other cases, we observed rebidding putting upward pressure on prices by reducing the amount of low-priced capacity offered. Patterns of this kind of behaviour could lead to inefficiencies in the market and may not be in the best interests of energy consumers.
Background
The AER is required to report into significant price outcomes in the NEM.
30-minute wholesale electricity prices do not often reach $5,000 per MWh, but with a market price cap of $17,500 per MWh prices can occasionally exceed this reporting threshold. This reporting framework is intended to pick up these outlier events.
A high price may occur due to a variety of factors, including outages that adversely affect supply-demand conditions in the wholesale market.
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.
The AER has published a Guideline for how we report into significant price outcomes.