The Australian Energy Regulator (AER) monitors and reports on events and causes that result in the wholesale spot price of electricity exceeding $5000 per megawatt hour (MWh).
While the wholesale electricity spot price exceeding this threshold triggers the AER reporting, there are many reasons a spike in spot prices occur. Sometimes prices spike simply due to normal supply-demand wholesale market behaviour. The AER’s investigations focus on whether breaches of the rules have contributed or caused the spike in prices.
2 and 6 February 2017
On 2 February 2017, wholesale electricity spot prices in Queensland were volatile from early afternoon to late evening, reaching $6456/MWh at 5 pm and $13 400/MWh at 5.30 pm.
On 6 February 2017, wholesale electricity spot prices for 4.30 pm and 5 pm reached $11 028/MWh and $6319/MWh respectively in Queensland, and $11 962/MWh and $6392/MWh in New South Wales. Spot prices for the rest of the day were relatively low.
The AER’s analysis determined that the following factors contributed to the high prices on both days:
- High temperatures led to high demands for electricity, especially during the late afternoon. On both days, the temperature exceeded 30 degrees in Brisbane and on 6 February Sydney temperatures exceeded 35 degrees. We understand energy consumers typically increase their air-conditioner usage during periods of hot weather, resulting in greater electricity consumption.
- Supplies of cheap electricity from other states were limited.
More in-depth analysis of these events can be found in the AER’s 2 February 2017 and 6 February 2017 high price event reports.
Most end-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 price variations in the wholesale market by entering hedge contracts that lock in firm prices for the electricity they intend to produce or buy.
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 the COAG Energy Council, other stakeholders and market bodies on wholesale market issues. We typically publish our reports into high price events within 40 business days.