The risk of future price volatility in VIC remains high as the state chases an ambitious target requiring 50% of all electricity generation to come from renewable sources by 2030. A few events below has caused prices to remain high:
In 2021, Energy Australia brought forward the closure date of its Yallourn Power station (supplying 22% of Victoria's electricity) by four years from 2032 to 2028
More recently on 9 February this year, AGL announced they will bring forward the closure dates of two large generators, Bayswater by 2-5 years and Loy Yang A by 3-8 years. This will potentially leave a gap of nearly 5,000 MW of baseload generation in the market
On 17 February, Origin Energy announced that it intends to close its 2.88 GW Eraring plant in NSW (Australia’s largest power station) seven years early in 2025. This caused wholesale electricity prices in VIC for calendar year 2025 to spike nearly 20%
On 15 April, an electrical fault occurred at Loy Yang A coal power station (30% of Victoria’s electricity supply). Approximately one-quarter of its capacity will remain offline until the start of August 2022
Given the momentum with which coal-fired generating units are announcing early retirement across Australia, there is a good chance these dates will be pulled forward even further. There is a very good chance we will see high price volatility in Victoria over the next 3-5 years.
NEW SOUTH WALES
New South Wales continues to see a widening gap between demand and supply during the early evening hours as renewable generation ramps down and the market’s reliance on expensive gas & coal fired baseload power increases.
Factors causing this:
On 17 February this year, Origin Energy notified the Australian Energy Market Operator (AEMO) of its intention to close the 2.88 GW Eraring plant (Australia’s largest power station) seven years early in 2025. This caused wholesale electricity prices in NSW for calendar year 2025 to spike over 20%
On 1 April this year, AGL began its two-stage decommissioning of Liddell Power Station (more than 10% of NSW power supply). Liddell’s unit 3 (500 MW) is now offline and the remaining three units (1,500 MW in total) are scheduled to close in April 2023
There is a very good chance we will see high price volatility in NSW over the next 3-5 years.
Following the explosion at Queensland’s coal-fired Callide power station in May 2021, wholesale electricity prices in QLD have continued to rise. The exploded C4 unit is not expected to come back online until April 2023. A few other events below have also caused prices to rise:
On 17 February, Origin Energy notified the Australian Energy Market Operator (AEMO) of its intention to close the 2.88 GW Eraring plant (Australia’s largest power station) seven years early in 2025. This caused wholesale electricity prices in QLD for calendar year 2025 to spike over 20%.
There have also been several generator outages at other power stations in QLD including Tarong, Swan E, Gladstone, Kogan Creek and Callide’s B2 unit. The outage at Swanbank E power station is now expected to extend to 26 September 2022. However, according to the operator CleanCo, “the return to service date is based on the information available at this time and may change.”
An analysis conducted in 2020 by Green Energy Markets listed Gladstone Power Station (Queensland’s largest power station) among those with the highest potential to close by or before 2025 due to financial distress.
South Australia relies on electricity generation from renewables (60%) and natural gas (40%). Gas-fired generation is the primary back-up when renewable generation is not meeting demand. When gas prices are high (as they are today), this flows into electricity prices.
Since SA decommissioned its last coal-fired power station in 2016, the state has relied primarily on renewable generation and electricity imports from Victoria to meet demand. When renewable generation is low and imports from Victoria are insufficient during periods of peak demand, expensive liquid fuel (gas/diesel) peaking generation is dispatched. This has resulted in significant real-time spot price volatility that has flowed into retail energy rates.
It is evident that real time market volatility is having more and more of an upward impact on forward contract prices for years 2023 and beyond as we move further into 2022.
Western Australia will see a significant portion of its coal-fired generation exit the market starting with the staged closure of all but 2 units at Synergy’s coal-fired Muja Power Station between late 2022 and 2024.
Collie Power station is also tipped to close within the next 3 years. Muja and Collie Power Stations together account for nearly 20 per cent of generation capacity in WA.
Currently, renewable generation in WA makes up approximately one third of capacity in WA. Renewable energy generation in WA is projected to rise to almost 80 per cent within 20 years. With an increasing reliance on intermittent wind and solar generation taking hold in WA, it is likely the electricity market will experience significant levels of price volatility as reliable baseload coal-fired generation becomes less available.
Over the past year, wholesale electricity prices in WA increased from the mid $45/MWh range to +$60/MWh on average and are tipped to increase further over coming months. There is a very good chance we will see high price volatility over the next 2-4 years.