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9th Australian Wind Energy

Conference

Craig Oakeshott

Director – Wholesale Markets Branch

Australian Energy Regulator

18 November 2013

Outlook for the National

Electricity Market

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Outline - Outlook for the NEM

• Very Brief Background

• Factors impacting on wholesale market prices – Changes in electricity consumption patterns

• impact of high delivered electricity costs;

• efficiency improvements;

• solar; and

• economic growth.

• Intermittent nature of wind generation – Impacts on spot price volatility and existing thermal

generators

• Industry at a Crossroads

• NOTE these are my interpretations and not necessarily the official position of the AER

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Wind across the Country • NEM Wide – 3192MW

• QLD – 12MW

• NSW – 265MW

• VIC – 1132MW

• SA – 1475MW

• TAS – 308MW

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Wind growth over time

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1475MW of wind generation

Small intermediate and peaking gas/oil plants – total of around 730MW

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Factors impacting on

wholesale market prices

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Demand

• Customer demand forecasts are flat in all states

– many other places in the world

• Delivered electricity prices have risen noticeably

• Causes are not actually black and white

– Economic conditions – some big customer failures

– High prices have encouraged domestic conservation

– Rooftop PV with FiTs • Eaten into the load profile

• But intermittent not firm

• But what about at a wholesale market level?

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Market Prices

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2003–04 2004–05 2005–06 2006–07 2007–08 2008-09 2009–10 2010-11 2011-12 2012-13

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Qld NSW Vic SA

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Wind ouput (MW)

• Prices are low – but not at record low levels

– Wind can depresses market prices

– Frequency of negative prices dropping despite

increased penetration

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Black Vs Green Price SA and Vic Examples

Financial Year SA

Volume weighted

State Price

($/MWh)

SA

Black Volume

Weighted Price

($/MWh)

SA

Green Volume

Weighted Price

($/MWh)

2012-2013 73.71 76.03 57.22

2011-2012 31.41 32.01 26.91

Financial Year VIC

Volume weighted

State Price

($/MWh)

VIC

Black Volume

Weighted Price

($/MWh)

VIC

Green Volume

Weighted Price

($/MWh)

2012-2013 59.45 59.50 52.18

2011-2012 27.48 27.48 25.71

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Still plenty of space for wind

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Other factors affecting spot

prices • Transmission pricing and congestion

– ElectraNet outcome

– Connection and congestion is still an issue

– Market design is to deliver power to customers

– Affects all generators equally

• Uncertainty about 2014 RET review

• Short and long term future of Carbon

• New technologies advancing

• Potential future Gas price hikes

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Intermittent nature of wind

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Intermittent nature of wind

• Despite distribution of farms, output can be correlated.

• Worst case if wind drops as demand is increasing

• Output variability over short term and long term

• Longer term problem is– AEMO’s

• Shorter term may be Wind farms – causer pays FCAS

• Low and negative prices

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Intermittent nature of wind

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MW

Bluff Clements Gap Hallett 1 Hallett 2 North Brown Hill Snowtown Waterloo 5 min price

Intermittent nature of wind

• 140 MW reduction in 5 minutes

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With whom is wind competing

• Wind offers at the bottom of the bid stack

– Normally a price taker not a price setter

– Amongst the other “determined to stay on”

generators

• So as wind increase what changed ?

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% contribution by fuel source SA example

0%

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-11

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r-1

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g-1

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Coal

Gas

Wind

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% contribution by fuel source SA example

0%

10%

20%

30%

40%

50%

60%

70%

Jan

-11

Feb

-11

Mar

-11

Ap

r-1

1

May

-11

Jun

-11

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11

Au

g-1

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v-1

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De

c-1

1

Jan

-12

Feb

-12

Mar

-12

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r-1

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May

-12

Jun

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g-1

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-12

Oct

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No

v-1

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De

c-1

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Jan

-13

Feb

-13

Mar

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Ap

r-1

3

May

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Jun

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Jul-

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Coal

Gas

Wind

NPS shutdown NPS partial shutdown

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Industry at a Cross Roads

• SO Where to from here?

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Industry at a Cross Roads

• Lean.….

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Industry at a Cross Roads

• Lean.….Green

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Industry at a Cross Roads

• Lean.….Green…..Gas Dream

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Industry at a Cross Roads

• Lean.….Green…..Gas Dream…..Storage

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So many factors to consider

• Challenges OR Opportunities – Changes to consumption patterns

• Greater Energy efficiency and Home automation

• Electric vehicles

– Technology • When is the technology available and where will it be built

• Energy transport - pipelines v transmission lines

• Higher efficiency fossil fuels

• Renewable intermittent generation – Wind in a different market role

– More rooftop solar PV eroding demand

– Solar thermal

– Fuel switching and international pricing

– Energy Storage • Distributed and/or Central

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Opportunities

• Wind - most commercially viable renewable

• Market has adapted for wind

– New technical standards

– Semi dispatch

• Can wind adapt to market opportunities

– FCAS, NSCAS, Black start?

• Mostly small $ compared to the energy market

• Stick to spots near infrastructure or work

together with others including loads

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Opportunities for Wind

• Detractors and champions

– Some areas in favour others against

– New technology – increasing yields

• Do the characteristics of wind present

opportunities?

– Intermittency

• Does wind need an ally to move ahead

again

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New players & alliances ?

• Who else will enter?

– financial institutions in or out?

– Telco’s could be facilitators

• NBN

• Home automation – IApps

• Distributors and transmission companies

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Invert the paradigm

• Don’t generate to meet demand make demand match available generation

– Telco carries market signals and pricing to domestic customers

– Distributors and transmission companies manage storage to maximise their asset lives

– Integrating intermittency into constraints

– Work with others to optimise renewable value • Storage - hydro, chemical and thermal

• Equipment manufacturers

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Invert the paradigm

Smart appliances

Smart cars

Network

Data

Home Renewables

Insulated smart homes

Smart Meters

Data

Management

Grid

Renewables Grid

Conventional

Internet information

Grid loading local and remote

Pricing

Availability of Renewables

Storage Storage

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Invert the paradigm

Smart carpark

Network

Supply

Data

Management

Grid

Renewables

Grid

Conventional

Internet information

Grid loading local and remote

Pricing

Availability of Renewables

Smart buildings

Chilled water storage

High efficiency lighting

Solar panels

Thermal shading

Insulation

Storage

Storage

Storage

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Thank You