Renewable energy continued to drive zero or negative wholesale electricity prices and record-low daytime demand levels during the December quarter in the National Electricity Market (NEM), as highlighted in AEMO’s latest Quarterly Energy Dynamics report.
Emerging La Niña conditions in the quarter led to Adelaide, Melbourne and Sydney experiencing their coolest November in decades and Australia’s wettest November in 122 years. Record levels of distributed PV (photovoltaic) output this quarter, coupled with the absence of extreme heat days and cooler average temperatures saw quarterly average operational demand fall to 19,876 MW, its lowest Q4 average since 2005.
AEMO Executive General Manager Reform Delivery, Violette Mouchaileh, said: “Below average temperatures, reduced demand and increased renewable installations in the NEM contributed to new records for minimum operational demand, down 1,257 megawatts (MW) to 12,936 MW, and increasing average renewable output levels, up from 31.6% to 34.9%.”
New minimum demand records were set in South Australia (236 MW to 104 MW), New South Wales (4,636 MW to 4,425 MW) and Victoria (2,529 MW to 2,333 MW).
“Grid-scale solar, wind, hydro and rooftop solar PV continued to displace thermal generation, with black coal-fired generation falling to its lowest Q4 average since 1998, while gas generation declined to its lowest Q4 average since 2003,” Ms Mouchaileh said.
“The changing generation mix saw zero or negative spot prices occurring during 16.6% of all dispatch intervals during the quarter and a total of 11.2% for 2021, more than doubling 2020’s average of 4.9%,” she said.
NEM mainland electricity prices averaged $57/MWh during the final quarter of 2021, which was below Q3’s average of $66/MWh but 31% higher than Q4 2020’s $44/MWh.
“While underlying spot prices fell or were stable in the southern NEM regions, the larger share of thermal generation in Queensland and New South Wales and higher prices being set by black coal and gas, as well as limitations on transfers of lower cost energy from the southern regions, each contributed to an average $45/MWh north-south price differential,” Ms Mouchaileh said.
Queensland’s price of $97/MWh was its highest Q4 average on record, more than double the level of one year ago, with price volatility in November and December lifting the region’s average by $27/MWh. Conversely, Victoria’s quarterly average price of $28/MWh was its lowest Q4 average since 2014, with negative average spot prices between 9:25am and 2:20pm (AEST), while the overall average between 8am and 4:30pm was just $0.1/MWh.
In the east coast gas market, total demand decreased by 1% compared to Q4 2020, mostly driven by a 22% decrease in gas generation demand, the lowest Q4 demand since 2003. Demand in AEMO markets was up 5%, primarily due to a colder spring in Victoria, New South Wales and South Australia than 2020.
However, prices returned to high average levels in November and December yielding a quarterly average of $10.60 per gigajoule (GJ) across AEMO’s spot markets, comparable with Q3’s $10.74/GJ but well above their $5.95/GJ average in Q4 2020.
In Western Australia’s Wholesale Electricity Market (WEM), increasing levels of renewables met nearly 40% of total underlying demand in Q4 and a new minimum operational demand record.
“Similar to the NEM, unabated rooftop solar PV investment set a new minimum operational demand record of 761 MW on 14 November 2021, a 12% decrease on the previous record. During this 30-minute interval, rooftop solar PV met 67% of the total underlying demand,” Ms Mouchaileh said.
“Unlike the NEM, a four-day heat wave event in the WEM from Christmas Day set a new Q4 maximum operational demand record at 3,869 MW on 27 December, just 137 MW lower than the all-time maximum demand set in February 2016,” she said.
Increased renewable supply also led to a 16% reduction in gas and distillate-powered generation. Overall, there was a decrease of around 3% in Western Australian domestic gas consumption, as reductions in electricity generation, minerals processing and industrial use were partially offset by increased mining consumption.
An early observable impact of 5MS has been the effective cessation of dispatch prices regularly falling to the market price floor of -$1,000/MWh following a very high price dispatch interval. Previously, loads and generators had a strong financial incentive to rebid after a price spike early in a 30-minute trading interval due to the effect of the spike on the 30-minute average settlement price. Under 5MS, this incentive is removed and in most circumstances price spikes have not been followed by price collapses to the floor over the balance of a half hour.
Following commencement of the WDR mechanism, AEMO registered three WDR units, two in Victoria and one in New South Wales. Although there was no significant market utilisation of WDR during the quarter.
In late November, the commissioning of the four synchronous condensers in South Australia reduced the required gas generation units for system security purposes from the equivalent of four large units to two, under most operating conditions. Since the update in system strength limit advice, this resulted in a notable reduction in average gas generation output under direction and therefore direction costs. Prior to this, high gas prices and very low daytime electricity prices led to frequent direction of multiple gas units.