AEMO’s Quarterly Energy Dynamics (QED) – Q4 2019 tracks the market impacts of extreme heat, generator and transmission line outages, and the shifting supply mix as we enter a critical new year for the energy sector.
2019 was Australia’s hottest and driest year on record, and also saw our second lowest annual hydro generation output in a decade. The market impacts of prolonged and extreme heat and dry conditions experienced across much the country, and the tragic bushfire emergency that is still unfolding, are also reflected in this final quarter report.
In December, the combination of extreme heat, generator and transmission line outages and intense bushfires resulted in several days of Lack or Reserve (LOR) conditions, testing the National Electricity Market (NEM) power system and leading to periodic price volatility in South Australia and Victoria in particular.
On 30 December 2019, high Melbourne temperatures and line outages caused by bushfires resulted in forecast LOR conditions, and high Victorian prices (up to $6,443/megawatt hours [MWh]). In response to the forecast LOR conditions, AEMO activated around $3.5 million worth of contracts under the Reliability and Emergency Reserve Trader mechanism to secure energy supply and meet forecast demand.
Over the quarter as a whole, NEM spot electricity prices averaged $72/MWh, which is 19 per cent lower than Q4 2018 and represents the lowest quarterly average since Q4 2016. This was driven by increased supply from wind farms, solar farms, and gas-powered generation (GPG), with combined grid-scale wind and solar output increasing by 39% compared to Q4 2018.
Black coal-fired generation decreased by 1,061 megawatts (MW) on average compared to Q4 2018, reaching its lowest quarterly level since Q4 2016. The decline was due to a combination of coal supply issues (notably at Mt Piper which fell an average 552 MW), unit outages, and displacement by solar output.
Total variable renewable energy (VRE) output across the NEM continued to rise this quarter. During Q4 2019, average grid-scale VRE generation reached 2,868 MW, representing a 39% increase from last year. VRE generation accounted for 14% of the NEM supply mix in Q4 2019 compared to 10% in Q4 2018.
Market revenue for grid-scale batteries also trended upwards this quarter, driven by increased returns from Frequency Control Ancillary Services (FCAS) markets. Total Q4 2019 battery revenue of $20 million represents the highest quarter on record, 70% higher than the previous record. Drivers of increased FCAS market revenue for batteries included two high priced FCAS events in South Australia, increased market share, and higher FCAS prices.
For gas, total east coast gas demand for the quarter was 9% higher than in Q4 2018 due to increased demand from GPG and higher liquified natural gas exports from Curtis Island. Meanwhile wholesale gas prices continued their downward trend from Q3 2019, falling by an average of 26% compared to Q4 2018 and reaching their lowest levels since the end of 2017.
Q4 2019 was also a quarter of records in Western Australia’s Wholesale Electricity Market (WEM). A new minimum demand record was set at 1230 hrs on Sunday, 13 October 2019, when operational demand was 1,159 MW, 14 MW below the previous all-time record. The WEM also recorded its highest Q4 demand on record, with demand reaching 3,587 MW at 1730 hrs on 12 December 2019 during heatwave conditions in Perth.
Wind and rooftop PV generation in Western Australia increased by an average 87 MW and 63 MW, respectively. This change in generation mix was most pronounced at 1130 hrs on 30 November 2019, when the South West Interconnected System recorded its highest ever level of VRE penetration. During this 30-minute period, 51% of underlying system demand was supplied by VRE output. For the first time since the WEM commenced in 2006, the wholesale electricity price cleared at the Minimum STEM Price, for three Trading Intervals in October 2019. This outcome was driven by record low demand combined with high rooftop PV generation and participant bidding behaviour.:
This is just a
snapshot of the insights shared as part of AEMO’s QED Q4 2019 report. For
more information and analysis including inter-regional transfers, power system
management, pipeline flows, pipeline capacity trading and day ahead auction
data, download the AEMO Quarterly Energy Dynamics Q4 2019 report online.
For additional insights check out our latest Energy Live podcast below, featuring our Market Insights team, which wraps up the year that was with our QED 2019 highlights: