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Australian May 2020 energy market report by


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Australian May 2020 energy market report by

  1. 1. © SavvyPlus Consulting 1 Jun 2020 May 2020 May 2020 Monthly Market Report National Electricity Market
  2. 2. © SavvyPlus Consulting 1 Jun 2020 May 2020 Introduction Welcome to our monthly market report for the month of May 2020 and we hope everyone is keeping healthy from the COVID-19 pandemic, and not too badly impacted. This month’s special features include: 1. A summary of the Technology Roadmap released by the Federal Government 2. A pictorial snapshot of the demolition of the chimney stacks at Hazelwood Power Station and a recap of the plant’s history and contribution 3. An update from last month’s assessment of the COVID-19 pandemic impact on the daily demand profile 4. An assessment of the Price Setter results for 2020, in the context of the history dating back to 2009 5. A measurement of the potential additional LGCs that may be created from so-called ‘old’ hydro stations if they exceed their long-term baseline, which they are on track to do so We have also introduced an “At a Glance” summary page for each Region of the NEM depicting the main 4 or 5 events of the month affecting that Region. There is a common theme that spot electricity and gas prices remain soft, although the forward market for the later years is rising. Market Highlights The key market highlights are: 1. After three months of the lowest wholesale electricity spot prices since 2015 or 2016, average spot prices increased compared to the previous month for all regions except QLD. The lower spot prices have been driven by large capacity offers in low price bands 2. Spot prices remain in the bottom quartile of our Q2 forecast 3. The average wholesale gas price across the country remain at all-time lows during May 4. After six months of softening prices in the electricity forward market, prices rallied during May for all regions. Our forecast models have been predicting this rally for some time, and now it appears to be happening 2 Executive Summary 5. Average temperatures for May were lower for all regions compared to the same time last year. The aggregate NEM weather exposure increased from 6.8% in April to 9.2% for May. 6. During May there were minimal changes in the share of total NEM generation and base load outages were the lowest level for this time of year, for the last 3-years 7. Above average rainfall for Victoria and southern NSW resulted in a substantial increase in Snowy Hydro’s water storage during May 8. Hydro Tasmania’s water storage increased over the month, despite an increase in dispatched generation during the month 9. LGC spot price rose slightly during the month and the STC price remained flat Market News Market News items are listed in the report, and late breaking news relate to the potential sale of Infigen Energy while Amaysim has been reported to be saying that they are open to selling its energy business (Click Energy). Origin Energy has been reported as the leading suitor. On the corporate Power Purchase Agreement landscape: a) SavvyPlus assisted Procurement Australia to facilitate the establishment the execution of 10-year power purchase agreements (PPAs) with 13 Victorian councils and 1 State Government Authority. Spokespeople from both Alinta Energy and Procurement Australia said they were excited and proud of the agreements. The Bald Hills Wind Farm in Gippsland, an accredited GreenPower generator, will supply large-scale generation certificates to meet the specific renewable energy requirements of each signatory. The agreements are effective from 1 July 2020. b) Swinburne University announced a 15-year PPA with Infigen Energy using the Cherry Tree wind farm near Seymour in Victoria. It has been reported that the PPA covers 100% of its power consumption with renewable energy. The agreement becomes effective 1 July 2020.
  3. 3. © SavvyPlus Consulting 1 Jun 2020 May 2020 3 Market News Headlines May 1: In a move to promote lower energy prices, the WA government passed legislation to allow electricity customers in regional areas to disconnect from the grid to be standalone generators. Western Power, state-owned utility, anticipates will install 6000 sites over the next 10 years. WA passes laws for Regional standalone sites May 3: Total, one of France's largest energy producers and 27.5% equity holder in Ichthys LNG project will enter the Australian energy market targeting large industrial and commercial customers from June 1. This is part of their expanding low carbon energy generation business model, expanding tenfold from their current footprint in Australia to 25GW by 2025. Total enters Australian electricity market May 3: CEFC has a new $300 million concessional finance fund to support the development of both domestic and international markets for hydrogen generation and production. While the fund does not exclude coal in the development process, CEFC has said it anticipates the funds to be directed towards green hydrogen generation. This is to support the government's objective to bring the price of hydrogen to below $2/kg. CEFC to boost hydrogen May 4: AGL have announced their focus to pursue domestic batteries, predicting they will install 150,000 units by 2025. To support this they are looking for fast track approvals for their Crib Point LNG import plant, having been in the planning process for two years. AGL is monitoring its business activities due to the COVID-19 market conditions. AGL using batteries to boost post COVID-19 May 5: Neoen, The French developer will go ahead with a 400 MW solar farm on the Western Downs in Queensland after securing an offtake agreement or a majority of the power with CleanCo. In addition to providing economic stimulus to the region, it will go a long way to helping Queensland meet its 50% renewables target by 2030. Massive solar farm for SW QLD May 5: South Australia has announced its ambitious target to be 100% renewables by 2030. This may be a challenge considering the Market operator has said there are considerable market and regulatory requirements to be put into place for the 75% of renewables (solar and wind) into the grid by 2025, to make this possible. Further, the SA government believes their policy initiatives will enable this ambitious target to be met compact despite recent challenges in keeping the grid operational. SA to be 100% renewables by 2030 May 5: QIC owned Pacific Energy has acquired the microgrid operator Hybrid System Australia, after securing a 20 year deal with Horizon Power for the supply of energy to Esperance and surrounding mining and commercial operations. QIC considers this market as a target following the WA government recent disconnect decision. QIC to enter WA energy market May 7: ARENA has provided funding to develop ammonia production options from renewable hydrogen as opposed to natural gas. The development project is to be undertaken in Geraldton WA. This is also seen as a pathway to develop hydrogen on a larger scale. ARENA fund H2 Ammonia plant May 11: Tasmanian government has released it's 2040 renewable energy plan which seeks to place it as a world leader in renewable energy generation and applications. This has secured broad support from Hydro Tasmania and TasNetworks for the Battery of the Nation, Marinus link and the proposed hydrogen generation plans. However there is dissenting views, outlining how the falling cost of batteries would make it a better investment than large- scale infrastructure, such as BoTN and Marinus, which Tasmania would be stuck with for 40+ years. Tasmania seeks to be world leader in renewables May 10: The Grattan Institute has released a report supporting green steel, being produced by hydrogen that can be a significant employment generator, using Australia’s abundant renewable energy. The value-add of cheap energy to produce hydrogen that would be used to create steel products at lower cost than such countries as Korea, Japan and Indonesia. Government direction for a flagship green project would kickstart an export driven economy, potentially employing a hundred thousand people in the sector. Green steel production May 13: COVID-19 pandemic looks set to delay introduction of the five minute pricing reform rule change after AEMO asked the rule- maker to move the start date to July 2021. The delay will allow large generators improve access to data to better manage their generating profiles to meet market expectations. The peaking generators, such as hydro, gas and liquid generators are currently unable to respond to demand spikes, and will be less likely to bid at previously low prices. AEMC has indicated there will be no further delays past July 2021. A decision is expected after July 2020 COVID-19 delay to rule changes
  4. 4. © SavvyPlus Consulting 1 Jun 2020 May 2020 4 Market News Headlines May 17: AEMO has released it’s quarterly wholesale pricing, where all states and regions reported less than $110/MWh, being the lowest in many years. This was due to a combination of mild weather and producers being able to offer prices at lower costs. Gas prices continue to fall for the fifth quarter in a row. Energy prices continue to fall May 18: A new national standard for solar panels is said to be imminent in an attempt to qualify the standard of energy generated to be supplied to the grid. AEMO and the Energy Security Board are working together to remove the "invisible" solar generators that are contributing to the instability of the grid. Grattan Institute has said the new standards should come with tariff reforms on how solar generators could supply into the grid. Solar panel Standards upgrade May 19: Q-Cell, A South Korean solar panel manufacturer has reported an increase of 36% in the first quarter. They said with more people working from home, there is demand to increase their home energy generation and therefore efficiency. Green Energy Markets said 237MW had been added in April, a jump of 56%. However others, such as REC Solar have said new enquiries have reduced over the last quarter due to the pandemic. Solar panel sales on the up May 21: Infinite Blue Energy is proposing a $3.5 billion baseload energy plant, using solar and wind to generate hydrogen as dispatchable generation to meet baseload energy demand. Green hydrogen as dispatchable generation May 21: New South Wales State government has given planning approval Snowy 2.0 to proceed. This will allow the Federal Government to proceed with its due diligence for the project. Snowy 2.0 is considered vital as part of the post pandemic reconstruction of the economy. Snowy 2.0 gets the nod May 24: Woodside and CK’s Australian Gas Infrastructure Group have pitched for a 10MW hydrogen electrolyser in south-east Australia as part of the government $70 million hydrogen development fund. This is part of the long-term strategy to be hydrogen exporters. Woodside is working with Japanese LNG exporter JERA to transition from "blue" hydrogen using LPG as generating medium to “green” hydrogen using renewables. Hydrogen funds targeted May 25: Hazelwood PowerStation chimneys have been spectacularly demolished ending an era of coal fired power generation in Morwell. The long-term plan is to hand the site back to the community, once remediation work has been completed. Hazelwood towers fall May 26: International Energy Agency reports international energy investment has dropped 20% or $US400 billion as a result of the global pandemic. IEA added, in addition to the loss of jobs and projects, the pathway of transitioning to a more resilient and sustainable energy generation was at risk. While investment in renewables was resilient, the flattening of the curve from 2015, will be not enough to bring lasting emissions reduction. COVID-19 slashes energy investment May 27: New South Wales government has called on business to pitch for it's $4.4 billion 3000MW renewable energy zone (REZ) being centred around Dubbo. New South Wales is also planning for two other REZ in the Southwest and New England regions unlocking up to 17,700MW. The REZ Program is seen as a way to transition from its ageing coal fired generation, boosting the State’s claim to have the cheapest energy in the nation. NSW calls on renewables to kick start the economy May 27: Federal energy minister, Angus Taylor has increased pressure on the States to release further gas exploration areas to complement the growth of renewables in the economy. He said with the retiring coal-fired power stations it was essential to have gas as a baseload provider in the interim. This was supported by industry, in particular the aluminium producers, who require secure baseload power for production capabilities. Gas as the interim energy supply May 28: Australian Energy Statistics report has indicated large- scale solar power generation has increased 135% over last year. While renewable energy generation has increased 54% since 2015, coal was still the largest producer of energy being 44% and brown coal 12%. Gas is flexible and is providing balancing to intermittent renewable energy generation for a stable and secure grid. The report further indicated the requirement for gas to transition generation from fossil fuels to renewables. Large scale solar generation increase
  5. 5. © SavvyPlus Consulting 1 Jun 2020 May 2020 5 Market News Tech Roadmap Australia's Technology Investment Roadmap: Discussion Paper The Federal Government is developing a national Technology Investment Roadmap. The aim of the roadmap is to help prioritise Australian investments in new and developing low emissions technologies and work towards clear priorities over the short, medium and long term. On the 21 May 2020 the government released the Technology Investment Roadmap Discussion Paper, inviting stakeholders to share their view on the proposed roadmap by the 21 Jun 2020. The current roadmap is underpinned by an economy-wide survey of over 140 new and emerging technologies. The survey found a range of technologies across all sectors of the Australian economy with the potential to improve productivity, lower costs, reduce emissions and support secure energy supply. Stakeholders are invited to share their views with respect to: • challenges, global trends and competitive advantages we should consider in setting Australia’s technology priorities • the short-list of technologies Australia could prioritise for achieving scale in deployment through its technology investments • goals for leveraging private investment • what broader issues, including infrastructure, skills, regulation or, planning, need to be worked through to enable Australia to adopt priority technologies at scale while maintaining local community support • where Australia, including its regional communities, is well-placed to take advantage of future demand for low emissions technologies, and support global emissions reductions by helping to deepen trade, markets and global supply chains Written submissions can be provided to by 21 June 2020.
  6. 6. © SavvyPlus Consulting 1 Jun 2020 May 2020Hazelwood Demolition
  7. 7. © SavvyPlus Consulting 1 Jun 2020 May 2020Hazelwood Story Demolition of Hazelwood In 1949 the development of new brown coal reserves in the Latrobe Valley started by the State Electricity Commission of Victoria, was the foundation of what would supply the new power station to be known as Hazelwood Power station. Approval for the construction of the plant was granted in 1959. The initial design had six (6) 200MW generators with a combined output of 1200MW, which was to be Victoria’s largest power plant at the time. The first generator was completed in 1964, the following 5 generators would be completed by 1971. However, due to the increased electricity demand in Victoria an additional two (2) generators were built and the previous end date moved up to 1969 with the two new units completed in 1970 and 1971. The final output of the 8 generators was 1600MW which supplied up to 25% of Victoria’s energy needs. In 1996 the power station was privatised under the Kennett government and sold to the International Power company PLC which was part of the GDF SUEC group now known as ENGIE and held majority (91.8%) of the shares with the remainder owned by the Commonwealth Bank of Australia (8.2%). The sale to International Power extended the lifetime of the plant due to an $800 million investment to keep the plant operational and the successful application to extend the mining license which ensured coal supply until 2030. Otherwise the plant would have been decommissioned in 2005. The power plant had been listed as the least efficient power plant in the Organistion for Economic Cooperation and Development (OECD) nations by WWF Australia. In 2010 a study by The Climate Group showed that the plant had the highest emissions intensity in Victoria with 1.37 tonnes of CO2e/MWh and it produced 15.70 million tonnes CO2e emissions. The annual generation which can be seen in the chart to the right shows that Hazelwood produced between 11,300GWh to just over 12,000,GWh annually from 1999 until 2011, with generation peaking in 2011 at 12,041GWh. From 2012 generation began to decrease with the introduction to the Carbon Tax which started in July 2012. The carbon scheme continued until mid 2014 when it was abolished however, generation continued to decrease due to the age and reliability of the power plant. In November 2016 Engie announced that the plant will be decommissioned in March 2017. On 25 May 2020 the 8 chimney stacks, which have stood for over 55 years and were 137m tall were demolished in just over a minute. Our previous slide showed the demolition in action, whilst the remainder of the demolition is expected to occur over the next few months. Source: Engie, The Guardian, ABC News, SBS News, The Climate Group and SavvyPlus 10,000 10,500 11,000 11,500 12,000 12,500 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 GWh Hazelwood Annual Generation
  8. 8. © SavvyPlus Consulting 1 Jun 2020 May 2020COVID-19 Demand Impact QLD NSW VIC SA TAS Last month, we observed it appeared COVID-19 was impacting the morning peak demand, causing the critical peak to occur slightly later. Our hypothesis was supported by the impact of home office working, and less travellers on electrified public transport. Moving into cooler weather and even after considering May-20 average temperatures were cooler than May-19, the impact of COVID-19 is becoming clearer. This analysis considers solar PV and focusses on working weekdays. QLD: Unlike last month, 2020 average half-hour demand for May was lower than 2019, and 2020 May morning peak, occurred later. NSW and VIC: In May 2020, the morning peak was later and higher, while the evening peak was noticeably higher. SA: In May 2020 average demand was higher throughout the whole day and had a peakier profile. TAS: The morning peak in 2020 was clearly later, with a similar evening peak.
  9. 9. © SavvyPlus Consulting 1 Jun 2020 May 2020Price Setter Analysis Across the NEM in 2019, coal generation was deemed as the Price Setter on 57% of the time, followed by hydro (22%) and gas (20%). In 2019 across the NEM, assets owned by AGL were the most dominant Price Setter (21%), followed by the Queenslanders of Stanwell (18%) and CS Energy (13%). Technology Ownership Price Setter Long Term Trends When the spot price is set for each 5-minute period, it is possible that many offers set the marginal price, which we call the Price Setter Ratio. Looking at the Price Setter Ratio since 2009, NSW is fairly typical of other Regions, where the Price Setter Ratio markedly increased through the 2014 to 2017 period from the 2011– 2013 period. However, since 2017 (following the closure of Northern and Hazelwood), the Price Setter Ratio has decreased, suggesting those setting the price, have less competition. NSW Price Setters (2009-2020) QLD NSW VIC SA TAS Above $300/MWh Price Setters in 2019 and 2020 The top 3 Price Setters during 2019 and 2020 when spot prices were above $300/MWh for each Region are shown below, where AGL continues to be a dominant player, followed by Snowy Hydro.
  10. 10. © SavvyPlus Consulting 1 Jun 2020 May 2020 10 QLD At a Glance Œ Gas & power spot prices continue to soften …  Gas generation and renewables are increasing … Ž Intraday price profile has changed … Lower gas prices have driven lower electricity prices Power and gas prices are highly correlated This chart shows the average electricity intraday prices for May-20 vs May-19. A notable shift has occurred in the middle of the day, reflecting the increased solar penetration.  Lower Qld solar farm average prices … This chart shows the average solar farm price is lowering over time compared to the time weighted average price.  Rising forward prices … May-19 May-20
  11. 11. © SavvyPlus Consulting 1 Jun 2020 May 2020 11 NSW At a Glance Œ Soft power spot prices continue …  Base load outages lowest in last 2 years … Ž Snowy storages only adequate. Most energy sent to VIC … VIC  Forward prices now rising …
  12. 12. © SavvyPlus Consulting 1 Jun 2020 May 2020 12 Victoria At a Glance Ž Renewable sector market share increasing …  Declining Wind Farm average spot price … Œ Soft power spot prices …  Soft gas prices … Month of May for 2017 - 2020 May 2020 This chart shows the average spot price earnt by Victorian wind farms compared to the time weighted average spot price  Rising Forward Price …
  13. 13. © SavvyPlus Consulting 1 Jun 2020 May 2020 13 South Australia At a Glance Œ Soft spot prices continue … with negative risk-of-change …  Intraday prices hold same profile, but lower … May 2020 Ž Higher penetration of renewables displacing gas … renewables represent ~80% of energy for some half-hours This chart compares the average daily price profile of May-19 with May-20 This chart compares the median daily price profile of May-19 with May-20
  14. 14. © SavvyPlus Consulting 1 Jun 2020 May 2020 14 Tasmania At a Glance Œ Soft spot prices …  High water storages … Ž High non-discretionary generation  Significant low-price capacity offered … By year-end, on track for: 1. Possible 444,000 LGCs 2. Market value of $12.5m to $15.2m  Possible LGC windfall … ‘ Rising forward prices …
  15. 15. © SavvyPlus Consulting 1 Jun 2020 May 2020 15 Electricity Spot Price After three months of the lowest wholesale electricity spot prices since 2015 or 2016 for the majority of NEM regions, average spot prices increased compared to the previous month for all regions except QLD, where the average price for May was almost 16% lower than the previous month and the lowest price for May since 2015 at $31/MWh. The average price for May this year was on average, half the average spot price of the previous three years for across all regions. NSW had smallest increase compared to the previous month but remains the most expensive power price at $42/MWh. VIC and SA saw increases of around 10% compared to the previous month, with average spot prices around $38/MWh. Tasmania saw the largest rally in the spot price, up almost 50% from last months historical low of $23/MWh to almost $35/MWh. The risk-of-change is used to measure the potential price outcome for a relatively small change in demand (i.e. +/-100MW) in all states, except for SA and TAS which is +/-50MW. The risk-of-change metrics remain similar to the previous month, with the mainland states showing little risk-of-change in the spot price. Tasmania is now showing an increased risk-of-change for lower spot price outcomes. In the intraday spot price profiles to the far right, QLD shows low average price around 10:30am due to extreme negative price outcomes on 2-May when the average price fell to minus $700/MWh. All regions show high average spot prices during the evening peak corresponding to days when half hour spot prices went to $200-300/MWh.
  16. 16. © SavvyPlus Consulting 1 Jun 2020 May 2020Q2-20 Spot Price Forecast 16 The dials to the right compare the current Q2-20 forward price against our spot forecast prepared in Q1-20. All regions are tracking in the lowest quartile of our spot forecast. The lower and upper extremes of the dark grey area mark the 25th to 75th percentiles respectively, and the median is marked as the break in the dark area. QLD During April the QLD Q2-20 forward price softened during the first half of May before a short rally in the second half, closing at $35/MWh, closing near our 5th percentile forecast. NSW The NSW Q2-20 forward price also softened early in the month before a rally that saw the forward price close just below $44/MWh, below the 25th percentile of our spot forecast. VIC The VIC Q2-20 forward price rallied during May, closing the month at just over $40/MWh, near the 5th percentile of the spot forecast. SA The SA Q2-20 forward price continued to soften during May, closing the month at $36/MWh, below the 5th percentile of our spot forecast. Q2-20 Flat Swap ($/MWh)
  17. 17. © SavvyPlus Consulting 1 Jun 2020 May 2020 17 Electricity Demand Total Energy Consumption showed little change compared to the same time last year for NSW, VIC and TAS, with all three regions seeing around just 1% less energy consumption compared to last year. QLD saw a larger drop in total energy consumption with a 5% drop, while SA saw energy consumption for May increase by 3.6% compared to the same time last year. In terms of Maximum Demand levels for May, SA saw Maximum Demand 7% higher than the same time last year, while VIC saw Maximum Demand 7% lower. NSW, QLD and TAS meanwhile saw similar Maximum Demand to May last year. With the cooler weather rolling in and all regions observing lower average temperatures than the same time last year, the typical winter demand profile with the notable humps corresponding to the morning and evening peak periods can be observed for all regions. The variation in demand levels during the middle of the day is also apparent for all regions, as the autumn weather brings both mild days and cold snaps in the weather. Increase solar PV across the NEM also continues to push down operational demand during the middle of the day.
  18. 18. © SavvyPlus Consulting 1 Jun 2020 May 2020 18 Weather Pattern
  19. 19. © SavvyPlus Consulting 1 Jun 2020 May 2020Forward Prices 19 In the risk-of-change metrics to the right, the southern regions show a high risk-of-change in the forward price, while in QLD the risk-of-change is more moderate. This suggests the market price is move likely to continue to rise, rather than fall. After six months of softening prices in the electricity forward market, prices rallied during May for all regions. While the southern regions began their rally in late April or early May, QLD’s FY-20/12 forward price rally started later in May resulting in a close for May of $2/MWh lower than April at $45/MWh. SA, VIC and TAS saw FY-20/21 forward prices rise in the order of $5-6/MWh, while NSW rose by about $2.50/MWh.
  20. 20. © SavvyPlus Consulting 1 Jun 2020 May 2020 Nov Generation Mix: During May there were minimal changes in the share of total NEM generation. Black Coal saw minimal change, while Brown coal generation fell by just 1% compared to the previous month. Gas and Hydro generation both increase by just under 1% in share of total NEM generation, while Residential solar’s share fell by just over 1% and large scale solar was down 0.5% compared to the previous month. Generation: Total generation for the NEM increased by over 8% compared to the previous month with a total of 16.8TWh of generation during May. Baseload generation increased by 7% overall compared to the previous month with a 9% increase in black coal fired generation to 8.3TWh and a 2% increase in brown coal fired generation to 2.8TWh. Market Share Non-Baseload: The share of the non- baseload generation also increased substantially with an 11% increase over the previous month to 5.6TWh. Solar generation decreased during May both in large scale solar down by 11% and residential solar PV down by 13% compared to April. Hydro, wind and gas-fired generation all saw increases of around 20% or more over the previous month. Hydro generation for May was 1.44TWh, wind generation was 1.72TWh and gas-fired generation was up 22% compared to the previous month at 1.28TWh. Outages: Outages during May were slightly lower than the previous month. In NSW Liddell had two units with a total of 1,000MW out for the first week of May and a single unit our for the rest of the month. Eraring also had around 720MW out for most of the month, while Vales Point B (665MW) and Mt Piper (702MW) had a week long outage mid-month. QLD also had substantial outages during May with two 281MW units out all month, a 444MW outage at Tarong North all month, and a 441MW outage at Millmerran for a total of 16 days during May. In VIC Yallourn had the most outages during May, with one unit (394MW) out for the whole month and a second unit (408MW) out for two weeks. Loy Yang A had one unit with 569MW out for most of the second half of the month and a 550MW outage for one day at Loy Yang B mid-month. Generation Mix 20 Apr May
  21. 21. © SavvyPlus Consulting 1 Jun 2020 May 2020 21 Generation Strategies VICTAS SANSW The lower spot prices have been driven by generator offers dominated by capacity in low price bands. The most notable example of this has been Hydro Tasmania which in recent months has significantly increased the capacity offered overall and in particular in the price bands below $35/MWh. All other regions in the NEM, including QLD which is not shown here, saw historically high levels of capacity offered in the lower price bands below $35/MWh. In NSW this behaviour was led by Energy Australia. In VIC it was AGL that offered the most capacity in the lower price bands, while in SA it was AGL and Origin that increased their offered capacity in the lower price bands.
  22. 22. © SavvyPlus Consulting 1 Jun 2020 May 2020Water Storages 22 Above average rainfall for Victoria and southern NSW resulted in a substantial increase in Snowy Hydro’s water storage during May. Snowy Hydro increased generation to the highest level since June last year, with total generation during May at 352GWh compared to 212GWh in April. The current storage level is now 28% which is higher than the same time last year, but considerably lower than historical levels. Hydro Tasmania’s water storage increased over the month, despite an increase in generation during May. During the month Hydro Tas generated 1.34GWh compared to 1.14GWh in April. The average water storage level for May was 41%, which is was the highest level for May since 2012.
  23. 23. © SavvyPlus Consulting 1 Jun 2020 May 2020Interconnector Flows 23 Exports across the QNI interconnector from QLD to NSW was higher than the previous month with a net flow of 388GWh during May. The QNI interconnector was more constrained during May at 19.7% of the time. Interconnector flows across the NSW-VIC link were at the highest level since winter 2018, with a net flow of 283GWh from VIC to NSW during May. The interconnector was less constrained than the pervious month at 18.2% of the time. There was significant energy flow in both directions across the Heywood interconnector during May. Net flow slightly favoured the direction towards SA during the month, with just over 75GWh sent towards SA and around 83GWh sent from SA to VIC. The Heywood interconnector was constrained just 6% of the time. Energy flow across Basslink was at similar levels to the previous month with a net flow of 168GWh towards VIC during May. Basslink was slightly less constrained compared to the previous month at 6.4% of the time.
  24. 24. © SavvyPlus Consulting 1 Jun 2020 May 2020Gas Spot Prices 24 The average wholesale gas price across the country remain at all time lows during May. Both QLD and NSW recorded new record low average monthly time weighted gas spot prices, with QLD averaging below $4/GJ for the first time since 2016, while the average price for NSW was just above $4/GJ at $4.21/GJ for May. Gas spot prices in VIC and SA remain at all time low levels albeit marginally higher than the previous month. The average gas spot price for VIC during May was $4.65/GJ and for SA it was $5.10/GJ.
  25. 25. © SavvyPlus Consulting 1 Jun 2020 May 2020Enviro Spot Certificate Prices 25 The LGC spot price rose from $31.50/certificate at the beginning of the month to a close of $32.88/certificate at the end of May. The STC price remained flat during May, closing the month at $39.30/certificate.
  26. 26. © SavvyPlus Consulting 1 Jun 2020 May 2020 26 ‘Old’ Hydro LGCs Source: AEMO For so-called ‘old’ hydro power stations, if the generation exceeds their baseline (i.e. long-term average), then each incremental MWh generated earns a LGC. Given HydroTas and AGL Vic hydro assets have been operating well above the long-term average so far this year, this means if they operate in a similar way as 2019 for the balance of 2020, then LGCs will be granted. The charts show for each Power Station the potential generation above baseline. The total potential number of LGCs that could be created assuming 2019 dispatch is repeated for the balance of 2020, is almost 600,000. The potential value of the LGCs will depend when sold, but if sold at: • Cal-20 forward price implies potential value of $20.5m • Cal-21 forward price implies potential value of $16.8m TAS VIC State LGCs Cal-20 LGC Price Cal-21 LGC Price Market Value (Cal-20) Market Value (Cal-21) TAS 444,180 $34.38 $28.13 $15,271,000 $12,495,000 VIC 154,528 $34.38 $28.13 $5,313,000 $4,347,000 Total 598,708 $20,584,000 $16,842,000 Potential 598,000 additional LGCs Potential market value of … $16.8m to $20.6m
  27. 27. © SavvyPlus Consulting 1 Jun 2020 May 2020Enviro Spot Certificate Prices 27 In NSW, the ESC spot price softened during May from $28.50 at the beginning of May to a $26/certificate. In Victoria, VEEC’s remained flat during May closing the month at just under $34/certificate.
  28. 28. © SavvyPlus Consulting 1 Jun 2020 May 2020Enviro Forward Prices 28 The LGC forward market remained mostly flat during May, with prices rising just slightly at the end of the month. Cal-20 forward price increased by just over $1 to a close of $33.13/certificate. Cal-21 forward price also rose by $1/certificate, closing the month at $26.55/certificate. The Cal-22 forward price increased by $2/certificate to a close of $20.83/certificate. The Cal-23 forward price showed little change closing the month at $10.10/certificate, while the Cal-24 forward price softened slightly to a close of $6.50/certificate.
  29. 29. © SavvyPlus Consulting 1 Jun 2020 May 2020 The El Niño-Southern Oscillation (ENSO) outlook show INACTIVE, meaning there is little chance of El Niño or La Niña forming in coming months. 29 Winter is likely to be wetter than average for most of Australia, with exception of the far north and costal areas of NSW, VIC, WA and TAS, where average rainfall is expected over the winter months. Weather Report & Outlooks The BOM’s median maximum temperature outlook for the coming three months is showing warmer daytime temperatures for most of the country, excluding southern SA and western VIC and NSW. Overnight temperatures are expected to be much warmer than average across the whole country. Jun-Aug Source: BOM Short-term rainfall deficiencies ease for south-east Australia Jun-Aug ENSO Outlook Temperature Outlook Rainfall Outlook v v 3mth 9mth 24mth Annual Rainfall Deciles A wetter start to 2020 has eased the severity of short-term soil moisture conditions for much of eastern and south eastern Australia. But rainfall deficiencies extending since early 2017 has left most of the country still experiencing sever long-term rainfall deficiencies. The impact on water storage resources is evidently particularly in the northern regions of the Murray-Darling Basin and NSW. The past three-year period has been the second driest on record since the Federation Drought that lasted from May 1900 to April 1903.