State of the energy market 2020 is the AER’s annual report covering Australia’s wholesale electricity and gas markets, the transmission and distribution networks, and energy retail markets. The report provides an accessible review of energy market activity in eastern and southern Australia over 2019 and the early months of 2020.
National Electricity Market - Snapshot:
- As ageing coal generators exit the market, over 93 per cent of investment since 2012–13 has been in wind and solar plant, often located on the fringes of the grid.
- Renewable plant produced record output in 2019. Wind farms accounted for 8 per cent of output, and solar farms for 2.5 per cent. Rooftop solar photovoltaic systems met another 5.2 per cent of the market's electricity needs.
- Investment in wind and solar plant slowed from mid2019, as technical issues with integrating new plant into the system delayed projects. Coordinated planning reforms aim to better integrate renewable plant, rooftop solar PV, demand response and battery storage into the system, with a focus on ensuring the transmission grid can meet transport needs.
- As the market transitions, intervention to manage power system security and reliability risks has risen, imposing significant costs on energy customers. The Australian Energy Market Operator has directed some generators to operate even when not economic, and constrained some low priced plant from operating. South Australia and, more recently, Victoria and Queensland have been the focus of these interventions.
- Investment in ‘firming’ capacity (such as fast start generation, demand response, battery storage and pumped hydro plant) is needed to fill supply gaps when a lack of wind or sunshine curtails renewable plant.
- The Reliability and Emergency Reserve Trader mechanism was activated in each of the past three summers to secure back-up supply, at a cost of $126 million. And the Retailer Reliability Obligation, launched in July 2019, was activated in January 2020 (in South Australia).
- Victoria at $126 per megawatt hour (MWh) edged South Australia ($125 per MWh) as the NEM’s highest price region in 2019. Wholesale prices peaked early in the year, due to high fuel costs and periods of (weather driven) high demand. Generator outages in Victoria also impacted the market.
- Rising solar generation and weakening fuel costs eased wholesale prices from mid-2019, with prices for the first quarter of 2020 below $110 per MWh in all regions for the first time since 2015. But extreme weather contributed to record frequency control costs ($220 million) for that quarter.