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With great heat, comes great power bill

Feb 05, 2019

Since the closure of Hazelwood Power Station in Victoria, coal-fired and gas generators have been forced to increase their output to ensure the grid’s stability. The high natural gas prices along with high black coal prices are the main causes for the increases of the wholesale electricity prices. Increased global energy demand is the main factor behind the high coal and natural gas prices. The price of thermal coal has increased from $66 per metric tonne in early 2016 to $140 per metric tonne in 2019 while the price of LNG increased from $5/GJ in 2016 to $13/GJ in 2018.

As the narrow demand and supply balance prevails, heatwaves continue testing the grid’s stability. Last week some parts of South Australia and Victoria were hit by power outages, with over 100,000 properties in SA and almost 200,000 in Victoria left without power.

The situation has been very tense at the AEMO as the CEO and her team stayed late in the office managing the power outages. Excessive heat and unscheduled outages forced AEMO to dip into the Emergency Power Reserve and requested consumers cut down on consumption, AEMO’s CEO herself had not turned on the aircon in her house. She doubted that anyone in her team slept very well that night and not because of the heat.

Further drastic measures were taken as spot market prices in Victoria reached $14,500/MWh and a price cap of $300/MWh was enforced. The average daily spot price in Victoria was the highest in 20 years reaching $3,378/MWh. It has been reported that the last week’s heatwaves cost the Victorian’s and South Australian’s approximately $1.1 billion.

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