26th January 2006 – high demand and price in Victoria and SA

As noted on the summer 2005-2006 overview, there was a high level in demand in Victoria on Thursday 26th January 2006 (especially considering that it was an Australia Day public holiday, when commercial – though not industrial or residential – demand could be expected to be somewhat lower).  Coupled with this level of demand was a significant spike in price that lasted several hours.

The following is a brief synopsis of the event in Victoria and South Australia:

26th January 2006 in Victoria

The incident (in Victoria) can be seen in the following image:

(please click on the image for a better view)

From this illustration, the following can be seen:

(a) At the time of the price spike, it can be clearly seen that Victoria was heavily dependent on imports from the Snowy region;

(b) During the time of the price spike, this situation is exacerbated by the fact that there were significant reductions in output at Loy Yang A, Loy Yang B and Hazelwood stations;

(c) At the beginning of the day, Yallourn had 2 units out on maintenance and is seen to bring one unit back from outage at the time of the price spike;

(d) We also see a (relatively smaller) reduction in output at the Angelsea station;

(e) In response to these high prices, the peaking plant of Southern Hydro, Bairnsdale (Alinta), Somerton (AGL) and Valley Power (not shown on the chart) are all operational.

(f) The largest response during the day is shown by Ecogen Energy, which had all its capacity online and heavily loaded.

You could perform your own more detailed analysis through your own copy of NEM-Review.

26th January 2006 in South Australia

The same incident (in South Australia) can be seen in the following image:

(please click on the image for a better view)

Similarly, the following observations can be made:

(a) South Australia imported power from Victoria throughout the day (even though the Victorian region was heavily loaded at the time as well)

(b) Production at the NRG Flinders plants (Northern and Playford) was flat across the day, though the Osborne cogen plant was off-line through outage at the time;

(c) Production at Pelican Point was steady throughout the day as well, but well below its rated capacity (detailed analysis reveals output varying between 220MW and 160MW throughout the day, with output increasing at the time of the spike);

(d) Output at Origin Energy’s Ladbroke Grove plant was also constant throughout the day.

(e) Output at the Torrens A and B stations increased significantly from overnight lows to match the daily load shape;

(f) The Quarantine (Origin) and Hallett (AGL) peaking plant were both online to meet the peak prices.  However none of the Synergen (Internationalpower) plant were online at all during the day.

Use NEM-Review to delve into more detail at your convenience!

26th January 2006 in Snowy

As shown in the chart below, the price spike was more muted in ifs effect in the Snowy region, and non-existent further north in NSW (and hence Queensland).  Additionally, as Basslink was not operational, the price spike did not affect Tasmania either.

(please click on the image for a better view)

As can be seen in the chart:

Similarly, the following observations can be made:

(a) For three half-hour trading intervals (14:00, 15:00 and 15:30), Snowy experienced prices above $1,000/MWh:

i)   The price spike at 14:00 was only slightly below the price levels reached in Victoria (which implies that the prices had not separated in that half-hour due to constraints);

ii)   However at 15:00, the price in Victoria was more than 3x the level of pricing in Snowy, due to transmission constraints being operational during that period;

iii)   At 15:30, prices were again separated from each other by only a small amount.

iv)   At 16:00, however, the Victorian price again jumped at 16:00 whereas the Snowy price fell to $375.25.  This can be understood with reference to the explanation below of the situation at the 15:55 dispatch interval.

(b) Production from the Snowy portfolio climbed througout the day to be in excess of 2,000MW by the afternoon peak in demand in Victoria (leaving plenty of surplus generation capacity available, but unused).

(c) However, the effect of this generation in Victoria was muted by the inability to transfer more than 1,200MW south at the times when the price spike was being experienced in Victoria, as explained further below.

We invite you to use NEM-Review to draw your own conclusions about the way the market was operating on the day!

This situation is well summarised in the following snapshot taken in NEM-Watch at 15:55 on the day (with NEM-Watch operating in play-back mode to allow for the full extent of dispatch price spikes to be

(please click on the image for a closer view)

In particular, it should be noted that, for this time:

(a)  The dispatch (5-minute) price in Victoria and South Australia hit the VOLL ($10,000/MWh) price cap (though it is noted that this instant is the subject of a NEMMCO review because of Over-Constrained Dispatch, as shown in NEMMCO “Market Notice” 14083 issued on 26/01/06 (archived), which was displayed in NEM-Watch at the time.

(b)  At this time, it can also be seen that Victoria had (at that time) a deficit in available generation capacity, and South Australia only had a small surplus that was slightly larger than the deficit in Victoria.  Hence, across Victoria and South Australia, there was only the barest margin of surplus available generation.

(c)  Given that flows from Snowy to Victoria were constrained in the period 15:50 to 16:05 (because of a network outage in the Snowy system, as outlined in NEMMCO “Market Notice” 14082 issued 26/01/06 (archived), this would mean that Victoria and South Australia would have experienced load shedding had a large generator fallen off-line at the time.  In this light, the high level pricing can be understood.

(d)  Finally, it is also noted that a limitation on flows from Snowy to 1200MW between 13:05 and 14:50 (as explained in market notice 14080 issued 26/01/06) would also have increased upwards-pressure on spot prices during this period.

About the Author

Paul McArdle
One of three founders of Global-Roam back in 2000, Paul has been CEO of the company since that time. As an author on WattClarity, Paul's focus has been to help make the electricity market more understandable.

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