- Index
- Background
- The depressed prices experienced in winter 2008 (to date) – the content of which has been reported here:
- The nature of peak demand forecasts (for winter in the NSW region) over the coming 10 years – the content of which has been reported here:
- As an aside to these separate pieces of analysis, Paul made a few points with respect to the implementation of the Emissions Trading System, scheduled for introduction from 2010, and specifically the possible emergence of a NEM heavily dependent on gas supplies, which might be unreliable – the content of which has been reported here
- Introduction
- Analysis of Summer 2007-08
- Previous Analysis of Winter 2007
- Specific Comments
Our Managing Director spoke at the “Australian Energy & Utility Summit 08” in Sydney on Tuesday 22nd July 2008.
In his presentation, Paul touched on a number of issues, including the following:
To start this presentation, Paul spoke about the extremes of price volatility that were experienced over winter 2007.
Comments made at this conference were grounded on two pieces of previous analysis:
Analysis had previously been performed (in conjunction with a presentation at the “QLD Energy” Conference in March 2008) of the level of volatility in the QLD region over summer 2007-08.
The results of this analysis are summarised in this article:
Furthermore, some analysis had previously been made of winter 2007, following some instances of very low Instantaneous Reserve Plant Margin (IRPM).
The results of this analysis are summarised in this article:
For this presentation, specific focus was provided of NSW prices (given the conference was in Sydney).
The following slide shows the correlation between NSW dispatch (5-minute) prices over the notional “winter” period (May→August 2007), and NSW dispatch demand.
As can be seen, the situation is largely as expected, with prices increasing with increase in demand. However it is noted that some of the volatility occurred when NSW demand was significantly below the peaks achieved over the winter period.
It was thought that the situation might be clearer if the NSW prices were correlated against NEM-wide dispatch demand, as shown here:
However a similar situation is apparent in this chart.
To understand further, we looked at the definition of Instantaneous Reserve Plant Margin, as used in the NEM-WatchTM product.
The following chart shows the correlation between price and IRPM:
This was particularly of interest, given the situation uncovered in QLD in the previous analysis for summer 2007-08, whereby high prices had been engineered by QLD generators, when NEM-wide IRPM was high, and even when there was significant surplus of capacity available within the QLD region.
In particular, it was noted that these high NSW prices in winter 2007 occurred across a broad range of interconnector constraint scenarios.
This was unlike the situation in summer 2007-08 for QLD, when prices were only high on occasions when QNI was constrained flowing north (i.e. when QLD generators had local market power)
During the presentation, the low reserve plant margins experienced in winter 2007 was highlighted as well:
An illustration was provided of how these events were represented in NEM-Watch:
Reference was made to the news article written in the Australian Financial Review to document this event.
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