QLD Region

The following chart (produced with our deSide® software) shows a distribution of QLD spot prices for each April month over the 10-year range (1999-2008).

From this chart, a couple of observations can be made:

• Perhaps most significantly, we see how the shape of prices in the QLD region was fundamentally different in April 2007, with:
• We can see that there was almost no instances of prices below $20/MWh (which was certainly not the case in any of the other years);
• Indeed, we can see relatively few instances (only 20% of the time) when prices were below $40/MWh – which might typically be considered the Long-Run Marginal Cost of most coal-fired generation plant in QLD;
• Instead, because of water constraints on plant in QLD, and further south, prices were above $40/MWh for the vast majority of the time, over the month;
• Prices were above $100/MWh for about 15% of the time over the month.
• Furthermore, we know that this situation persisted though much of 2007, and subsided only when water restrictions were eased following rain at the end of the year.
• Apart from 2007, we see that the early years (1999 and 2000) show the highest incidence of prices above $100/MWh:
• This happened because QLD was not (in 1999) and only barely (in 2000) connected to NSW in the early years, and had a relatively tight supply-demand balance (prior to the development of a number of new base-load generators);
• This can be seen to explain why QLD prices are shown to be higher in the first 2 x April months in the main chart above.

NSW Region

A similar chart has been included (below) for the distribution of April prices in NSW:

A very similar situation can be seen with respect to NSW prices in April 2007.

Because of the different dynamics in the early years, however, we can see a higher incidence of lower prices in NSW in 1999 and 2000 than in most other years (the exception being 2003).

This goes a long way to explaining the low prices seen for NSW in April months of 1999, 2000 and 2003.

VIC Region

The analogous chart has been included for April spot prices in Victoria, below:

As can be seen, the situation is almost identical to that for NSW – both in terms of:

• the very different price pattern in 2007, hence the higher average prices seen in April 2007; and
• the lower average prices seen in April 1999, April 2000 and April 2003.

In addition, it can be noted that prices in April 2008 had reverted to previous “typical” patterns to a lesser degree than was shown to be the case in the northern regions of NSW and QLD.

We believe that this is due, at least in part, to the fact that water shortages persist to a greater degree in TAS than they do in QLD – hence Hydro Tasmania is still importing a higher amount of energy over the Basslink interconnector than was the case in April 2006, for instance.

Certainly, it can be clearly seen in the above chart (from NEM-Review version 5.3) that the exports from VIC to Tasmania have been increasingly steadily.

SA Region

The chart below (from deSide) for South Australia reveals a very similar story to that for QLD.

In particular, we see:

• Much higher incidence of prices above $40/MWh (and above $100/MWh) in April 2007 than in any other April month;
• The highest incidence of prices above $100/MWh (apart from April 2007) occurring in the early years (1999 and 2000):
• Unlike QLD, SA was connected to another region (VIC) in those years;
• Like QLD, however, SA suffered from a tight local supply/demand balance, which tended to constrain the Heywood link and hence allow prices to rise in SA.
• In addition, we see that a significant number of hours (around 20) in 2005 showed prices above $100/MWh:
• This goes to explain the slightly higher average price in SA for April 2005;
• This has not been further investigated.

TAS Region

A similar chart has been included for Tasmania, but for only the 3 April months in which it has been a part of the NEM.

Given the chart above (showing aggregate monthly Basslink flows) shows an increase import to Tasmania in April 2008, compared to April 2007, it is no surprise that prices in Tasmania have not subsided to anywhere near the same degree as they have in the mainland regions.