During a hot and volatile summer in the Queensland region of the NEM, we fielded a number of questions from clients (and others) who asked us to help them understand what was happening, and why – specifically with respect to spot prices, but also with respect to other variables.
As summer progressed, we prepared some isolated pieces of preliminary analysis – which were delivered to clients directly, or published more broadly on WattClarity® here.
However the questions kept coming (both externally and internally), even after summer had finished:
Is price volatility the whole story? If not, what are the other pieces, in terms of changes to price?
Was this a “only in QLD” issue?
Why is this happening when demand is declining?
Is the Carbon Tax to blame?
Was it because Stanwell shut down 2 units at Tarong?
Who’s responsible for forcing the price up?
Did this bidding really mean others ran out of fuel?
What is this “Disorderly Bidding” I’m hearing about now?
Why are the generators crying poor?
How much Demand Side Response was there exhibited?
What is this 855/871 constraint that I keep hearing about? What does it mean?
What has been the effect of the dynamic ratings on 855/871 – and away from declared ratings? Did they have a role in the volatility?
I heard this constraint is going away – what does it mean for next summer?
But the 855/871 may not have been the most important constraint over summer, in terms of the volatility – what was the most important one?
What role is Solar PV playing in the volatility – does it help, or hinder?
How will prices flow through to the retail market – in tariffs and contracts?
Is this a new normal, in terms of behaviour?
Could this happen in my region?
How did we prepare the report?
Given we already had a number of initiatives on the go, and to ensure that we delivered an in-depth analysis, we’ve contracted in the services of a several people who have, until recently, been employed within the trading rooms within the Queensland region, plus the assistance of other senior industry figures. Primary amongst these people has been Thomas Dargue, an experienced market analyst who has previously worked with Tarong Energy, Stanwell Corporation, and Ergon Energy.
This provided us with additional time, skills and experience with which to complete this analysis and prepare this report.
This report is being prepared, with the benefit of hindsight and time to analyse (and with the assistance of experienced market analysts), to expand on the explanations given – particularly with respect to the diverse number of factors combining to deliver this volatility. It will be released at the end of May.
Who’s the intended audience for the report?
The larger physical traders are not the audience for this report – they have their own dedicated teams of analysts who specialise in the completion of analysis such as this.
Rather, this report is intended to assist those smaller wholesale market participants, and interested observers, who do not have the same time (and/or capacity) to analyse and interpret these events in detail.