During the heatwave, and in the week following, we’ve been bombarded with a wide range of views of what’s helped, and what’s hindered in the NEM over that period – including:
3) We’ve heard how wind farm output did as could be expected and as forecast during the period (whether that’s a good thing, a bad thing, or just one of those things is open to each person’s perspective – and, in particular, whether focusing on the value of energy or capacity);
5) Others (like Keith) have written how it might have been hasty to talk too loud about “gold plating” on the network side, and how a pattern of declining demand is not as consistent (in terms of peaks, at least) as might have been thought.
[PS and Terry gives credit to coal here]
I’m sure there will be plenty more said as the summer progresses….
(A) Gas-fired generation helps meet demand in the heatwave
One thing that’s been particularly of interest to us, now that we’re able to provide a bit more clarity in terms of what’s been happening on the gas market, on the other side of the fence, is the contribution that gas generation made in meeting the additional demand.
The scale of this contribution is fairly clear in the following chart produced in NEM-Review:
With respect to this chart we can see many things, including
1) The first observation that can be made is just with respect to demand – we see that the demand in the heatwave week was more than double the demand experienced in the early days of the prior week, and double what’s happened this week (so far) – a clear illustration of the strong temperature dependency of electricity demand (particularly in South Australia).
2) We see that production from gas-fired plant in SA increased significantly to provide the lion’s share of this increased demand.
3) Output from Northern (Alinta’s brown coaler) picked up in the heatwave week, with 2 units running heavily at times
4) A number of the liquid fuelled peakers were also called on to run, depending on the commercial drivers of the portfolios that owned them
5) As others have noted, we see that the wind farms continued to produce with the expected intermittent pattern. In particular we see an inverse correlation between wind farm output and spot price, which is entirely expected (after all, as others have pointed out the wind farms help to lower spot prices when the wind blows – so the inverse is to be expected).
6) There are other things that can be seen, of course. If there are particular points you believe we should have made, please include them below.
(B) Heatwave produced increased demand in the gas market
Following through to the gas market, we see that the significant increase in gas supply for generation impacted back in the Short Term Trading Market, as well.
If we select three different days from the date range above (using a pre-release beta version of GasWatch version 2) and perform a before/during/after comparison, the effect of the heatwave becomes fairly clear:
1) Before (Monday 6th January)
As shown in the NEM-Review chart above, demand on the 6th January was well below 1,500MW in South Australia. As a result, production levels from gas-fired plant were running fairly consistently at a little below 500MW.
Back at that time, we see the daily gas price at the Adelaide hub being a little more than $4/GJ and the utilisation of the Moomba-to-Adelaide pipeline being very low – which, together with the SEAGas pipeline, delivered scheduled quantity of 55TJ for the day.
In the charts on the right, we see the gas price having been fairly consistent over the previous week in the low $4/GJ range.
2) During (Thursday 16th January)
Moving into the heatwave week and we see a very different picture:
From NEM-Review, we saw that the South Australian demand peaked well above 3,000MW on the day (so more than twice what was the case on 6th January), and that the production from gas-fired plant peaked at over four times as much (over 2,000MW contributed at peak demand times).
This flowed through to the gas market – as we see the volumes required in the gas market surprised by more than 10TJ on each of the previous days (Monday 13th, Tuesday 14th and Wednesday 15th), and we see prices trend upwards as this effect is felt.
The Moomba-to-Adelaide pipeline is called on to supply these additional quantities to the gas peaking plant.
[for those who are interested, the market price shown in Victoria is the 10pm market price, coming on the back of the other 4 prices in the day of just below $4/GJ – other screens show this detail]
3) After (Wednesday 22nd January – yesterday)
This week we see (in the NEM-Review chart above) that demand in South Australia has subsided back to more “normal” levels – about half of what they were the prior week. With that, production volumes from gas-fired plants have also scaled back.
It should not surprise that this has also wound back gas prices at the Adelaide hub, as shown:
Part of the reasoning behind the formation of the AEMO in the first place (by merging together NEMMCO, Vencorp and other organisations) was that the gas and electricity markets were becoming more closely linked. The above is just one illustration of that.
(C) Gas prices flow through to electricity market bidding
As also would be expected (especially for the gas-fired stations that ramped up to meet the peak in demand) this gas price increase was reflected in bidding behaviour over the period. Focusing in on the Torrens Island station (because it was one of the ones that contributed significantly to that increased production in the region) we see the following pattern of bidding behaviour:
In this snapshot from ez2view over a 20 day range spanning the 3 days above, we see a significant increase in the volumes bid into the market, we see the use of price buckets above $300/MWh over the period of the heatwave.
Narrowing down the filter more to just look at Torrens B3, we see that bid prices were escalated above $150 leading into the heatwave, and then further above $300 during the heatwave. The spike in gas prices (above) would have been part of the reason for this – though there would also have been opportunistic behaviour involved as well.
[more to come, time permitting …]