NSW power prices surge after outage

NSW power prices jumped as record low coal generation and an outage at the Liddell plant bucked cheap tariffs across the rest of the national grid.

Gas prices also increased in all east coast markets, reversing nearly two years of declines and mirroring increasing international oil and gas prices.

NSW power prices jumped in the last quarter of 2020 as record low coal generation and an outage at the ageing Liddell plant bucked cheap tariffs across the rest of the national grid, aided by an influx of renewables and demand falling to its lowest level in two decades.

Wholesale electricity prices skyrocketed by 39 per cent in NSW to $64 per megawatt hour for the last three months of 2020, with output from coal stations plummeting to its lowest since the national electricity market was created in 1998, the Australian Energy Market Operator said.

A number of coal plants carried out planned maintenance during the quarter but the fossil fuel was also battered by solar continuing to undercut it on price during daytime hours.

NSW’s black coal-fired output declined to 5249MW with the state’s plants operating at only half their capacity a week before Christmas and the trend exacerbated by an accident at AGL Energy’s Liddell which further cut supplies until the end of summer.

The state’s power prices soared to 71 per cent more than southern neighbour Victoria and were 42 per cent higher than Queensland.

Still, even at $64/MWh, NSW prices remain well off levels seen two years ago and have moderated in January to frequently trade under $40/MWh.

Power prices averaged $44/MWh across the market in the December quarter, 38 per cent less than the same quarter in 2019 and the lowest December quarter wholesale price since 2014.

South Australia achieved the cheapest power in the grid for the first time since 2012.

The state’s quarterly price was down 57 per cent to just $29/MWh due to increased renewables which included an hour in October where solar power covered the state’s entire electricity needs.

Still, there was a note of caution from AEMO, which pointed out the costs of directing South Australian gas-powered generators to retain system strength also rose 91 per cent to $49m in 2020.

Energy Minister Angus Taylor noted the renewables boom was increasing reliance on firm generation to maintain reliability and keep the grid secure.

“Increasing costs associated with the need for AEMO to issue market directions and growing reliance on reliability services underscores the need for balance in our generation sources, to make sure the lights can stay on when the sun isn’t shining and the wind isn’t blowing,” Mr Taylor said.

Gas-fired generation decreased to its lowest fourth quarter level since 2005 due to low operational demand and record high renewables, while hydro output was steady on the same period a year earlier.

The rise of renewables shows little sign of easing, with total wind and solar generation up by nearly 20 per cent in 2020, while nine new renewable projects entered the grid during the fourth quarter of 2020, spread across 1280MW of generation.

Mild weather and strong uptake of solar led to quarterly operational demand dropping by 3 per cent on the same period in 2019, its lowest quarterly average since 2001.

That trend, along with record high wind and solar output, ­pushed out coal and gas generation and resulted in the lowest national electricity market emissions on record, falling 7 per cent from the fourth quarter of 2019.

Gas prices also increased in all east coast markets, reversing nearly two years of declines and mirroring increasing international oil and gas prices.

LNG prices in Asia soared in December as traders scrambled to secure new supplies amid a prolonged cold snap that has depleted inventories and prompted warnings of power shortages across the region.

The east coast domestic gas price is now linked to international LNG prices and markets after Queensland‘s three export projects started shipping local gas to customers in Asia over the past few years. The flow of gas to Curtis Island, where the plants are located, also reached record levels.