Australia’s electricity market wins ‘most volatile’ title

Transmission towers against striking red evening sky (far north queensland)
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Australia’s power market is now the most volatile in the world as unexpected losses of supply from unplanned coal generation outages and transmission line issues related to natural disasters lead to huge price fluctuations, according to Rystad Energy research.

Rystad Energy analysed public price data from 39 electricity markets globally and concluded that Australia’s NEM holds the unwanted title of ‘most volatile’, with domestic price spreads for Queensland and South Australia seeing the widest spreads of all markets.

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The key metric used to measure volatility is the average one-hour intraday spread for a year of data, i.e., the difference between the highest and lowest price during a given hour. Volatility is driven by significant supply issues, including unplanned coal power plant outages or transmission line problems caused by natural disasters such as cyclonic winds or bushfires, which have become more frequent and devastating in recent years.

Outside Australia, the other markets that exhibited high volatility in Rystad’s research were Japan and the Philippines, plus select regions of the US such as California and Texas.

“Volatility can be unsettling for retailers who lack proper hedging strategies and for consumers who bear the brunt of resulting cost fluctuations. To tackle this, Australia should prioritise the enhancement of transmission infrastructure and invest in storage solutions to mitigate the impact of volatility. This will help to create a more stable and affordable electricity market for all Australians,” Rystad Energy senior analyst David Dixon said.

In September 2023, renewable energy generation in the NEM saw significant growth, with solar leading the way. The total renewable energy output reached 7TWh, up 13% year-on-year. Solar accounted for most of this increase, generating 1TWh more than in September 2022. Wind generation remained steady year-on-year, while hydro generation dipped slightly.

Nationwide utility PV generation reached 1,331GWh, a substantial 41% year-on-year increase. Wind generation in September totaled 2,488GWh, a 1% increase compared to September 2022.

Coal-fired generation in the NEM and Western Australia’s isolated Wholesale Electricity Market (WEM) remained low in September this year, compared to recent norms. This was due to a combination of seasonal factors, increased renewable generation and outages at some coal-fired generation facilities.

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Total output from coal-fired generation reached 0.36TWh in September, compared to the September all-time low of 0.35TWh set in 2022. In the NEM, coal generation facilities generated a total 8.8TWh, below the 11-year historical range (2011-22). This downward trend was also visible in Western Australia’s WEM.

In Western Australia, the WEM’s coal fleet operated at a capacity factor of 34% in September, despite all coal power facilities being operational for the month.

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