Australia's National Electricity Market (NEM) has claimed the unenviable title of the world's most volatile power market, according to a recent study by Rystad Energy. The market's surges in electricity prices, primarily attributed to unplanned coal generation outages and disruptions in transmission lines triggered by natural disasters, have raised concerns among retailers without effective hedging strategies and left consumers grappling with cost fluctuations.
Rystad Energy, a prominent research firm, conducted an in-depth analysis of public price data from 39 electricity markets globally, ultimately bestowing Australia's NEM with the dubious distinction of being the “most volatile” market. The key metric employed to assess this volatility is the average one-hour intraday price spread, measuring the difference between the highest and lowest prices within a single hour.
This volatility is driven by an array of factors, including unforeseen supply issues like unplanned coal power plant outages and transmission line disruptions resulting from natural disasters, such as cyclones and bushfires, which have been occurring with increasing frequency and intensity in recent years. The daytime surge in solar power generation has pushed daytime prices down, but increased natural gas prices have led to soaring electricity rates during the evenings and at night when solar generation wanes, necessitating the use of gas-fired generation.
Addressing these price fluctuations, the study highlights the pressing need to expand storage capacity. Rystad Energy suggests that by 2050, Australia will require a substantial 46 gigawatts (GW) and 640 gigawatt-hours (GWh) of pumped hydro and utility-scale battery storage capacity, a monumental leap from the current 2.8 GW.
While Australia tops the list of volatile markets, the study also identifies other markets worldwide with high volatility, including Japan and the Philippines, as well as specific regions in the United States, notably California and Texas.
David Dixon, Senior Analyst at Rystad Energy, emphasized, “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 prioritize 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.”
In a recent development, the National Electricity Market saw substantial growth in renewable energy generation in September 2023, with solar power leading the charge. Total renewable energy output surged to 7 terawatt-hours (TWh), marking a 13% increase compared to the previous year. Solar power was a significant contributor to this increase, generating 1 TWh more than in September 2022. Meanwhile, wind generation remained steady year-on-year, with hydro generation experiencing a slight dip.
The state of New South Wales (NSW) emerged as a leader in utility solar PV generation in September, producing 650 gigawatt-hours (GWh). Nationally, utility PV generation reached 1,331 GWh, marking an impressive 41% year-on-year increase. Notably, 14 of the top 20 utility PV assets were located in NSW, with the Edenvale solar farm in Queensland securing the top spot with an operational efficiency of 35%.
Wind generation for September reached a total of 2,488 GWh, reflecting a 1% increase compared to September 2022. The top-performing wind assets were primarily situated in Queensland and Tasmania, with Prime Super's Morton's Lane wind farm as the sole exception outside these regions. Victoria led wind generation at the state level with 874 GWh, followed by South Australia (464 GWh) and NSW (456 GWh).
However, the most notable trend is the decline of coal-fired generation in Australia. In September, coal generation in the NEM and Western Australia's isolated Wholesale Electricity Market (WEM) remained at historic lows, mainly due to seasonal factors, increased renewable generation, and outages at coal-fired facilities.
The total output from coal-fired generation in September was 0.36 terawatt-hours, slightly above the all-time low of 0.35 TWh set in 2022. In the NEM, coal generation facilities produced 8.8 TWh, falling below the 11-year historical range (2011-22). This downward trend was also observed in Western Australia's WEM.
Spring, marked by milder conditions leading to lower demand and increased solar generation resources, traditionally experiences reduced coal generation in both the NEM and the WEM. Victoria's coal power fleet operated at a capacity factor of 74%, while NSW and Queensland recorded 55% and 61%, respectively. It is crucial to note that several coal-fired generation facilities were offline in September, totaling 3.0 GWac of capacity, equivalent to 14% of the NEM's coal-fired generation capacity.
In Western Australia, the WEM's coal fleet operated at a capacity factor of 34% in September, despite all coal power facilities being operational throughout the month.
