Electricity and gas prices soared across the power grid in the second quarter of 2021 after supply was crimped by a raft of outages including incidents at the Callide and Yallourn coal power stations, with black coal-fired generator capacity falling to its lowest quarterly level on record.
Wholesale prices in the national electricity market more than doubled to $95 per megawatt hour for the three months to June 30, from just $37/MWh in the first quarter of this year, the Australian Energy Market Operator said in its quarterly energy dynamics report.
Queensland’s Callide accident, which caused a fire that cut power to half a million homes and businesses, saw the state record its highest second-quarter average electricity price on record, up threefold to $128/MWh, while NSW nearly tripled to $111/MWh from $38/MWh in the first quarter. Victoria also skyrocketed to $70/MWh from $25/MWh in the March quarter while South Australia was up 70 per cent, also to $70/MWh.
Black coal-fired plant availability fell by 1479MW, its lowest second quarter performance since the national electricity market started in 1998.
Rising international LNG prices and higher use also saw gas surge by a quarter to $8.20 per gigajoule, nearly double the average of $4.37/GJ a year ago and up strongly from $6.03 in the March quarter.
The twin coal outages at Queensland’s Callide plant and Victoria’s Yallourn power station were partly to blame for the rapid turnaround in the market, which follows a 50 per cent fall between mid-2019 and early 2021 for wholesale spot costs, the prices that retailers pay day-to-day for uncontracted electricity.
“The start to winter tested power system resilience, with generator outages contributing to tightening supply conditions and significant electricity price volatility over the quarter,” AEMO chief markets officer Violette Mouchaileh said.
Energy Minister Angus Taylor said price jumps and the Callide incident illustrated the potential impact if existing large coal-fired generation was not adequately replaced.
Negative and zero spot prices, reflecting the growing influence of solar and wind generation, were recorded in 5.5 per cent of all trading intervals, up from 4 per cent a year ago, with the trend spreading from South Australia and Victoria into Queensland and Tasmania.
AEMO’s bold plan to have a power system in place by 2025 that can handle 100 per cent instantaneous renewable penetration is also gathering momentum, with grid-scale wind and solar, hydro, biomass and rooftop solar reaching a record high 57 per cent of total demand on April 11.
The role of gas in the power mix continues to be fiercely contested, partly due to the government-owned Snowy Hydro and its controversial decision to build the Kurri Kurri gas plant in NSW’s Hunter Valley,
Both gas and hydro generation provided strong back-up capacity after failures at Callide and Yallourn, AEMO said, with gas output up by 1111MW in June compared to May as a back-up source.
Gas pipeline operator APA pointed to the fossil fuel doing the heavy lifting during outages.
“The dip in electricity generation at Yallourn from flooding and supply demands elsewhere in the grid due to Callide have demonstrated the critical role gas plays in Victoria and on the east coast,” APA chief executive Rob Wheals said.
“When the Callide explosion took out about a quarter of Queensland‘s dispatchable generation, gas stepped up, and when Yallourn flooded, gas again stepped up. We saw a doubling of the role that gas played in electricity generation during that time, demonstrating the critical role of gas in the energy mix.”
Local gas generators boosted their consumption in response to the twin coal outages, with Victoria’s Iona gas storage plant required to run at record rates. AEMO said Iona fell from a record high of 24.5 petajoules on May 10 to finish the June quarter at 14.3PJ, its lowest end of second quarter level on record.
With supplies from the Exxon and BHP-run Longford gas plant also cut due to maintenance, APA said pipeline demand was high.
“Existing gas pipeline infrastructure has been able to support the east coast under these compounding conditions and the system has responded, showing its critical, unique and flexible role,” Mr Wheals said.