Demand, emissions and wholesale prices still going down

In April, annualised demand fell in every state in the NEM while there has also been a steady fall in wholesale prices in all mainland NEM states since the middle of 2013.

Annual electricity supply and demand in the NEM for the year ending April 2014 showed a continuation of trends seen in the year ending March 2014 and described in the last Carbon Emissions Index - Cedex - report.

Demand and total generation fell slightly (Figure 1), as did supply from both black and brown coal fuelled generators. Hydro generation continued to fall, while wind generation increased slightly and gas generation increased more significantly (Figure 2).

The overall outcome was further small falls in both generation and emissions. Compared with the year ending April 2013, the fall in generation was 4.4 TWh, equivalent to 2.4%, and the fall in emissions was 5.8 Mt CO2‐e, equivalent to 3.5%.

Figure 1

Graph for Demand, emissions and wholesale prices still going down

Figure 2

Graph for Demand, emissions and wholesale prices still going down

Figure 3 shows the relative trends in total demand for electrical energy in each state in the NEM and also in WA. In April, annualised demand fell in every state in the NEM. By contrast, demand rose quite strongly in WA (strictly, the South West Interconnected System, or SWIS).

Analysis of seasonal energy consumption (the four winter months, May to August, and the four summer months, December to March), some results of which were reported in last month’s Cedex, shows that the steady reduction in demand has been experienced in both winter and summer. Shifting winter heating loads to gas is therefore not an important contributor to falling demand for electricity.

Figure 3

Graph for Demand, emissions and wholesale prices still going down

Finally, in a first for Cedex, Figure 4 wholesale prices, specifically monthly median NEM regional spot prices (termed pool prices) in each NEM region (state) since the introduction of a price on greenhouse gas emissions in July 2012. The median price is a better measure of the general level of prices than the mean, because it minimises the effect of short term very high price spikes. These sometimes reach to over $10,000 per MWh, or 200 times the values shown in Figure 4, and so, even if short‐lived, can disproportionately affect means.

These price spikes are also the occasions when most wholesale trades occur at spot prices, rather than at hedged contract prices, which are used for the majority of trades between generators and retailers. The median is generally a fairly good approximation to hedge contract prices. The key feature of this Figure is the steady fall in prices in all mainland NEM states since the middle of 2013. Note that the short periods of very high prices in January had no impact on median prices. In April, median prices net of the carbon price were about $28 per MWh for coal fired generators in NSW and Queensland, and below $20 per MWh for Victorian brown coal generators.

It goes without saying that such prices are way below what would be required to build a new coal or gas fired power station.

Figure 4


Graph for Demand, emissions and wholesale prices still going down

This is the latest report on Australia's energy emissions from pitt&sherry.