Full dams spur rise in hydro energy
Annualised output from Hydro Tasmania is now at its highest since Tasmania joined the National Electricity Market in 2005, while output from the Snowy system is at its highest since 2006, said Hugh Saddler, the principal consultant with the Pitt & Sherry consultancy.
Hydro Tasmania "is pretty well at its limit", Dr Saddler said, adding that the carbon tax had "certainly made hydro look attractive".
On an annualised basis, carbon emissions from the NEM - which serves the eastern states and South Australia - are down about 4.2 per cent since the introduction of the carbon price in July.
"The steady fall in demand coupled with the carbon price is undermining the economics of the coal-fired generators," Dr Saddler said.
Demand for electricity has fallen in NSW and Victoria as both those states experience a drop in industrial activity, while the rapid take-up of solar photovoltaic panels is also eroding the NEM's customer base.
"We are in an oversupply situation," said Mike Sandiford, the director of the Melbourne Energy Institute. "Even with this relatively warm summer, demand has not increased significantly."
In the year to January, wind and hydro energy sources accounted for 12.1 per cent of NEM generation.
Hydro's share has risen from 6.4 per cent to 8.4 per cent of the NEM total since February last year, in part because of good flows into dams, Dr Saddler said.
Output from coal-fired power plants has continued to fall. Floods affected Energy Australia's Yallourn plant in the middle of last year. The company has since decided to shut one of its four units from November to mid-January, Dr Saddler said.
In January, NSW's Wallerawang C power plant announced it would mothball one of its two 500 megawatt units for at least a year, starting at the end of last month. Energy Australia also owns the output from Wallerawang C.
Frequently Asked Questions about this Article…
Pitt & Sherry research says higher hydro output and growing renewable generation are pushing down carbon emissions. Annualised output from Hydro Tasmania is at its highest since it joined the NEM in 2005 and Snowy system output is the highest since 2006. Good dam inflows, plus faster take-up of other renewables such as wind and rooftop solar, are increasing renewable shares and reducing reliance on coal.
Since the introduction of the carbon price in July, carbon emissions from the NEM are down roughly 4.2% on an annualised basis. According to Pitt & Sherry’s Hugh Saddler, the carbon price has made hydro more attractive and is undermining the economics of coal-fired generators, contributing to lower coal output.
In the year to January, wind and hydro together accounted for about 12.1% of NEM generation. Hydro’s share alone has climbed from about 6.4% to 8.4% of the NEM total since February last year, helped by strong dam inflows.
Flooding affected Energy Australia’s Yallourn plant in the middle of last year; the company shut one of its four units from November to mid-January. Separately, NSW’s Wallerawang C announced it would mothball one of its two 500 MW units for at least a year starting at the end of last month. Energy Australia also owns the output from Wallerawang C.
Demand has fallen in NSW and Victoria because of a drop in industrial activity and the rapid uptake of rooftop solar photovoltaic panels, which is eroding the NEM’s traditional customer base, according to the article.
Dr Hugh Saddler said Hydro Tasmania’s annualised output is at high levels and that the system is ‘pretty well at its limit,’ meaning there’s limited scope for much more hydro output from that operator in the short term, especially given present dam and capacity conditions.
Mike Sandiford of the Melbourne Energy Institute described the market as in oversupply: demand hasn’t risen significantly even during a relatively warm summer, while renewables and reduced industrial demand add capacity. For investors, oversupply can pressure wholesale prices and affect the profitability of traditional generators, particularly coal plants facing higher operating costs and unit shutdowns.
Based on the article, investors should watch renewable generation shares (wind, hydro, rooftop solar), hydro reservoir inflows, policy drivers like the carbon price, and operational moves by large generators (unit shutdowns or mothballing). These factors are influencing generation mix, emissions, and the economics of coal-fired plants in the NEM.
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