AER publishes reports on high wholesale electricity prices in December 2019

Today the Australian Energy Regulator (AER) has published two reports into prices in the wholesale electricity market in South Australia on 19 December 2019 and Victoria on 30 December 2019.

The AER monitors and reports on events and causes that result in the wholesale electricity spot price exceeding $5000 per megawatt hour (MWh). The wholesale electricity spot price exceeding this threshold triggers the AER reporting, but there can be many reasons a high spot price occurs, including supply-demand conditions in the wholesale market at the time.

On 19 December 2019 the spot price for electricity for the 7 pm and 7.30 pm trading intervals reached the market cap of $14 700/MWh in South Australia.

The AER’s analysis found the following factors contributed to the high prices:

  • Temperatures were high, exceeding 45ºC in Adelaide leading to almost record demand for electricity.
  • Of around 4900 megawatts (MW) of maximum possible generation usually available in South Australia during summer, on the day generators offered about 3000 MW, with the difference primarily due to reduced availability of wind generation.
  • Lower than forecast imports from neighbouring regions meant higher-priced local electricity was needed to meet demand.

The wholesale spot price for electricity also reached $6443/MWh for the 3.30 pm trading interval on 30 December 2019 in Victoria.

The AER’s analysis found the following factors contributed to the high prices:

  • An unplanned network outage in New South Wales saw reduced imports into Victoria.
  • Temperatures were high, exceeding 40ºC in Melbourne leading to high demand for electricity.
  • Of around 11 000 megawatts (MW) of maximum possible generation usually available in Victoria during summer, on the day generators offered about 9000 MW, with the difference due to two planned generator outages and reduced availability of wind generation.

Rebidding from low to high prices did not contribute to the high price events on either days.

More in-depth analysis of these events can be found in the AER’s 19 December 2019 and 30 December 2019 reports.

Most customers are not directly exposed to wholesale electricity prices. Energy retailers are the main purchasers in the wholesale electricity market. Retailers bundle electricity with network services for sale to their residential, commercial and industrial customers. Generators and retailers can manage their exposure to wholesale market price variations by entering hedge contracts that lock in prices for the electricity they intend to produce or buy and these instruments would have affected overall financial outcomes on the day.

The AER’s role in monitoring wholesale energy markets and reporting on high price events helps to enhance market transparency and compliance. Our analysis provides a foundation to detect non-compliance, market irregularities, inefficiencies and consumer harm. We draw on this work to advise the COAG Energy Council, other stakeholders and market bodies on wholesale market issues.


Sector: 
Segment: 
Issued date: 
19 February 2020
AER reference: 
AC 15/20