AER reports into high wholesale electricity prices in South Australia on 1 December 2016

The Australian Energy Regulator (AER) monitors and reports on events and causes that result in the wholesale spot price of electricity exceeding $5000 per megawatt hour (MWh).

On 1 December 2016, wholesale electricity spot prices exceeded this threshold in South Australia for four trading intervals, reaching $13 767/MWh at 2 am, $5066/MWh at 3 am and $6674/MWh at 3.30 am and then later reaching $9175/MWh for the 10.30 am trading interval.

For the majority of the day the Heywood interconnector (which connects South Australia and Victoria) was operating on one line rather than the usual two.

The AER’s analysis determined that two separate events led to these high prices:

  • A series of planned network outages had the Heywood interconnector operating on one line. A fault occurred at 12.16 am on the operating Heywood interconnector line which caused it to trip. South Australia was then separated from the rest of the National Electricity Market (NEM) and power supply to some customers in South Australia was interrupted. AEMO intervened to manage power system security. High priced generation in South Australia was dispatched to meet demand and this led to high prices for the 2 am, 3 am and 3.30 am trading intervals. This fault also interrupted power supplies to Alcoa’s Portland aluminium smelter in Victoria. The planned outages were recalled and South Australia was reconnected to the NEM at 4.46 am.
  • Following the fault, the Heywood interconnector continued to operate on a single line throughout the morning. To manage this, constraints involving the Heywood interconnector and Mortlake power station, in Victoria, were in place. This meant that as output from only one of the two Mortlake generators increased, less could be imported into South Australia across the Heywood interconnector. Rebidding by Origin Energy of capacity from high to low prices for its Mortlake power station increased its generation which in turn forced electricity to flow from South Australia to Victoria. High priced generation in South Australia was dispatched to meet demand and the flows forced into Victoria, which led to the high price for the 10.30 am trading interval.

More in-depth analysis of these events can be found in the AER’s 12.16 am and 10.30 am high price event reports.

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. We typically publish our reports into high price events within 40 business days.

Issued date: 
2 February 2017
AER reference: 
AC 08/17