AER reports on high wholesale electricity prices in Queensland on 11 February 2017

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

While the wholesale electricity spot price exceeding this threshold triggers the AER reporting, there can be many reasons a high spot prices occurs, including supply-demand conditions in the wholesale market at the time.

On 11 February 2017, wholesale electricity spot prices reached $7628/MWh, $8569/MWh and $8372/MWh in Queensland for the 4.30-5.30 pm trading intervals.

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

  • High temperatures (37 degrees in Brisbane) led to high demand for electricity.
  • Two network outages (one planned and one unplanned) resulted in the market operator (AEMO) limiting electricity flows from New South Wales generators to customer load in northern New South Wales.
  • As a result of these outages, electricity was forced from Queensland into northern New South Wales. Electricity generation priced above $5000/MWh from Queensland was required to meet local and northern New South Wales demand.

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

More in-depth analysis of these events can be found in the AER’s 11 February 2017 high price event report.

Most end-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 price variations in the wholesale market by entering hedge contracts that lock in firm prices for the electricity they intend to produce or buy.

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.

Sector: 
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Issued date: 
12 May 2017
AER reference: 
AC 49/17