AER reports on high wholesale electricity prices in South Australia in March 2020

Today the Australian Energy Regulator (AER) has published a report into prices in the wholesale electricity market in South Australia on 2 March 2020.

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 2 March 2020 the spot price for electricity for the 2 pm and 2.30 pm trading intervals exceeded $5000/MWh in South Australia.

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

  • The Heywood interconnector tripped leading to South Australia being electrically separated from the rest of the National Electricity Market.
  • Constraints and directions used to manage the outage and system security in South Australia prevented large amounts of low priced generation making it to market.
  • Participants rebid considerable amounts of wind capacity from low prices to the market cap, further reducing the available supply of low priced generation.

More in-depth analysis of these events can be found in the AER’s 2 March 2020 report.

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.

Issued date: 
29 April 2020
AER reference: 
AC 48/20