The Australian Energy Regulator (AER) has today published a report into high energy prices exceeding $5,000 per megawatt hour (MWh) and Frequency Control Ancillary Service (FCAS) prices exceeding $5,000 per megawatt (MW), in the National Electricity Market (NEM) on 21 July 2021.
On that day, the spot price in Queensland reached $5,434/MWh and $6,564/MWh for the 6 pm and 6.30 pm trading intervals, respectively. Raise FCAS prices exceeded $5,000/MW in Queensland between 6 pm and 8.30 pm.
This report covers both the energy market and the FCAS markets, given the main drivers of the high prices in both markets were the same.
The main drivers included generator outages and reduced generator availability. This coincided with the highest winter demand recorded in Queensland since the start of the NEM.
There was limited access to low-priced capacity from New South Wales. Upgrades to the Queensland-New South Wales interconnector required Queensland to provide its own FCAS and forced exports from Queensland into New South Wales. The line outages associated with the upgrade were extended on numerous occasions through the evening peak.
Co-optimisation between the Energy and FCAS markets, and rebidding capacity to high prices or removing capacity also contributed to the high prices.
More information can be found in the AER’s 21 July 2021 report.
The AER is required to publish a report whenever the electricity spot price exceeds $5,000/MWh and when prices for a market ancillary service over a period significantly exceed the relevant spot price for energy and exceed $5,000/MW for a number of trading intervals.
There can be many reasons a high price occurs, including outages that adversely affect supply-demand conditions in the wholesale market. 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 stakeholders and market bodies on wholesale market issues.