Australia’s Power Generation Mix – Update

Fuel Generation Mix - NEM

Australia’s power generation mix continues to evolve.

Over a decade ago in 2006, the National Electricity Market (NEM) primarily relied upon electricity from coal-fired generation.

Roll forward eleven years, and in the 12 months ending 31 December 2016, electricity demand in the NEM has declined and the market has evolved to incorporate a more diversified generation fuel mix.

Read our white paper here on the change in the electricity generation mix over time, state-by-state within the NEM.

Electricity Price Spikes across the NEM

Electricity Price Spikes - Q2 Prices

Businesses renewing their retail electricity contracts during the last quarter (Q2 2016) faced significant price rises due to a spike in forward wholesale electricity contract prices. These electricity price spikes were primarily the result of a surge in wholesale spot prices across all regions of the National Electricity Market (NEM).

With the exception of 2007, when drought limited production from major power stations, average Q2 spot prices were the highest in the history of the market in almost every region. Average spot prices ranged from $64/MWh in Queensland to $81/MWh in South Australia, well above price outcomes over the last decade which have averaged around $40-50/MWh depending on region.

The causes of these latest electricity price spikes are varied and complex. Some of the more obvious drivers include the impact of LNG-related electricity demand in Queensland, and the closure of Northern Power Station in South Australia. Other potential factors include generator bidding behaviour (i.e. the exercise of market power by generators who control a large proportion of the available generation capacity within a region), a high level of seasonal planned maintenance, unplanned power station outages (particularly in NSW), and the impact of a higher proportion of intermittent renewable power generation.

This recent surge in electricity prices underlines the importance of actively managing the timing of retail electricity contract renewals and the duration of those contracts. History shows us that the wholesale electricity market in Australia can be highly volatile. Businesses that passively re-contract when their existing contract is nearing expiry are more likely to be exposed to this volatility. We encourage businesses to plan ahead and actively consider re-contracting options up to 24 months ahead of their contract expiry dates.

Energy users who are due to re-contract later this year will be hoping that this recent surge in prices represents a short-term aberration rather than a new norm. We will be keeping a close eye on market outcomes and developments over the coming weeks and months.

For a more detailed update on wholesale price outcomes, download our latest market update report here.

 

 

Australia’s Power Generation Mix (2006-2015)

Source data: AEMO, Creative Analytics, Australian PV Institute, e4b estimates.

Over the past decade there has been a very significant change in the sources of power generation used to supply electricity customers in South Australia (SA), and the SA experience has been markedly different from the other National Electricity Market (NEM) states of QLD, NSW, VIC & TAS.

Tasmania remains the standout as the state with the lowest carbon emissions intensity of all NEM regions, largely due to it hydro-electric resource endowment. However, the state that has and continues to experience the greatest green transition is South Australia.

Read our white paper here on the change in the electricity generation mix over time, state-by-state within the NEM.

 

Lower prices for embedded network customers ?

Melbourne office buildings at night

The AEMC has called for public comment its draft determination to enable customers in embedded networks top choose their own electricity retailer.

Embedded networks are privately-owned electricity networks that serve multiple residents or businesses. Common settings for embedded networks include residential apartment blocks, office buildings, shopping centres, retirement villages, industrial parks, airports and caravan parks.

Embedded network operators typically buy electricity in bulk and then on-sell to customers within the embedded network. These are on-selling arrangements are codified in lease or body corporate agreements.

The proposed changes would allow embedded network customers to choose their electricity supplier. This access to the competitive market should deliver price benefits as well as improved access to other services and products.

There is significant complexity associated with making these changes. As a result the new rules are not slated to take effect until 1 December 2017.

Further information on the draft rule determination can be found here.

I’m trapped in an embedded network – what can I do now?

1 December 2017 is a long way off if you’re “trapped” in an embedded network paying uncompetitive rates for electricity.

In many cases, embedded network customers have little practical choice regarding their electricity supply. This may be due to the terms of their lease, body corporate arrangements or prohibitive costs associated with establishing a stand-alone network connection.

However, there are existing consumer protections in place for embedded network customers, and in some cases it is possible to successfully negotiate a lower cost of supply. If you are an embedded network customer and you are concerned that you are being over-charged for electricity, contact e4b for advice on whether there is scope to negotiate a better deal.

For advice, call us on 1300 781 791 or email us here.

SA Power Networks – Network Tariffs 2015-16

Electrical Substation

The Australian Energy Regulator (AER) published SA Power Networks’ (SAPN’s) approved 2015-16 pricing proposal on 30 June 2015. This proposal contains the network tariffs that will apply in South Australia for the 2015-16 financial year. A copy of the full proposal can be viewed on the AER’s website here.

Small business customers in South Australia can expect some reductions in energy costs from July 2015, at least with respect to their regulated network charges. Using the example of a 10,000 kWh per year small business customer connection on a single rate network tariff, network savings of around 17% can be expected compared to 2014-15 rates. This should amount to a reduction on the total electricity bill of around 9% that is attributable to these reduced network charges.

More significant changes are in store for medium to large business electricity customers in South Australia from July 2015.

SAPN is continuing the process of reform that will ultimately have all customers on cost-reflective network tariffs. This is being achieved by transitioning customers from historic tariffs, some of which were based largely on energy usage (kWh), to network capacity utilisation or demand-based (kVA) tariffs.

There are a range of tariff types that apply to medium to large business, some levied on the basis of negotiated or “agreed” annual demand and others levied on the basis of actual peak and shoulder demand on a monthly (or billing period) and seasonal basis.

SAPN has also introduced some transitional tariffs to accommodate customers who would otherwise be worse off by being transferred to one of the new demand-based tariffs.

SAPN currently has approximately 5,500 large business customers in SA consuming more than 160 MWh (160,000 kWh) of electricity per year. Around 80% of these customers or ~4,500 are currently on cost-reflective demand tariffs. The remaining 1,000 are being assigned to cost-reflective tariffs in July 2015. Some will be transferred to transition tariffs to dampen the impact of the move to cost-reflectively over a period of up to 5 years to June 2020.

Customers on transition tariffs also need to be aware that certain actions post 1 July 2015 may trigger an automatic transfer from a transition tariff to a cost-reflective demand tariff, including (among other things):
• Relocating a meter that involves an SAPN site visit to de-energise/re-energise supply;
• Installing solar PV;
• Installing battery storage;
• Meter isolator installation.

SAPN will be notifying affected customers of the 2015-16 network tariff changes by letter. Click here for examples of the specific impact of these tariff changes on SA businesses.

Customers who:
• are uncertain of the impact of the network tariff changes on their business; or
• would like to confirm that they are, or have been placed on the lowest cost network tariff by SAPN; or
• would like to optimise their network tariff selection based on their historic and forecast electricity usage,
can contact e4b on 1800 781 791 or email us.

Given this significant move for many customers from usage to demand-based tariffs, it is also timely to consider the additional costs associated with a poor power factor in your business. Customers with a poor power factor should assess the merits of installing a power factor correction (PFC) system to further reduce electricity costs. Depending upon the energy usage and demand characteristics of the site the payback on PFC systems can be as short as 12 months.

Click here for further information on power factor and power factor correction.

For advice on the impact of these changes and options for reducing your energy spend, contact e4b on 1800 781 791 or email us.

Ergon Network Tariffs 2015-16

Ergon Network tariffs 2015-16

Network tariffs for customers in regional Queensland were approved by the Australian Energy Regulator on 12 June 2015.

Customers in the Ergon Energy territory (East Zone) connected to a demand tariff may see increases or decreases in their charges, depending on their location and network tariff.

Customers connected to “Demand Large” tariffs are the biggest winners, with reductions in network charges of around 3.0% to 8.5%.

Most “Demand Medium” customers can also expect a modest reduction in their network charges for 2015-16.

However, the news isn’t so good for the largest segment of commercial and industrial customers. Customers assigned to a “Demand Small” network tariff can expect increases in their network charges of around 0.5% to 4.5% depending on their location, with customers in the northern region hardest hit.

Contact e4b for a free assessment of the impact of these changes on business, and advice on how to optimise your supply arrangements and minimise your costs.

Call us on 1300 781 791 or drop us an email here.

 

 

 

Energex Network Tariffs 2015-16

Electrical Substation

Energex has released its draft Annual Pricing Proposal for 2015-16. This proposal contains network tariffs for the 2015-16 financial year. A copy of the full proposal can be viewed on the AER’s website here.

Based on the draft tariffs, small business customers in the Energex territory can look forward to some welcome relief from rising energy costs. Energex network charges for small business sites are estimated to decrease by between 4% and 9%, with customers on the Business Flat tariff enjoying the biggest savings.

However, the news is not so good for larger Energex customers connected to a demand based network tariff. As of 1 July 2015, demand charges for these customers will take account of the reactive power supplied to the site. As a result, customers with a poor power factor will experience a significant increase in their network charges. For customers on the Demand Small tariff, these increases could be as high as 20%.

Customers with a poor power factor should assess the merits of installing a power factor correction (PFC) system to mitigate against these cost increases. Depending upon the energy usage and demand characteristics of the site the payback on PFC systems can be as short as 12 months.

Click here for a more complete analysis of the specific impact of these tariff changes on your business.

Click here for further information on power factor and power factor correction.

For advice on the impact of these changes, contact e4b on 1800 781 791 or email us.

Queensland Network Prices 2015-16

power-pole

In April 2015, the Australian Energy Regulator published preliminary revenue determinations for Energex and Ergon for the period 2015/16 to 2019/2020.

These preliminary determinations will set network prices for 2015-16. After further consultation and submissions, the AER must make a final determination on these charges no later than 31 October 2015. If the final decisions differ from the preliminary decisions, necessary adjustments will be applied across the remaining four years of the five year regulatory period.

Proposed network tariffs for 2015-16 are due to be published on 25 May 2015. Final AER approval and publication of these tariffs should occur during June 2015.

Upon release of these tariffs, e4b will undertake network tariff analysis for all existing Queensland customers. The purpose of this analysis is to determine the lowest cost network tariff for each connection point.

Where a connection point is identified as being assigned to a sub-optimal network tariff (based on historical half-hourly meter data), e4b conducts further investigations to determine if the historical load profile is representative of expected usage and demand going forward. If a change of network tariff is required, e4b then manages the change request process.

Full details of the final approved tariffs will be published on the AER website.

ACCC Investigates Gas Prices

gas-well

The Australian Government has directed the ACCC to commence a 12 month public inquiry into the competitiveness of wholesale gas prices in Eastern and Southern Australia.

“The ACCC will be considering competition levels on the East Coast upstream gas market – the producer, processor, pipeline, and wholesale levels of the market.” ACCC Chairman Rod Sims said in a statement.

The ACCC will be distributing an Issues Paper in May this year and will be calling for public submissions.

This inquiry is due to report to the Government by April 2016.

Contact us for advice if you have any concerns regarding your gas charges.

Phone: 1300 781 791 or email us at enquiries@energy4b.com.au.

Source: ACCC (13/04/15)

Energy Retailers Fined

elec-bill

Two of Australia’s largest energy retailers, Energy Australia and Origin Energy, have been hit with fines for using misleading sales tactics to sign customers to new contracts.

Energy Australia was fined $1.5 million for breaches relating to failing to obtain proper consent.

Of the fines ordered by the Federal Court, $1 million related to telemarketing calls by EA’s agent, Bright Choice, when consumers were told they would be sent information on EA’s offers allowing them to decide whether to sign up. But the consumers were recorded by Bright Choice as having already agreed to a new contract, and were sent a welcome pack with contract documents as if they had already agreed to switch to EA. Bright Choice was fined $100,000 for its part in the deception.

Origin Energy was slugged with a $2 million fine after the Federal Court found that its sales agent engaged in unconscionable conduct, undue harassment or coercion, and made false or misleading representations.

The Federal Court has ordered Origin pay $2 million in fines due to the conduct of its sales staff in Victoria, New South Wales, Queensland and South Australia. Origin’s marketing company SalesForce Australia were also ordered to pay $325,000 in penalties. False or misleading representations found by the court included telling consumers:

  • there was a mistake on their electricity bill from their current supplier
  • they had to change to Origin due to changes implemented by the government
  • they would not be charged an exit fee if they changed to Origin
  • that the sales representative was part of a government-commissioned study investigating complaints about the cost of energy
  • that they were signing an expression of interest and their electricity supplier would not be changed until they contacted Origin

Source: Sydney Morning Herald; ABC (28/03/15 & 30/03/15)