Last month, The Australian Energy Market Operator took unprecedented action to constrain the allowable output from five large scale solar farms in VIC and NSW to half of their capacity due to concerns with “system strength” caused by voltage fluctuations impacting power system security. In further moves that many observers suspect as a strategy to push solar generation out of the market for periods to benefit coal generators, negative pricing events in the spot market have caused a number of large scale solar farms in QLD and SA to switch off as they are not willing to pay others to take their power or are required under their contracts. For customers on Power Purchase Agreements for renewable energy, this highlights the risks of regulatory intervention impacting contract delivery.
Spot market pricing has increased recently, with unscheduled baseload generation outages in June for NSW, QLD and VIC, importantly, the Loy Yang A2 and Mortlake generator in VIC will be out of production until early 2020. Hydro generation is at risk with lower storage levels at Snowy and HydroTAS and there are constraints on the Basslink from Tasmania importing power into VIC.
Pricing had dipped but in the last 2-3 weeks has started to increase with hot weather and the impacts of these generation outages, there is a dip in pricing currently which is not expected to last long before the increases prevail and continue until January before it will start to ease.
Market indicators suggest that pricing will ease during 2020 but the pricing volatility is increasing demand for energy efficiency solutions to deliver sustained reductions in energy usage to minimize the risks of cost blowouts.