July & August 2024

By Aaron Bool

July and August were marked by elevated spot prices across the National Electricity Market (NEM), driven by a combination of extreme weather conditions, coal-fired plant outages, and fluctuating renewable generation that led to frequent price spikes. The colder start of July brought high heating demand and low wind output, while August featured tight supply-demand conditions and further outages. Both months experienced a mix of elevated prices, instances of load shedding, and brief periods of relief from wind generation, underscoring the challenges of managing supply during periods of low renewable energy and system stress.

Review of Market Events

As July began, a high-pressure system brought a cold snap to southeast Australia, leading to an increase in heating demand. At the same time, low wind generation in Queensland, New South Wales, and South Australia set the stage for a month of notable market volatility. Unplanned network outages in NSW forced the Australian Energy Market Operator (AEMO) to implement load shedding to manage the strain on the grid. This measure was crucial in preventing widespread blackouts but highlighted the vulnerability of the network under extreme conditions.

Mid-month, the Queensland battery at Wandoan became operational, marking a significant milestone in the region’s energy infrastructure. However, the market continued to experience volatility. South Australia saw unusual morning price spikes, reaching $12,500/MWh due to low wind generation and increased demand. The Tamar Valley Combined Cycle Gas Turbine (CCGT) in Tasmania ran at full-load operation continuously for approximately seven weeks, underscoring the reliance on gas-fired power during periods of low renewable (both wind and solar) output.

A brief respite came toward the end of the month, as strong wind generation over a seven-day period provided some relief. This was short-lived, however, as wind generation dropped once again, prompting AEMO to issue a Lack of Reserve (LOR1) notice for Victoria due to potential shortages. South Australia continued to experience evening price spikes, maintaining pressure on the market.

The final days of July were particularly eventful, as the NEM witnessed simultaneous spot price spikes across all states—New South Wales, Queensland, South Australia, Tasmania, and Victoria. These spikes, driven by a cold snap, multiple coal-fired plant outages, and low renewable generation, were unprecedented. Prices surpassed $15,000/MWh in some states, and this marked only the eighth day since 2007 that the NEM had seen such widespread, simultaneous state-wide price spikes. AEMO’s intervention with a LOR1 notice for South Australia reflected the ongoing challenge of managing supply in a period of high demand and low generation.

August saw the NEM experience soaring spot prices during both the morning and afternoon periods. At the month’s beginning, all states experienced simultaneous elevation, with prices spiking for NSW, QLD and VIC towards market cap. SA had prices reach around $11,000/MWh however, this occurred for an extended period which saw the state approaching the Cumulative Price Threshold (CPT). This price elevation was largely driven by low wind generation and the absence of solar power during the late afternoon, which kept the supply-demand balance precariously tight.

By mid-August, a significant outage at Loy Yang A further tightened the supply, keeping spot prices elevated in New South Wales during the evening. Queensland saw a milestone, with market demand dipping below 3,000MW for the first time in over two decades, driven by warmer weather and reduced winter heating demand.

As the month progressed, additional outages at Tarong North, Loy Yang A, and Millmerran Power Station added to the strain. Despite these challenges, most regions saw relatively low spot prices, except for Tasmania, where prices briefly hit the market cap during midday. Callide C3’s return to service brought some stability, but the volatility resumed in South Australia, where morning prices again surged to $12,500/MWh.

AEMO previously issued a threat notice in June about a possible gas shortage across New South Wales, Victoria, and South Australia, potentially lasting through to September due to high gas usage for power generation. Towards the end of August, AEMO revoked that threat notice for the East Coast gas system, which offered some relief. However, planned outages at Eraring Unit 3 and significant curtailment of solar generation—up to 70% during midday—continued to impact supply. In the south, particularly Tasmania, wind speeds reached an extreme 156 km/h, briefly boosting generation. As the cold winter weather gave way to warmer conditions, demand dropped, and midday spot prices turned negative. By the end of Winter, Callide C4 returned to service after a long outage dating back to May 2021. Both New South Wales and Queensland set new record lows for demand, reflecting the seasonal shift and changing market conditions.

July and August saw both upward and downward price movements, with an overall downward trend. Prices are easing off from winter’s higher demand, and as the weather warms, prices have begun to settle. However, while the market is currently on a downward trajectory, several planned generation outages for maintenance remain on the horizon. This creates a delicate balance between reduced generation output and softer demand, where any unforeseen outage could disrupt the market and lead to sharp price increases, quickly erasing any recent improvements.

Recent Highlights

• The Australian Clean Energy Summit 2024 brought together leaders in the energy sector to discuss innovative strategies, share insights on renewable energy advancements, and collaborate on policies aimed at accelerating Australia’s transition to a sustainable energy future. Aus. Clean Energy Summit
• CS Energy released a detailed report on two major incidents: the explosive failure of Callide C4 and the cooling tower failure affecting both C3 and C4 units. CS Energy
• The Guardian published an article highlighting the extreme spot prices in early May, which led to AEMO’s Administered Price Cap intervention. It noted that while retailers AGL and EnergyAustralia operated within national regulations, their rebidding strategies to maximize profits during the crisis did not benefit consumers. The Guardian
• AEMO published its Quarterly Energy Dynamics report for Q2 2024, providing comprehensive insights into market performance and trends. AEMO
• The Australian Energy Regulator (AER) released its Wholesale Markets Quarterly report for Q2 2024, offering an analysis of market dynamics and participant/stakeholder developments. AER

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