November & December 2024

By Aaron Bool

The conclusion to the year was defined by extreme weather, constrained interconnectors, and generation outages, driving significant volatility across the National Electricity Market (NEM). November saw multiple Lack of Reserve (LOR) forecasts, market price spikes, and system constraints, culminating in interventions such as Reliability and Emergency Reserve Trader (RERT) dispatch to stabilise conditions. December continued with heatwave-driven demand, record-high temperatures, and further generator outages, resulting in elevated spot prices and market stress, though the most severe load-shedding situations were ultimately averted.

Review of Market Events

November was marked by a series of significant challenges in the electricity market, driven by a combination of 21 generation outages, various transmission constraints, and volatile demand patterns. At the beginning of the month, power at Broken Hill was restored through temporary measures, bringing its Solar Farm and Silverton Wind Farm back online, while the Basslink interconnector also returned to service. However, early forecasts of minimum system load (MSL) events in Victoria showed mixed outcomes, with one such event materialising.

As the month progressed, New South Wales and Queensland experienced frequent bouts of volatility. Spot prices surged to nearly $4,000/MWh on multiple occasions, with sharp peaks mid-month reaching as high as $16,000/MWh due to interconnector constraints and LOR conditions. Afternoon periods were particularly vulnerable, with limited flow on key interconnectors such as VIC1-NSW1 exacerbating the inability of southern states to assist northern regions during critical periods. These challenges were compounded by generation outages, including unplanned events at Yallourn and Callide C3, which led to further price spikes and market instability.

Toward the end of November, the market faced significant stress as temperatures climbed, pushing demand higher while key generators like Bayswater Unit 3 and Eraring Unit 3 remained offline for maintenance. On November 27, low reserve conditions escalated into a forecast LOR3 event in New South Wales. While load-shedding was averted through Transgrid’s decision to cancel planned outages and AEMO’s implementation of RERT measures, the market price cap of $17,500/MWh was reached at the height of the stress.

December introduced extreme weather conditions and persistent volatility in the electricity market, with high spot prices driven by heatwaves, constrained interconnectors, and generation outages. Early in the month, New South Wales and Queensland experienced significant price spikes, with values reaching $17,500/MWh in NSW and $14,000/MWh in Queensland, as the VIC1-NSW1 interconnector remained constrained. This period was further complicated by a “major incident” involving AEMO’s management system, resulting in missed dispatch intervals and increased uncertainty in the market.

South Australia and Tasmania also faced sharp price spikes during the month, with spot prices in Tasmania briefly reaching $12,000/MWh on the 3rd and South Australia hitting $17,400/MWh during a heatwave on the 15th. Hot weather and low wind generation were common factors driving these events, with wind output in NSW dropping to just 1% during a particularly volatile period on the 6th.

By mid-December, the market faced heightened stress, with AEMO forecasting LOR3 (load shedding) conditions in New South Wales and Tasmania due to soaring demand and the impact of ongoing generator outages at Eraring and Bayswater. While the most severe outcomes were avoided, market demand peaked at an extraordinary 33,674 MW during this heatwave, a level rarely seen in the history of the NEM. Spot price volatility was somewhat mitigated during this period, compared to the higher spikes earlier in the month.

Toward the end of the month, Victoria saw a forecast MSL2 event, though this was ultimately downgraded to MSL1, reflecting the continued challenges in balancing supply and demand. Meanwhile, planned transmission line outages added to the operational complexity, although their impact was relatively contained.

This intense period highlighted the fragility of the market, specifically the supply-demand balance, under extreme weather conditions. Generation and transmission limitations amplified price volatility and tested the system’s resilience, necessitating interventions to stabilise operations. These conditions affected market sentiment, as reflected in the ASX CAL Futures 2025 movements. Over the two-month period, contract prices increased across all states, with New South Wales rising by +14.65, Queensland by +12.95, Victoria by +11.2, and South Australia by +5.62.

Recent Highlights

• AEMO’s first Transition Plan for System Security outlines strategies for managing system security in a low-emissions power system across operational, mid-term, and long-term horizons. It introduces steps to use the Transitional Services framework to maintain security during the transition, aligning with National Electricity Rules. Watt Clarity
• The NSW Government and Ausgrid are upgrading existing infrastructure to establish the Hunter-Central Coast Renewable Energy Zone (REZ), enabling 1 GW of additional capacity for renewable energy projects without building new transmission lines. This approach aims to accelerate renewable energy deployment, minimise community and environmental impacts, and support economic growth in the region, which is historically reliant on coal. The initiative highlights a faster, cost-effective path to meet renewable energy targets and stabilise electricity prices. Renew Economy
• Approval for the $4.9 billion HumeLink project, connecting Snowy Hydro 2.0 to the electricity grid, marks a critical milestone in Australia’s clean energy transition. This 365km transmission line will strengthen connections within NSW and link to Victoria while complementing Project EnergyConnect, which will connect South Australia’s grid to NSW’s. Together, these projects enhance interstate energy connectivity, unlocking over $1 billion in consumer benefits. Backed by a $1.9 billion investment from the Clean Energy Finance Corporation, HumeLink is set to begin construction next year, with completion expected in 2027. AFR

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