A new report by AEMO has revealed a rebound in wholesale energy prices in the second quarter of 2021 caused by increased demand, incidents affecting electricity supply and higher international energy prices.

The Quarterly Energy Dynamics (QED) report outlines the multiple factors that are causing this rebound in prices, such as planned and unplanned outages. 

Several planned and unplanned thermal generator outages in Queensland, New South Wales and Victoria contributed to mainland wholesale electricity prices rising from a first-quarter average of $37 to $95 a MWh.

East coast gas market prices have been influenced by rising international prices and higher gas-powered generation (GPG) demand, increasing to $8.20 per GJ from $6.03/GJ in the first quarter and nearly double the average of $4.37/GJ in Q2 2020.

AEMO Chief Markets Officer, Violette Mouchaileh, said, “The start to winter tested power system resilience, with generator outages contributing to tightening supply conditions and significant electricity price volatility over the quarter.”

Following incidents at the Callide and Yallourn power stations, GPG and hydro generation provided backup capacity, increasing output significantly from May to June 2021. 

The sudden increase in gas demand from GPG contributed to rapid depletion of Iona gas storage plant, which fell from a record high of 24.5PJ on 10 May 2021 to finish the quarter at 14.3PJ, its lowest end of Q2 level on record.

Ms Mouchaileh said, “Despite the resurgence in high prices, negative and zero spot prices were also more common during the quarter occurring in 5.5 per cent of all trading intervals, up from 4 per cent in Q2 2020. 

“Contrasting recent quarters, the occurrence of negative prices was no longer confined to South Australia and Victoria, with increased prevalence in Queensland and Tasmania.”

New wind and solar projects connected to the National Electricity Market (NEM) helped increase generation by 457MW compared to Q2 2020, reaching 7,368MW in the quarter, which was 483MW higher than the previous record set in Q1 2021.

On 11 April 2021, instantaneous renewable penetration, including grid-scale wind and solar, hydro, biomass and rooftop PV, reached a record high 57 per cent of total demand between 11am to 11:30am, up from the previous record of 56 per cent set on 3 October 2020.

“A new Q2 maximum operational demand record was set in the Wholesale Electricity Market (WEM) in Western Australia, reaching 3,528 MW on the coldest day in June,” Ms Mouchaileh said.

“Elevated winter demand arising from cold Perth conditions contributed to a quarterly average Balancing Price of $58/MWh, its highest since Q3 2017, and increased frequency of high price events.” 

In early April 2021, Cyclone Seroja damaged transmission lines, impacting 767MW of installed wind capacity, and disconnected the North Country region from the South West Interconnected System (SWIS) for ten days.  

Following repairs to transmission lines, an all-time WEM wind generation record of 945MW was set on 27 June 2021.

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