The widely expected surge to an automatic price cap in the Queensland electricity market has been averted – at least for now – after wholesale prices moderated, against all expectations, in the last 24 hours.
Fears that the price cap of $1.398 million – 2016 consecutive trading periods at an astonishing average price of $693/MWh – would be triggered late Tuesday were driven by an extraordinary sequence of events during the day.
Firstly came a series of warnings of potential supply shortfalls, surges to the new spot market cap of $15,500/MWh, the activation of the market operator’s reserve trader mechanism, and the sudden, unexplained, withdrawal of 1.3GW of capacity in a 10 minute period.
This added on to the foul weather, which curbed solar output, and the numerous outages that crippled output at at least five major coal generators, on top of the eye-watering prices of coal and gas to fuel the turbines.
But then something happened, or rather it didn’t. Despite AEMO activating its reserve trader mechanism in the evening peak, and giving unspecific directions to another market player, the spot price of electricity remained at moderate (at least in today’s environment) prices of around $500/MWh.
The situation was helped by the state’s major storage units – the pumped hydro facility at Wivenhoe and the state’s first big battery at Wandoan – feeding power into the grid in the evening peak.
That may have curbed the pricing expectations of the peaking gas and diesel plants also operating, but none of these type of operations are known to want to waste a good crisis.
Which has led some to wonder privately, and of course with RenewEconomy: Did someone say something to someone about being a good energy market citizen?
There was certainly reason to do so. Triggering the automatic price cap would have likely sent the market into the same chaos as last month, when AEMO was forced to manually tell generators to switch their (bloody) kit on, or the lights would go out.
The generators complained that they were confused by the different compensation schemes under the price cap and market directions, and some also pleaded problems with managing fuel supply. Many others suspected a rort.
If Queensland had gone into the price cap on Tuesday, then the other states would surely have followed, as they did in June, and not entirely accidentally.
There’s precedence, too, for a quiet word in the ear of someone by someone else. The Queensland Labor government did exactly that in 2017 with its state owned Stanwell Corp, which had the delightful and almost immediate impact of sending Queensland prices down to the lowest in the country.
RenewEconomy has asked the Queensland government recently if they would do the same again now, seeing that the state-owned generators dominate the market, and we asked again today, for no response.
There’s other possibilities too.
The regulators might have had a firm word to various generators about good energy market citizenship rules after seeing that 1.3GW of capacity suddenly disappearing in 10 minutes. There are actually rules against that without good explanation.
The other possibility is that the various generators finally woke up to themselves. As we have written, the shenanigans of last month made people wonder if they cared or not if the lights went out, as long as there was some money to be made.
See The day the fossil fuel industry lost all perspective, and threw away its social licence
Those thoughts have been echoed by the chief regulator herself, and in a new consumer survey that shows a complete collapse in confidence and trust in the energy industry. Some times, even monopolies need customers.
Or maybe the market was simply more benign than we thought, and the clearing of the clouds allowed the combination of rooftop and utility scale solar to do its job, wrest the pricing control away from fossil fuels, and lower it to a level that people can afford.
That’s the interesting thing about electricity markets. They are both open and closed. We can see the prices, but we haven’t got a clue what the bloody hell they are up to.
P.S. The cumulative price is still hovering perilously close to the automatic price cap trigger, so just a couple of surges to the spot cap of $15,500/MWh will trigger it. It will be fascinating to watch.
