Electricity prices slump briefly with gas

Don’t hold your breath. At the AFR:

Wholesale electricity prices traded at the lowest in five years as the coronavirus lockdown crimped energy demand, especially from businesses in NSW and Queensland.

The latest quarterly report from the Australian Energy Market Operator confirmed the downward trend in prices over the past 18 months.

Average spot wholesale prices in the National Electricity Market were about $32 to $43 per megawatt-hour in the second quarter – down between 48 per cent to 68 per cent on the same period in 2019 and at the lowest since 2015.

This is purely the oil price, to which Australian gas prices are linked:

Gas drives the electricity price and both only just fell back into their pre-gas cartel historical ranges and are already rebounding fast as the gas cartel sails our cheapest gas in circles in the Coral Sea to ensure the market remains tight.

This is organised crime stealing from 90% of Australians.

David Llewellyn-Smith
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Comments

  1. Some added nuance:

    The report underlying the AFR article is the quarterly report from the electricity market operator (AEMO), https://aemo.com.au/-/media/files/major-publications/qed/2020/qed-q2-2020.pdf?la=en

    The gas generators, who often set marginal electricity prices, shadow spot prices for gas as that is where they buy (and sell) gas given they are large, discretionary gas users. Even when they have longer term contracts they are forced to mark to spot gas markets for the purpose of pricing electricity market offers or they incur opportunity costs. If they have a cheap gas contract versus gas spot, they need to price electricity at gas spot or they could be potentially selling power for less than equivalent price of gas sales. Conversely, if they have an expensive gas contract versus gas spot, they need to price electricity at gas spot or they won’t get dispatched (other gas generators will be pricing gas spot) and they will still have to take the expensive gas under contract but without offsetting power revenue.

    Spot gas prices are NOT oil linked per se. So I think that part of your argument is a canard.

    Figure 43 shows spot gas prices back down to $4-5/GJ and is highly correlated with spot electricity prices in Figure 8 (as you’ve been highlighting for some time).