Electricity spot prices above $5000/MWh South Australia, 1 December 2016 (10. 30 am)

Electricity spot prices above $5000/MWh

South Australia,
1 December 2016 (10.30 am)

2 February 2017

© Commonwealth of Australia 2017

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Amendment Record

Version	Date	Pages
1 version for publication	02/02/2017	26

Contents

1Introduction 4

2Summary 5

3Analysis 6

3.1Network availability 6

3.1.1Mortlake rebidding and imports 8

3.1.2Pricing outcomes 10

1Introduction

The AER is required to publish a report whenever the electricity spot price exceeds $5000/MWh.¹ The report:

describes the significant factors contributing to the spot price exceeding $5000/MWh, including withdrawal of generation capacity and network availability;

assesses whether rebidding contributed to the spot price exceeding $5000/MWh;

identifies the marginal scheduled generating units; and

identifies all units with offers for the trading interval equal to or greater than $5000/MWh and compares these dispatch offers to relevant dispatch offers in previous trading intervals.

On 1 December 2016 at 10.30 am, the spot price for electricity reached $9175/MWh in South Australia exceeding the $5000/MWh threshold. This report presents our analysis of the events in accordance with this obligation.

2Summary

On 1 December 2016 at 10.30 am, the wholesale spot price for electricity in South Australia reached $9175/MWh.

The circumstances surrounding this high priced event were the result of the interaction between network constraints invoked by AEMO to manage an unplanned (forced) network outage in Victoria on one of the lines that comprise the Heywood interconnector and generation in the proximity of the outage. Interestingly, rebidding in Victoria from high prices to low prices contributed to the high priced event in South Australia.

As a result of the unplanned outage, AEMO invoked a network constraint to manage the resulting voltage imbalances in the network. This constraint reduces the Heywood interconnector’s import limit into South Australia when either one of the two generators at Mortlake Power Station, which is located adjacent the interconnector in Victoria’s south west, are operating.

While Mortlake was originally not forecast to operate, at around 10 am Origin Energy rebid the capacity of Mortlake unit two to the price floor. Mortlake unit two started generating, forcing the flow on the Heywood interconnector to reverse and flow from South Australia into Victoria - counter-price. This created power system security issues in South Australia and caused the 5 minute dispatch price to rise to the market price cap from 10 am to 10.20 am.

At around 10.20 am AEMO directed Origin Energy to shut down the Mortlake generator restoring the security of the power system.

Rebidding of capacity from low to high prices did not contribute to the high prices in this event. In response to the high price event, participants rebid capacity from high to low prices resulting in two dispatch intervals at the price floor.

3Analysis

Table shows the actual and forecast spot price, demand and generator availability for the 10 am, 10.30 am and 11 am trading intervals. The spot price in South Australia exceeded $5000/MWh for the 10.30 am trading interval (in bold) and two other trading intervals associated with the same event.

Table : Actual and forecast spot price, demand and availability

Trading interval	Price ($/MWh)		Demand (MW)		Availability (MW)
	Actual	4 hr forecast	Actual	4 hr forecast	Actual	4 hr forecast
10 am	2551	80	1294	1173	1856	1883
10.30 am	9175	64	1239	1175	1753	1890
11 am	-113	84	1192	1131	1761	1899

Table shows that the high prices were not forecast in advance. Demand during the 10.30 am trading interval, in which the high price occurred, was around 60 MW more than forecast. Availability was 137 MW less than forecast, due to lower than forecast wind and the physical withholding of capacity from Mintaro and Port Lincoln.²