Quarterly market newsletter

Quarter 2

July 2020

We'll share insights and highlight key market events

to help you make better energy decisions.

Market snapshot

For the period 1 April to 30 June 2020

  • Coinciding with a drop in market demand for energy, the opportunity was taken to undertake necessary maintenance at Origin’s Eraring Power Station. Despite staffing challenges due to COVID-19, Unit 1 and Unit 4 were taken offline at separate times during April and May to undertake necessary inspection checks and ensure reliable energy supply.

           Read more about our Eraring community and the steps we’re taking to keep safe (PDF 637 kB)

  • 23 April, AEMO released its Quarterly Energy Dynamics Q1 2020 report. The report finds that Q1 2020 saw the lowest wholesale electricity and gas prices since 2016. This, in part, can be attributed to increased QLD gas production and generally more gas available in the market coinciding with falling international gas prices. During this period however, there was a record amount for NEM system costs that increased 8% due to extreme weather.
  • 30 April, AEMO released its Renewable Integration Study (RIS), the first part of the study that looks to incorporate increasing levels of renewable energy into the NEM.
  •  “Australia already has the technical capability to safely operate a power system where three quarters of our energy at times comes from wind and solar energy generation.” AEMO’s Managing Director and CEO, Audrey Zibelman.
  • 1 May, Origin partners with Octopus Energy working with Octopus to adopt its market-leading customer platform, Kraken. Over the next 2 years, Origin will transfer it’s 3.8 million retail customers to the Kraken platform, reducing operating and capital costs whilst delivering superior customer experience.1
  • 18 June, Chevron starts the sales process of one of Australia’s first LNG export plants. The venture located in the North West Shelf, WA, has been in operation for over 30 years.2
  • 18 June, the Victorian Parliament passed legislation to lift the 2021 moratorium on petroleum exploration and production, opening the market to further development of potential onshore gas reserves.
  • 19 June, Origin announces lower electricity and natural gas prices for many residential customers located in NSW, SA, QLD and ACT.
  • 23 June, Origin’s Greg Jarvis, Executive General Manager, Energy Supply & Operations spoke of the Annual Credit Suisse Australian Energy Conference: “We definitely saw some demand coming off which on average was about 10% and that's recovering somewhat this week to about 7% down on average.” Demand among large commercial and industrial customers fell 10-15% while small and medium sized businesses declined 15-20% during COVID-19 restrictions.3
  • 23 June, the Government announces a further $125 million to its initial $100 million investment to Geoscience Australia’s Exploring for the Future (EFTF) program. The EFTF program will map mineral, energy and groundwater systems.

Elec%20prices%20Q2 20

Electricity market

Towards the end of Q1 the coronavirus pandemic began to impact Australia, leading to lockdown measures being put in place across the country. This has had a huge impact on Australia as a whole and has obviously been reflected in shifts in electricity demand. The graph below shows how C&I and SME demand declined significantly once lockdown began, however this was partially offset by increased residential usage as people began working from home. Demand levels are still down compared to last year.

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The pandemic has also led to a lot of shifting of generator outages across the NEM as travel restrictions impacted staffing availability during this period.

This meant that at the beginning of Q2, there was lower demand coupled with delayed outages and low gas prices across the NEM, which combined to keep average electricity prices low, albeit with significant variability arising from changes in renewable output.

As April continued into May, low demand persisted while high renewables saw a significant duck curve effect during solar hours, with prices regularly at $0/MWh or below during these periods. This requires very fast ramp up of traditional sources of supply as the solar ramps down in the afternoon resulting in high spot prices in the evenings as winter demands began to appear.  

From early May, line work on the Queensland New South Wales Interconnector (QNI) placed constraints on the electricity transfer limits between QLD and NSW. This meant that the volume of QLD solar output that could flow south was limited and effectively trapped within the state, leading to significant negative prices during the QLD solar hours, with spot prices getting as low as -$700/MWh.

Some volatility returned over June with frequent periods of $300 prices in the evenings broken up by sub-$40 average prices during the days. High priced periods coincided with periods of coal generator outages and low wind generation while low priced days unsurprisingly coincided with periods of high wind generation. Essentially spot prices moving inversely with wind output.

Because of these generally low prices, forward prices on the ASX declined from April onwards, seeing a tick back up in June with end of financial year recontracting of customer volumes.

Finlay Macdonald-Stack, Portfolio Trader, Trading Operations 


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Gas market

Q2 saw the continuation of the impact of the Coronavirus which reduced domestic gas usage over the quarter. The market has seen reduced C&I usage offset slightly by a residential increase due to more people working from home. 

The international LNG market has long been reflected in Japan/Korea Marker or JKM pricing. LNG producers in QLD are experiencing Force Majeure causing oversupply in the East Coast markets, with STTM and DWGM prices over the quarter being low even on very cold days. Marginal gas generation was higher due to availability of lower priced spot gas volumes.

Kelly Clark, Portfolio Trader, Trading and Operations


Can Solar help reduce your business costs over the coming year?

An Origin Solar customer story

Ramvek: Shining a light on sustainability.

Ramvek is one of Australasia's leading fit-out companies. From construction and project management to Australian joinery manufacturing, they have an impressive client list – and while you might not have heard of them, chances are you’ll have experienced their work before.

Why go solar?

Located in the Melbourne suburb of Lynbrook, Ramvek’s head office employs around 70 staff. But it also houses a manufacturing warehouse consisting of 4000m2 of joinery manufacturing, woodworking machinery, as well as single phase equipment.

With such large ongoing electrical loads, Ramvek had to find innovative ways to reduce their grid-energy demand. In February, they contacted Origin to discuss their energy options and ultimately decided on a solar solution for the business.

Managing Director Bill Redmond explained the issue, “Sustainability for Ramvek is more and more becoming a driving value. Solar is just one of many initiatives we are undertaking to ‘go green’. Our aim is to lead with proactive initiatives rather than be led by the industry or by our clients. Our motivation to go solar was to reduce our impact on the environment and was made commercially viable by a forecasted return on investment.”

The Origin difference

Ramvek undertook an extensive business case to determine the cost/benefit analysis of going solar. Once they’d made the decision to proceed, they engaged an energy solutions broker and ran a competitive tender with multiple companies – including Origin.

First, we requested copies of bills and consumption history to drill down into a thorough analysis. We carefully examined their energy requirements and presented a detailed proposal which included a bespoke 98.6 kW solar solution. Ramvek’s new Chief Financial officer, who was already familiar with Origin’s energy portfolio, was able to recommend Origin as the retailer of choice. The agreement was signed just over 2 weeks after their initial contact with us – a genuine win-win!

Installation inspiration

One of the key challenges faced during the installation phase was meeting Ramvek’s request to have the construction completed within a tight deadline due to the COVID-19 pandemic.

Generally, a 98.6 kW system would take on average 10-days to complete. But our Solar team pulled out all the stops, reducing this timeframe by around 50% and completing installation on day five.

Amid COVID-19 restrictions, the safety of our installers and clients was paramount – and that meant a lot of work to ensure social distancing and other safety measures. Our installers planned daily measures to manoeuvre throughout each location, and through each phase, to get the job done, in the quickest possible time.

Saving money – and the planet

Now that solar is on the roof, Ramvek can expect their 98.6 kW system to yield an estimated 126,057 kWh annually. This means reducing carbon emissions by an estimated 135 tonnes of CO2-e/year1.* We anticipate they will self-consume 74% of the generation and save an estimated $26,098.00 in the first year. A boost for Ramvek. And the planet.

 

* Source: http://www.cleanenergyregulator.gov.au/NGER/Forms-and-resources/Calculators


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