Electricity spot price soars in South-East Australia heatwave
Electricity spot market prices sky-rocketed to the highest level in the month of January since 2010 and further increases are expected today as soaring temperatures across state capitals spike demand from over-taxed air conditioning systems.
Electricity spot market prices sky-rocketed on the 18th of January, from around $100 per megawatt hour to over $12,000. The average price was $905 over the day, representing the highest level for January since 2010, when average prices reached $1,153 over the day.
A further increase is expected in subsequent days, as temperatures reach 40 degrees across parts of Victoria. Demand spikes are expected to be higher and last longer, presenting conditions for a possible new record high.
Soaring temperatures across the east coast have caused electricity consumption to significantly increase as homes and businesses turn up their air conditioning to escape the heat. Dramatically rising demand is expected to eclipse the generation capacity of base-load coal-fired power plants, leading to the activation of fast-dispatch peaking power from gas-fired power stations.
Gas stations can be turned on during periods of peak demand, such as during heatwaves or cold snaps, to meet spikes in demand. However, gas-fired power is much more expensive than normal coal-fired generation.
However, two generating units at the Loy Yang and Yallourn power stations failed in November 2017, which forced Victoria to import large amounts of energy and rely on expensive gas-fired power. This factor has contributed to recent spikes in the electricity spot market.
The recent closure of the 1600MW capacity Hazelwood plant in Victoria has amplified supply difficulties, with the Australian Energy Market Operator (AEMO) forced to assess the short-term balance of supply and demand for Victoria and South Australia.
To prevent blackouts this summer, the AEMO has developed alternative power generation assets to relieve demand pressure, such as installing emergency diesel generators in the Latrobe Valley. The AEMO has also reactivated three gas-fired power generators in South Australia, Queensland and Tasmania that were previously closed.
