Australian Electricity Price in South East Australia: Gas, Wind, Solar Generation Investment: the AEMO market

Map of South Eastern Australia electricity grid

Eastern Australia - Queensland, NSW, South Australia, Australian Capital Territory, Victoria, and Tasmania
Eastern Australia - Queensland, NSW, South Australia, Australian Capital Territory, Victoria, and Tasmania | Source

How electricity price gets set in South East Australia pool:

This page explains how the electricity market works in the South Eastern Australia grid
Pool price: Wholesale trades in electricity in the spot market of Eastern Australia - Queensland, NSW, South Australia, Australian Capital Territory, Victoria, and Tasmania use a trading pool. The gas market in Australia has also begun to use a pool process to set gas prices.
South Western Australia grid: South Western Australia acts a separate electricity market. The two electricity markets do not connect. Yet. They use different rules.
288 bids bid per day day: For the bigger of the two, (the South Eastern Australia grid) in Eastern Australia, bids and offers get matched 288 times a day.
The large wholesale electricity sellers:

  1. update spreadsheets which link to the central calculations; and
  2. all sellers across the whole region, earn the lowest-price, bid.

Huge risks for whole economy - as California electricity market collapse showed

Huge risks: One big problem. Retailers can face the need to find $1 billion in a day to pay the market operator, AEMO. In California, once, the market operator went into financial collapse after a series of hot days. Retailers could pay the operator. The operator could not pay the generators. So its a serious whole-economy risk.
One generator can earn over $40 million a day:
Lots of things go wrong and so real people have to make decisions. These events can involve millions of dollars and can lead to disputes. Works like the Stock Exchange: Electricity supply and demand get matched in real-time through a central computerized process, like the stock exchange.
Price can vary between:

  1. $12,500 per megawatt hour (MWh); and
  2. minus $1000 megawatt hour (MWh).

Manage daily billion dollar financial risk from electricity spot price.

Generators pay customers the difference when the spot  price is above the strike price. When the spot price is below the strike price, customers pay generators the difference between the spot price and the strike price.
Generators pay customers the difference when the spot price is above the strike price. When the spot price is below the strike price, customers pay generators the difference between the spot price and the strike price.

Example of wind and hydro dispatched to the grid in the Australian Electricity Market region of Victoria

Three types of bids or offers to supply – daily  bids, re-bids and default bids. Daily bids go in 12:30 pm on the day before and show in forecasts. Generators may rebid any 5 minutes to raise profits
Three types of bids or offers to supply – daily bids, re-bids and default bids. Daily bids go in 12:30 pm on the day before and show in forecasts. Generators may rebid any 5 minutes to raise profits | Source

How the electricity market rules work:

Generators offer to sell electricity at various prices and times:

  1. one generator group may have various units, and bid a different price for each;
  2. offers are submitted by generators, every five minutes of each 24 hours;
  3. market operator, AEMO's computation, selects the cheapest bid, each five minutes;
  4. All bidders earn that price for that five minutes; the average creates the daily price;
  5. AEMO “turns on and sends out“ - 'dispatches' lowest price to meet demand;
  6. AEMO sets a dispatch price every five minutes;
  7. six dispatch prices averaged every half-hour make the spot price for that period;
  8. top price biddable is Market Price Cap, of $12,500 per megawatt hour (MWh);
  9. lowest price is $ minus $1000 megawatt hour (MWh).

Electricity transport diagram

Electricity travels along a conductor near the  speed of light, to you
Electricity travels along a conductor near the speed of light, to you | Source

Electricity price in Australia

What is Electricity?: A form of energy produced by flow of electrons in metals like copper and aluminium, used in electrical wiring.
Energy in many forms: To make electricity machines, or chemistry, takes out energy from other fuels or sources, like the atom (nuclear energy) coal, coal seam gas, natural gas, oil, sun and wind.
Energy never created or destroyed: Just converted from one form to another, for example to heat and light and used to power machines.
How to measure electricity: We call the unit of power as a watt. The wattage, of an electrical appliance indicates the rate at which the appliance converts electrical energy to another form of energy such as heat or light.
One watt makes one joule of work per second: Then. we measure:

  1. electrical pressure (voltage) and
  2. the number of electrons flowing (current); to
  3. determine the electrical power or rate of energy conversion.

So, for example: A 60-watt light globe uses 60 watts of electricity to produce light, and a typical electric kettle uses 2400 watts to produce heat.
How to make electricity: Generators in power stations make electricity. Large, powerful magnets spin rapidly inside the huge coils of conducting wire. The energy to spin the magnets comes from cracking the atom (nuclear energy) or burning coal, coal seam gas, natural gas, oil, or from water falling down hill into turbines.
Australia burns coal and gas to make electricity: Most - 90 per cent of Australia's electricity production burns fossil fuels - coal, gas and oil to heat water and produce steam. The steam drives a generators to make electricity.
Tech talk: This we call conversion of chemical energy to kinetic energy to electrical energy.

  1. kinetic energy of falling water drives turbine blades to produce electrical energy at a hydro-electricity plant, and the
  2. kinetic energy of wind drives the blades of a wind-power turbine to produce electricity.

How to measure and count electricity

  1. One megawatt (MW) means to one million watts (W).
  2. One gigawatt (GW) means one thousand megawatts.
  3. One megawatt hour (MWh) is the energy required to power ten
  4. thousand 100 W light globes for one hour.
  5. A 100 MW generator will power one million 100 W light globes
  6. A 600 MW generator has sufficient capacity to service 200,000 homes

How to get more on Australia electricity price, law, policy and regulation

Source

Independent Australia electricity news for corporate groups and researchers

Electricity Week: About half a million people a month read headlines from Electricity Week.
Corporate services: The full corporate service gives a higher level level of information service; whole company password-free news as data, pdf, html and web options via IP addresses.
Contacts: To request an order form and get a free sample pdf call Ray Fewtrell in Australia (61) 2 430 368 7 or email: iandn (at) bigpond.net.au

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