ELS Fortnightly News Wrap Up #5

Each fortnight, the team at ELS publish a news digest covering energy and sustainability. We read for our own pleasure but to save you time we identify a handful of pertinent articles from Australia and around the globe and add our own commentary. It used to be an internal memo but we kept being asked to share it, so here it is.

This fortnight has been a ‘planning for the future’ heavy fortnight, with Government, big businesses and regulators all coming into the spotlight with major announcements. We also feature a fairly unique pricing event on the NEM which can you explore below. Here are six of the best for your weekend reading:

Lower house inquiry to set ‘responsible road map’ out of coal for NSW
Quite a surprising development from the NSW Government but it is great to see the Government taking steps to make sure there is an orderly transition away from coal and following in the footsteps of countries like Germany. I will be quite impressed if this manages to avoid the normal political mud that gets thrown around in this debate so fingers crossed we can report a positive outcome (or just an outcome in general that is not hijacked by a vested interest group of either persuasion) later this year, not just another report that sits on someones desk gathering dust.

How ‘negawatts’ could help businesses cut their power bills
A new rule change has been recommended by the AEMC to allow large industrial electricity users to offer demand response directly into the electricity market (effectively acting like a generator and reducing the need for more expensive peaking plants to operate). As we featured a month ago, electricity retailers were not a fan of this rule change as everyone benefits except for them, so it is interesting to see that this may actually go somewhere. We personally have seen our clients reap significant benefits from participating in demand response programs and would highly recommend ‘industrials’ explore their ability to participate in demand response programs to reap the benefits on offer. Unfortunately, even if this rule change is accepted and implemented, it will not come into force until 2022 and currently does not allow for the aggregation of residential demand to participate but 2022 remains sometime away, so who knows what the end result will look like.

Queensland shortlists 10 big renewable and storage projects for CleanCo contracts
The Queensland Government’s newly created electricity generation company, Cleanco, has announced a shortlist of 10 renewable projects based on the Renewables 400 auction announced in 2017. The price estimates in this article are from the 2017 announcement so are a little out of date but it will be very interesting to see what prices are secured in this auction. Given the utility will be starting out with the under utilised 570MW Wivenhoe pumped hydro station and a number of other hydro assets to firm output, we could see some very low pricing. Fingers crossed Cleanco doesn’t go the way of Snowy Hydro and keep the prices secret — the more transparent the market, the better!

BHP sets emissions cut for customers in major carbon push
BHP have come out and put US$400 million on the table and will be looking to help their customers reduce emissions (think shipping companies, steel mills, power plants etc), known as BHP’s Scope 3 emissions. While this is a step in the right direction, with some acceptance of responsibility by BHP for the emissions of customers who purchase their products, there is very little in the form of a target for emissions reduction. A shareholder resolution will be coming their way to set “measureable, verifiable and science-based targets on Scope 1, 2 and 3 greenhouse gas emissions” so this is definitely a watch this space moment.

Electricity prices across the grid fall to zero as renewables reach 44% share
An interesting phenomenon occurred on Sunday with a 5 minute interval seeing the price in all NEM regions hit zero (or slightly below). This is quite a feat considering the significant pipeline of renewables that are still being announced, construction and financed. This highlights the value, and necessity of storage to help balance these price lows, but also the opportunity for fast response storage such as batteries to pull of some tasty arbitrage trades. It is certainly very interesting times in the NEM and it will be extremely interesting to see if these pricing events become more normal and how long it will take market players to be able to ‘arbitrage away’ zero pricing events.

Why German coal power is falling fast in 2019
Germany has been a leader in renewables for quite some time and are seeing their electricity market being shaken up in response to the European emissions trading system. The rising price of emissions is is dramatically effecting the profitability of Germany’s significant coal fleet. This has seen output from the coal fleet fall by over 20% compared to last year, with the gap largely filled by renewables. How this scenario plays out moving forward, especially as the nuclear fleet shuts down, will provide a bit of a road map for the rest of the world and will be extremely useful for Australia. The phase out of all ‘baseload’ electricity generation in an industrialised economy that is heavily into manufacturing would be a huge step in the right direction and would be a breathe of fresh air in an increasingly partisan energy discussion. Here’s hoping the Germans can pull it off.

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