Quarterly market newsletter

Quarter 4

December 2019

We'll share insights and highlight key market events

to help you make better energy decisions.

Market snapshot

For the period October to December 2019

  • ‘Industry needs a strong signal to invest.’ 

ABC Radio National Australia interview with Chief Executive of Origin Energy, Frank Calabria, October 2019

Listen to the ABC interview (duration 14:21 minutes)

  • In October, Origin extended its agreement with Engie Australia for another four years to ensure Pelican Point gas plant can support the increasing renewable energy supply in South Australia.
  • Darling Downs solar farm officially launched in November 2019. The 110MW solar farm located in Queensland is under contract to supply all of its output to Origin Energy under a 12-year power purchase agreement.
  • Wednesday 6 November marks the first day in Australia when renewable energy met over half of electricity demand. Relatively stable demand levels and ideal weather conditions meant that both solar and wind energy could be utilized.
  • The damaged generating unit at Mortlake Power Station, Victoria, returned to service in December following a six-month outage. During the replacement works, capacity of each of the generators increased by up to 20 megawatts. Mortlake is a gas peaking power station with two generating turbines with an overall capacity of 566 megawatts.
  • AEMO released its Summer Operations Report 2019-2020 in December 2019. The plan outlines the option for AEMO to seek additional emergency reserves to support summer demand. AFR reports that AEMO had purchased of 1600MW to assist with the high supply levels required for period.

Read the full AEMO Summer 2019-2020 Readiness Plan


Electricity market

Prices in the NEM reduced significantly in November from the previous month across all states, with the largest reductions occurring in NSW and VIC. This trend continued into December and January to date.

There were several factors that contributed to prices coming off. Firstly, despite 2019 being the hottest year on record, the backend of the year didn’t see extended spells of hot weather and thus we didn’t see periods of extreme demands that characterised the previous summer. Secondly, baseload availability rose from all-time lows in the post winter period. Finally, renewable output continued to rise, with wind generation increasing slightly and solar generation increasing significantly across the NEM in the later part of the year.

There were several periods of work on the interconnector between South Australia and Victoria, which limited flows between the states. This caused very low prices in South Australia as large amounts of wind generation was effectively trapped in the state. In early January, there was a volatility event in NSW when bushfires caused the interconnect between NSW and Victoria to trip and several large generators in the region were constrained off, causing prolonged periods of extreme prices.

Finlay Macdonald-Stack, Portfolio Trader, Trading Operations 


Gas market

East Coast Gas Markets have seen a relatively benign period with minimal volatility across all markets. There was no significant uplift in price from a 2-week Iona Gas Plant outage in October, though prices were more volatile with the removal of a supply source or demand sink (storage refill).

VIC Market 6am pricing trended toward 2017 levels, largely driven by a surplus of QLD gas. LNG markets were in a period of oversupply reducing global market prices which were also recognised domestically.

The increase in renewable electricity generation combined with a period of better coal plant reliability also reduced requirements for gas-powered generation. This in turn has also increased the availability of gas in local markets.

Louise Colbran, Portfolio Trader, Trading and Operations

Solar made easier for large business

Enthusiasm for solar energy in Australia continues at a rapid rate with 2019 solar installations increasing 36% year on year for systems under 100kW’s.Approximately a quarter of that volume was from solar installations on commercial premises as it becomes easier for big business to adopt renewable energy solutions.


Why now?

1.         Real impact to your bottom line from day one due to:

•           Lower initial investment

The cost of solar technology has reduced significantly over the past few years according to a recent Lazard Report; indicating the levelized, or lifetime cost divided by energy consumption, of rooftop C&I solar can be as little as $75/MWh.

In our experience, some businesses can expect to see a financial payback of between three to five years. Each customer will see a different Return on Investment (ROI) based on their energy rates, usage profile and available unshaded roof space.

•           Sustained reduction in your energy costs

In many cases businesses operate during the day, consuming and paying for electricity at ‘peak prices’ or at higher rates. For businesses using solar, the energy generated during sunlight hours is used, and energy peak prices can be avoided.

•           Easy payment options

Flexible payment options mean that some Origin customers can be cash flow positive from day one, resulting in bottom line savings for businesses immediately.

Here at Origin, we can discuss payment plan options that best suit your business priorities.

2.         Less reliance on the grid

By reducing reliance on the grid, businesses are less exposed to volatility in the energy market. This can help you better manage and plan upcoming expenditure and investment spend.

For Origin electricity customers, there’s an additional option to enter into an EPA or Export Purchase Agreement which provides price certainty around the cost of exported electricity for the duration of the commodity contract.

3.         Quality product and service means minimal on-going maintenance costs

Solar PV provides a long-term solution to the daytime energy needs of businesses.  Solar panel manufacturers typically offer a 25-year output guarantee, meaning that even after 25 years, installed solar panels will still be functional.

Solar panels typically require minimal maintenance or ongoing costs and are durable for the varied weather conditions throughout Australia.

Interested in solar?

Our dedicated Energy Solutions experts are on-hand to assess the suitability of solar for your business.

The first thing we do is find out more about your business and your priorities:

  • We’ll assess your existing daytime electricity load
  • Undertake a desktop assessment to determine the unshaded roof space available to hold solar panels.
  • Use economic modelling to determine the optimal solar solution for your business
  • Compile a report summarising the suitability of solar which includes the economic benefits of going solar and your ROI.

Email EnergySolutions@originenergy.com.au and we’ll call you back to arrange a time to meet.

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Download your bills, monitor your consumption and the market.

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What are demand charges and can you minimise this cost?

As an Origin Business customer, you will see Demand charges on your electricity invoice. These charges are from your network provider to ensure your business can draw large amounts of electricity when required.

How are demand charges calculated?

Using your business’ average energy usage over 15–30-minute intervals, and the highest interval for that billing month, the maximum capacity to draw energy, in kWh, is captured.

Each network provider will calculate the demand-charge rate differently using your capacity to draw energy.

Reducing your demand charges

You can reduce your demand charge by changing your energy consumption:

1.         Solar can assist  

Your business may be able to reduce its demand charges by drawing power from a different energy source like solar during peak periods. Doing this decreases the maximum load of energy drawn from your electricity network during any given 15–30 interval.

As an Origin customer, we have renewable solutions that can also help to reduce your demand charges in this way.

2.         Use energy more efficiently with a Power Correction unit

Another more direct way to reduce your demand charges is by reducing your energy consumption. This doesn’t have to mean sacrificing certain power sources or changing the way your business operates. It could be as simple as installing a Power Correction unit, designed to help your business use energy more efficiently and in turn reduce the maximum load of power your business places on the grid.

If your business has a poor power factor – typically between 0.7 to 0.8 – installing a Power Correction unit may have a long-term benefit.

3.         Stagger the start-up of your equipment

Starting up your equipment can often place a huge draw on the network and can increase your demand charges. You can potentially reduce your demand charges by staggering the start-up of your equipment and reducing the high volumes of energy drawn during this high-consumption period.

Our experts are on-hand for more tips on how you can reduce your demand charges. 

Email your questions to EnergySolutions@originenergy.com.au and we'll call you back when it best suits.

  1. SunWiz Executive Insights, December 2019