[AMA] I’m an Energy Markets Consultant. Ask Me Anything!

Ghogger on 05/10/2018 - 11:04
Last edited 05/10/2018 - 11:06

Hi fellow OzBargainers,

I work as an energy markets consultant for a consulting firm. My job is to consult some of Australia's largest electricity and gas consuming companies on how best to reduce their energy costs, and to advise on decisions based on price forecasting.

Obviously energy policy has been a sticky issue in Australia for the last decade, and there is a mountain of misinformation from politicians from every side of the fence, so I thought I would do my best to try and clarify some of the questions you may have about:
- Electricity prices
- Electricity markets
- The cost of electricity generation
- Fossil fuels vs. renewable energy
- Energy policy

Consultancy fee: $0

Introduce Yourself

closed Comments

  • GG57 on 05/10/2018 - 11:10

    You have only mentioned electricity; do you have knowledge of the gas energy market?

    • Ghogger on 05/10/2018 - 11:15
      +1

      Only that Australia's east cost gas market has become heavily tied to international gas demand and prices, particularly to service increased gas demand during winter for heating in East Asia.

      • GG57 on 05/10/2018 - 11:18

        Do you mean that the long-term export contracts for Australian gas have resulted in higher domestic pricing, due to a shortage of gas for domestic use (perceived or not)?

        • Ghogger on 05/10/2018 - 11:22
          +1

          Yep. Also, public backlash against coal-seam-gas extraction in NSW and Victoria have severely limited Australia's gas production (not that I think CSG is great either). Also, gas consumption for electricity generation in Victoria has increased 500% since Hazelwood shut down, so that is the main reason why electricity prices have increased there.

          The WA system works differently to the east cost, whereby 1/3 of all gas production must be retained for domestic use. This has helped keep the price of gas in WA down.

  • Xiaomi on 05/10/2018 - 11:11

    How much of the Australian Energy Market is foreign owned?

    • Ghogger on 05/10/2018 - 11:17

      Do you mean generation or distribution? A significant portion of Australia's generation is foreign owned, though much of the distribution is still state-owned. South Australia and Victoria have privatised networks for example.

  • BuyoTheCat on 05/10/2018 - 12:01

    When provides try to sell me green energy for more, am I actually gonna get green energy or am I just a sucker?

    • Ghogger on 05/10/2018 - 12:11

      When you pay extra for green energy, the retailer is going to buy additional 'large-scale generation certificates'. Retailers are obliged to purchase these certificates from the LGC market, which are created by certified generators (wind, solar etc.) at the cost of the spot price for LGCs. Currently they are at around $70 or so per certificate. These certificates act as an incentive for companies to invest in renewable energy projects since the certificate price acts as a subsidy.

      In the absence of other federal policy, these certificates have been the only real help the large-scale renewables industry has had

  • [Deactivated] on 05/10/2018 - 12:04

    Is Australia's carbon output a complete con, given our bushfire and backburning output is completely made up.

    • Ghogger on 05/10/2018 - 13:31

      Well land use changes are included in carbon emissions accounting, and there are independent bodies who measure emissions from fires using satellite data, however I don't know exactly how accurate it is.

      What I can say, is that Australia's per capita emissions from anthropogenic activities such as electricity production are extremely high, and climate change is only likely to make Australia drier and more prone to bushfires, releasing more CO2 into the atmosphere (this is called a positive feedback loop).

  • PoorStudent on 05/10/2018 - 13:09
    • What is your opinion on LNG import terminals projects and the impact on the domestic gas market?
    • What did you like and dislike about the NEG? Now that it's gone, what would your solution be?
    • What is your wholesale electricity price forecast over the next 6 months (broken down into regions and month - 30 prices)?
    • Ghogger on 05/10/2018 - 13:40
      +1

      • LNG import terminals would increase the supply of gas and would presumably reduce the cost of gas, though we could also just reduce our consumption of gas (particularly for electricity production) which would also reduce the cost of domestic gas. We could do this by doing the obvious - using our abundant renewable resources instead of gas power plants.

      • The main standout for the NEG for me was that it forced a bit more planning into the roll-in and roll-out of generators. For example, coal generators would have been required to give notice before closing, which would allow time to plan and install replacement capacity to reduce reliance on gas peaking generators for baseload generation. Other than that, the NEG was a relatively business as usual approach to energy policy and not very groundbreaking. Unfortunately, the Clean Energy Act 2011 was the best energy and emissions legislation we could have hoped for - if we could go back to that, perfect. Unfortunately carbon pricing is not a politically toxic policy, even though it's the most efficient option for reducing emissions. My solution - bite the bullet and implement carbon pricing. Though, politicians care more about their jobs than about efficient policy solutions.

      • Without giving exact prices, during summer (January-March they will likely be in the ballpark of:

      Qld: $90-100 /MWh
      NSW: $110-120 /MWh
      Vic: $130-140 /MWh
      SA: $130-150 /MWh

      Per kWh (like residential customers pay), between 9c and 15c depending on the state. Of course on top of that you need to pay network fees and environmental certificate prices which account for at least 50% of the total cost of electricity.

      • PoorStudent on 05/10/2018 - 20:41

        Thanks for replying, appreciate it.

        • I believe it costs over $1/GJ to process LNG to gas for our domestic use pipelines. Given this cost, is the LNG terminals still feasible? i.e. what would it cost for producers to develop more fields.

        We could do this by doing the obvious - using our abundant renewable resources instead of gas power plants.
        With this approach, what is your solution for when the renewable energy sources stop producing. E.g. cloudy day combined with no wind. With this approach, would it make electricity prices more peaky (i.e. $14,000/MWh more often due to gas generators need to recover their costs somehow).

        • With ageing power stations, they may be closed without notice even with the NEG if there is a costly major failure. How would the NEG have solved this?
          Also, I believe the reliability guarantee was to ensure our country is not powered by 100% intermittent sources as every grid needs stability (look at the current SA position).

        • Your forecasts indicates you believe wholesale prices will increase by 30% this year compared to last year. What is your reasoning behind this?

        • chami on 06/10/2018 - 17:28

          @PoorStudent..
          The hot days of 18,19 Jan 2018, electricity in South Australia cost the statue $68M and $60M due to the $14K/MWh charge compare to the usual $1M to $4M.
          They did not turn on the diesel generators they had as backup (bought at a cost $400M!). I have no idea of the cost in lost production because businesses had to close down. Hopefully this summer will be cooler.

          @Ghogger -
          What maximum temperatures can the SA Telsa batteries work at. I know their cars batteries have 'cooling architecture'.

        • Ghogger on 09/10/2018 - 07:42

          You asked for the next 6 months not a whole year - wholesale prices can be sold in quarters, and of course the summer quarter (Q1, Jan-Mar) is usually the most expensive due to summer demand. For the whole of 2019 prices are lower than what I have quoted.

          • PoorStudent on 09/10/2018 - 19:48

            @Ghogger: Understood what you said above.

            QLD prices
            Oct-2017 $53.73
            Nov-2017 $65.37
            Dec-2017 $71.53
            Jan-2018 $75.78
            Feb-2018 $71.84
            Mar-2018 $62.53

            Qld: $90-100 /MWh

            Hence why I said your price forecast is much higher than the previous summer. Care to elaborate?

      • chami on 06/10/2018 - 16:57

        What about WA?

  • theHMASfriendship on 05/10/2018 - 13:25

    How much can a polar bear?

    theHMASfriendship on 05/10/2018 - 13:25 (Collapsed - Offtopic. Show)
    • Ghogger on 05/10/2018 - 13:29

      About 2 degrees celsius above pre-industrial levels I believe

      • theHMASfriendship on 05/10/2018 - 13:37
        -2

        How many celsius's are in a furlong again?

        • GG57 on 05/10/2018 - 13:49

          What's a piecost?

  • poboy on 05/10/2018 - 17:02

    What approaches are the generators, distributers and retailers taking to convince the government to keep the status quo on regulation and pricing pressures?

    • Ghogger on 09/10/2018 - 07:44

      Unfortunately I wouldn't know! Although I'm fairly certain political idieology is doing all the work for them, pro-coal lobbying probably isn't even necessary at this point.

  • Godric on 05/10/2018 - 17:07

    Eneloops produce the best source of energy, agree?

    • Ghogger on 05/10/2018 - 18:16

      Yes.

  • ProBoDoBo on 06/10/2018 - 09:04

    Outlook of Oil&Gas industry in near future?

    • Ghogger on 09/10/2018 - 07:52

      Oil - We'll still be using it long after I'm dead. It's so energy dense and easy to transport, it's going to be very difficult to replace it. For example, I can't imagine any suitable replacement for jet fuel in the next century without some major scientific breakthrough on electricity storage. But who knows, 100 year ago we only just started flying planes!

      Gas - consumption all over the world is increasing, not just Australia, as gas partially replaces coal as a 'cleaner' fuel source. Large-scale gas exploration and mining will certainly be back on the table here in Australia once the price hits a certain point.

  • varunynr on 06/10/2018 - 10:11

    Excellent analysis. Keen to know your views on Tasmania being battery of nation????

    • Ghogger on 09/10/2018 - 07:41
      +1

      Tasmania's Basslink cable is already at max capacity for >75% of the time, we'll definitely need heavy investment in at least two new interconnectors ($1 billion or more each) to utilise any more hydro for mainland consumption.

      • varunynr on 09/10/2018 - 22:51

        Also mate, any experience with Simpli energy in Vic ? It belongs to a generator named Engie, a french conglomerate. Keen to know if you have any idea of how are they as employers ?

  • varunynr on 09/10/2018 - 22:50

    Agreed and thats being worked upon now :)

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