Market overview

The National Electricity Market is adjusting to changes in supply and demand conditions, with the closure of older coal-fired generation in recent years and more variable renewable energy coming online.

The summer of 2017/18 was the second warmest on record across Australia. While this was a key driver of electricity demand across the National Electricity Market, Queensland was the only state to set a new peak electricity demand record. This was set on three consecutive days in February 2018, reaching 9,840 MW (the previous record was 9,369 MW set in February 2017). There was sufficient electricity generation available to meet this new peak demand record and to ensure that Queensland’s wholesale electricity prices were, and remain, the lowest and most stable in the National Electricity Market.

A key driver of this reliable supply was dispatchable, fossil fuel generation, which performed at one of their highest availability rates for the past 10 summers. Coal-fired power stations generated at their highest levels since 2008 and increased average output by 580 MW when compared to the same period in 2017.

Market outlook

After a period of intense focus on the potential design and implementation of the National Energy Guarantee, the change in leadership of the Federal Government means the market is once again faced with uncertainty over the integration of national climateand energy policy.

This is important to instil confidence in investors and businesses looking to build new energy assets and invest in existing power stations in Australia. In addition, there are a number of challenges which government, industry and consumers will need to solve:

  • The way people consume and source electricity continues to change. Electricity demand in Australia is peaking and declining more dramatically throughout the
    day. Energy efficiency has resulted in people using less electricity overall but a lot more electricity is being used on just a few days or even for just a few hours each
    year. The challenge is to design a market that can ensure enough generation capacity to supply this peak demand for just a few days or hours.
  • Policies restricting or banning the exploration and development of gas in various states have contributed to the general tightening of gas supply across the National Electricity Market. This is resulting in increased costs for gasfired generation. Cost competitive gas-fired generation could assist in the transition to a lower carbon economy. It has lower emissions than coal-fired generation and is able to quickly respond to changes in electricity demand.
  • Ensuring a reliable supply of electricity as the generation mix changes is paramount. There is already close to 13,000 MW of renewable energy in the National
    Electricity Market, with another 4,000 MW of committed projects and 40,000 MW in proposed projects. The proportion and generation profile of renewable
    energy, along with the rate at which the ‘take up’ of batteries and other technology occurs, will change the supply and demand dynamics of the National Electricity Market.
    The ability to manage the risks associated with variable renewable energy by pairing it with firming generation is a critical next step. Ultimately, the challenge is to balance
    the energy mix to deliver least cost, reliable and lower emission electricity to customers.

Stanwell’s strategic response

The changes in the energy market provide both challenges and opportunities for our business. Stanwell has an important role to play as the market transitions to a lower
carbon future. Our strategy is designed to address the challenges facing the electricity industry. Working with our stakeholders (including our employees, customers and business partners), we seek to create energy solutions that will help transition to lower carbon sources of energy but in a way which safeguards energy affordability and security. For this to happen, we will:

  • work closely with our customers to develop innovative energy products to meet the changing needs of the market;
  • provide generation that is flexible to meet the demand patterns of a market in transition to a higher proportion of variable renewable energy;
  • be part of a renewable energy future. We will do this in many ways. We may trade the output from renewable assets or we may purchase the electricity directly
    from renewable generators; and
  • make our business as cost competitive, streamlined and efficient as possible.

Our strategy has four complementary elements designed to address the energy market priorities of security, affordability and sustainability.