Transmission line issues volatilise Australia’s power market

Norway’s Rystad Energy finds that the power market in Australia is now the most volatile in the world, partly due to transmission line issues stemming from natural disasters.

According to the energy research company, these issues – the result of natural disasters such as cyclonic winds or bushfires, which have become more frequent and devastating in recent years – as well as unplanned coal generation outages have led to unexpected losses of supply for the country.

Due to the losses, states Rystad, Australia’s National Electricity Market (NEM), which interconnects power markets in Queensland, New South Wales (NSW), Victoria, Tasmania and South Australia has been experiencing the most fluctuations in daily prices of any system worldwide.

The findings come courtesy Rystad Energy’s analysis of public price data from 39 electricity markets globally, concluding that Australia’s NEM holds the unwanted title of ‘most volatile’, with domestic price spreads for Queensland and South Australia seeing the widest spreads of all markets.

According to Rystad Energy, the key metric used to measure volatility is the average one-hour intraday spread for a year of data, i.e., the difference between the highest and lowest price during a given hour.

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Commenting in a release was David Dixon, senior analyst for Rystad Energy: “Volatility can be unsettling for retailers who lack proper hedging strategies and for consumers who bear the brunt of resulting cost fluctuations.

“To tackle this, Australia should prioritise the enhancement of transmission infrastructure and invest in storage solutions to mitigate the impact of volatility. This will help to create a more stable and affordable electricity market for all Australians.”

Rystad also notes the importance of solar and price fluctuations resulting from its intermittency.

Namely, while daytime generation for solar power is high, pushing prices down, elevated natural gas prices are causing soaring rates in the evenings and at night when solar generation falls and gas-fired generation is needed.

To handle these fluctuations, the company suggests that increased storage capacity is required.

A total of 46GW/640GWh of pumped hydro and utility-scale battery storage capacity will be needed to balance the market by 2050, they find, a significant increase from the country’s current 2.8GW.

Rystad added how, outside Australia, the other markets that exhibited high volatility in their research were Japan and the Philippines, plus select regions of the US, such as California and Texas.