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Energy News: July 2020

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The end of the financial year closes and as we look back over the year in the energy market, there have been significant events. Twelve months ago, we were facing upward price pressures leading to forward prices rising and the prospect of a challenging summer.

Approaching summer, the forward price peaked and began to soften. Meanwhile AEMO set in place agreements with customers to load shed if required under the Reliability and Energy Reserve Trader (RERT) mechanism. As a result this program cost $36m to deliver.

Australia faced the largest almost continuous fire season in history beginning in October 2019 and ending in February 2020. Never before had we seen such a large area impacted, generating unprecedented smoke that would be felt in the Capital City centres. Images were beamed around the world and wildlife was threatened on all fronts. Such areas have shown the early stages of recovery, but it will take years.

The power grid largely stood-up during this period, although a terminal station in the Snowy region was damaged and AEMO had to activate emergency plans to maintain supply into New South Wales. The lights generally stayed on, although there were distribution areas impacted by the fires, that took days and in some cases weeks to recover.

We emerged from the bushfires with unprecedented international interest as the images of Australia on fire, went viral. After summer, forward prices began the journey downward, reaching a bottom in about early May 2020.  

We then have been in lockdown by COVID-19 which has impacted the way we use and consume energy. Consumption by businesses has fallen, but residential consumption has increased. The early morning peak demand appears to be occurring slightly later due to the high proportion of people working from home. Total consumption is about the same as last year.

While all these macro events have been unfolding, the team at Procurement Australia have been pushing on. Those customers on the Progressive Procurement model have experienced a better risk managed outcome, and indeed a lower price outcome than a business-as-usual fixed price tender.

Procurement Australia has set in place a long-term renewable Power Purchase Agreement (PPA) for 14 organisations that is effective from 1 July 2020. This is a milestone for Procurement Australia and a credit to the organisations who have been able to have the foresight and organisational capability to contemplate and then execute a long term arrangement. This approach delivers 100% renewable energy for those choosing this strategy.

The success of the first PPA has resulted in the launch of the second PPA. We look forward to the challenge of developing a solution in an emerging and evolving marketplace.

The energy market is never a dull place, and we continue to strive to deliver solutions and value to our clients. Stay tuned.

 

Blog Submission: Carl Daley – SavvyPlus Consulting

Contact us today to speak to our energy specialists for more information.