Mark Searle - Key Energy & Resources Pty Ltd

Key Energy & Resources © AFSL 281356

Australian Gas Turbine Conference

November 2016

Energy Market Update

Mark SearleB.Eng, M.Eng, Dip Fin Serv., MIE Aust. CPEng

Principal ConsultantKey Energy & Resources

[email protected]


Disclaimer

Key Energy & Resources holds an Australian Financial Services License (AFSL 281356)

Any advice contained herein is ‘general’ in nature and specific advice should be sought before acting on anything contained herein.

2


Gas Turbine Experience

3


Energy Market ExperienceSpecialist Energy Management Consultancy

Energy Market AdviceGas and Electricity

Negotiate Supply contractsLarge users $5B +

Energy Planning and Cost ControlLarge cross section of Government, Semi-

Government and Private sector clients across Australia.

Gas Turbines buy gas to make electricity and heat

4


Gas Turbines

Clean

Low CO2

Reliable

Scalable – Modular

Flexible

Response times to match complex market

Better still if CHP

5


Generator (Export)

Three options:

Pool

Hedge

Cap

6


The NEM is a gross poolAll electricity is traded via the pool at the price of the marginal generator.

Pool Prices

$(2,000)

$-

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

Jul-

15

Au

g-1

5

Se

p-1

5

Oct

-15

Nov

-15

Dec

-15

Jan

-16

Feb

-16

Mar

-16

Ap

r-16

May

-16

Jun

-16

Jul-

16

$/MWh

NEM Pool Prices FY 15/16

QLD

NSW

VIC

TAS

SA

7


Pool Range

Min = -$1,000/MWh

Max = VOLL/MPC = $14,000/MWh

Administered Price Cap of $300/MWh Triggered when Cumulative RRP for previous 336 trading

intervals i.e. (7 days) > $210,100

8


Pool Prices…continued

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

1-M

ar

2-M

ar

3-M

ar

4-M

ar

5-M

ar

6-M

ar

7-M

ar

8-M

ar

9-M

ar

10-M

ar

11-M

ar

12-M

ar

13-M

ar

14-M

ar

15-M

ar

16-M

ar

17-M

ar

18-M

ar

19-M

ar

20-M

ar

21-M

ar

22-M

ar

23-M

ar

24-M

ar

25-M

ar

26-M

ar

27-M

ar

28-M

ar

29-M

ar

30-M

ar

31-M

ar

$/MWh

Queensland - March 2016

9



4,2004,4004,6004,8005,0005,2005,4005,6005,8006,000

$0$10$20$30$40$50$60$70$80$90

$100

Demand (MW)RRP $/MWh

RRP v DemandVic FY 15/16

Avg RRP Avg Demand

10


Pool Prices….continued

-$1,000

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

0%

4%

7%

11%

15%

19%

22%

26%

30%

33%

37%

41%

44%

48%

52%

56%

59%

63%

67%

70%

74%

78%

82%

85%

89%

93%

96%

$/MWh

Price Duration VIC FY15/16

11


Pool Prices….continued

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

1%

5%

9%

13%

17%

21%

25%

29%

33%

37%

41%

45%

49%

53%

57%

61%

65%

69%

73%

77%

81%

85%

89%

93%

97%

$/MWh

Price Duration – VIC FY15/16

12


Pool

-$1,000

-$800

-$600

-$400

-$200

$0

$200

$400

$600

$800

$1,000

Jul-1

5

Aug

-15

Sep

-15

Oct

-15

No

v-1

5

De

c-1

5

Jan-

16

Fe

b-16

Ma

r-16

Apr

-16

Ma

y-1

6

Jun-

16

$/MWh

VIC Pool Prices FY 15/16

VIC $85/MWh

13



$/MWh Median +/- Volatility Range Volatility

VIC $36.38 $20.17 39%

NSW $38.36 $13.52 21%

Qld $39.74 $17.48 24%

SA $45.55 $28.40 43%

14


WEPI

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$/MWh WEPI Trend - 30 Day Moving Average

NSW VIC QLD SA(03) 9885 2633

KE&R Key Energy & Resources

15


EFI

$0

$20

$40

$60

$80

$100

$120

Jan

-09

Mar

-09

May

-09

Jul-

09

Se

p-0

9N

ov-0

9Ja

n-1

0M

ar-1

0M

ay-1

0Ju

l-1

0S

ep

-10

Nov

-10

Jan

-11

Mar

-11

May

-11

Jul-

11

Se

p-1

1N

ov-1

1Ja

n-1

2M

ar-1

2M

ay-1

2Ju

l-1

2S

ep

-12

Nov

-12

Jan

-13

Mar

-13

May

-13

Jul-

13

Se

p-1

3N

ov-1

3Ja

n-1

4M

ar-1

4M

ay-1

4Ju

l-1

4S

ep

-14

Nov

-14

Jan

-15

Mar

-15

May

-15

Jul-

15

Se

p-1

5N

ov-1

5Ja

n-1

6M

ar-1

6M

ay-1

6Ju

l-1

6S

ep

-16

$/MWhEFI - Elec. Futures Index ($/MWh)

NSW QLD SA VIC(03) 9885 2633

KE&R Key Energy & Resources

16


Electricity Futures

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.00

08-Jan

-14

08-Feb

-14

08-M

ar-14

08-Apr-14

08-M

ay-14

08-Jun

-14

08-Jul-14

08-Aug

-14

08-Sep

-14

08-Oct-14

08-Nov-14

08-Dec-14

08-Jan

-15

08-Feb

-15

08-M

ar-15

08-Apr-15

08-M

ay-15

08-Jun

-15

08-Jul-15

08-Aug

-15

08-Sep

-15

08-Oct-15

08-Nov-15

08-Dec-15

08-Jan

-16

08-Feb

-16

08-M

ar-16

08-Apr-16

08-M

ay-16

08-Jun

-16

08-Jul-16

08-Aug

-16

08-Sep

-16

08-Oct-16

ASX Base FuturesNSW $/MWh

Cal2015 Cal2016 Cal2017 Cal2018 Cal2019 Cal2020

17


Electricity Futures….continued

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

$60.00

$65.00

$70.008-Jan-14

8-Feb-14

8-Mar-14

8-Ap

r-14

8-May-14

8-Jun-14

8-Jul-1

4

8-Au

g-14

8-Sep-14

8-Oct-14

8-Nov

-14

8-De

c-14

8-Jan-15

8-Feb-15

8-Mar-15

8-Ap

r-15

8-May-15

8-Jun-15

8-Jul-1

5

8-Au

g-15

8-Sep-15

8-Oct-15

8-Nov

-15

8-De

c-15

8-Jan-16

8-Feb-16

8-Mar-16

8-Ap

r-16

8-May-16

8-Jun-16

8-Jul-1

6

8-Au

g-16

8-Sep-16

8-Oct-16

ASX Base FuturesVic $/MWh

Cal2015 Cal2016 Cal2017 Cal2018 Cal2019 Cal2020

18


Hedge

$/MWh Peak Off Peak Base

Cal 2017 $80.76 $46.01 $60.89Cal 2018 $74.00 $56.17 $63.84Cal 2019 $66.13 $62.12 $63.85Cal 2020 $46.00 $46.39 $46.22

ASX Futures Settlement Prices - Victoria

Source: ASX Energy Futures Settlement Prices 01-Nov-16

19


But…..

If you don’t deliver and

RRP > Hedge

You are screwed

RRP < Hedge

Money for Jam

20


Cap

$/MW Cost pa

VIC $6.77 $59,305

NSW $8.15 $71,394

QLD $13.80 $120,888

SA $23.17 $202,969

Source: ASX Energy $300 Caps Settlement Prices 01-Nov-16 for Cal 2017

ASX Energy $300 Cap

21


Cap…continued

FY15/16

Intervals>$300/MWh

Pool Price Exposure

No. of times

generator switched

on Cap PriceAnnualisedCap Cost

VIC 16 $13,063 10 $2.84 $24,874

NSW 10 $15,913 5 $3.01 $26,368

QLD 88 $67,203 66 $8.44 $73,934

SA 185 $49,522 98 $7.56 $66,226

Source: ASX Energy $300 Cap Settlement Price on 4-Feb-15 for FY 15/16, ASX RRP Settlement Prices

Pool Price vs Cap

22


Delivered Electricity Cost

Retail57%

Market1%

Levies13%

Peak13%

Off Peak5%

Demand10%

Fixed1%

NUoS29%

Delivered Energy CostSite in NSW – 14 GWh

23


Delivered Electricity Cost (exc dmd)

$0

$20

$40

$60

$80

$100

$120

$140

Peak Off Peak

$/MWh

NSW ≈ 15 GWh

Market

Levies

NUoS

Retail

24


Gas

$0

$2

$4

$6

$8

$10

$12

$14

$16$/GJ

STTM Gas Prices

ADELAIDE SYDNEY BRISBANE

25


Gas

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

$/GJVIC Gas Wholesale Prices

26


CHP

Best of both worldsTraditionally > 6,000 hrs per annum

Still viewed as non traditionalResistance

High Capital Cost

Often best long term solution

27


Conclusion

GT’s offer a unique solution

Environmentally responsible

But……Market unsympathetic

Reform needed

Capacity Market

28


Questions

29

Engineering

Mark Searle - Key Energy & Resources Pty Ltd