The energy market is very similar to the stock market where energy wholesale pricing is based on market trends and the cost of generation to create the power. So, an increase in global gas pricing (gas is used to produce electricity) has an adverse effect on the wholesale electricity cost. The same goes for coal, brown coal (basically they burn mud) and other non-renewable energy sources. Without a renewed and constant understanding of the market, it can seem very complicated which makes decision making no easy task.
Australia’s cheapest large-scale power generation comes from coal-fired power stations. In 2016, the South Australian government closed its last coal-fired power stations at Port Augusta and Playford. However, they completely overestimated how quickly large-scale renewable energy resources (wind and solar) could be built to meet the demand previously met by Port Augusta and Playford. Blackouts aside, since July 2015 the cost of power in South Australia has risen from around $50 per MWh to $124 per MWh- more than double in less than 2 years.
Because South Australia relies on other states to top up the lack of generation, this has had a big domino effect when, more noticeably, a recent SA heatwave left over 30,000 properties without power.
Until it closed in March 2017, Hazelwood was Victoria’s second-biggest generator. The 1,600-megawatt capacity power station generated 25% of Victoria’s power and 5% of Australia’s National Energy Market. Due to the closure, 800 people lost their jobs and the cost of wholesale power rose 265% in a 12-month period, causing bill shock – again because demand outweighed supply. Victoria’s market conditions draw parallels to those in South Australia with large market contracts as high as 19c/kWh for peak times.
