Extreme heat in Australia has caused power prices to soar to an unprecedented A$14,000 per megawatt-hour (MWh) during peak demand periods in New South Wales as power stations struggle to meet skyrocketing cooling demand.
Wholesale power prices for immediate dispatch in the state, Australia’s most populous, soared to an unprecedented A$14,000 per MWh ($10,687) on Friday afternoon, up from between A$100-A$200 per MWh <EL-30MIN-NSW>. The surge could trigger controlled outages by utilities trying to control their power grids.
“This is a highly unusual event that has driven the futures market to unprecedented levels. The last NSW major price event occurred in Q1 2011, but this event easily eclipses that,” said Andrew Koscharsky, director at energy firm RCMA Group in Singapore, which trades in Australian power products.
Temperatures of 40 degrees Celsius in and around Sydney, Australia’s biggest city, have pushed up cooling demand so far that authorities are preparing to order some businesses to shut down, a measure known as load shedding, while asking residents to minimise electricity consumption.
Because of the heat, peak demand in New South Wales reached 15,000 MWh per hour (MWh/h), up from a norm of below 9,000 MWh/h. Power market data in Thomson Reuters Eikon showed that peak demand on Saturday would reach 14,000 MWh/h, versus a norm of under 8,000 MWh/h.
And the heatwave is not yet over, with meteorological data in Eikon showing the heat sticking around into early next week.
Power is sold wholesale to large companies who operate an active electricity trading firm, or in fixed retail prices to residents and small businesses.
Retail customers will not be affected by the price spike, but businesses who buy electricity in the wholesale market, or speculative traders, could be exposed.
Koscharsky said that electricity “retailers, industrial customers who chose to take spot market over a fixed price contract, and speculators who short the market via ASX listed Electricity Futures Contracts” could be most affected by the price spike. (Reuters)