The average pool price during January 2017 in the QLD wholesale electricity market was $197.65/MWh. This is the highest monthly average since the commencement of the National Electricity Market (NEM). It exceeded the previous record for QLD of $192.46/MWh set in June 2007.
Figure 1 shows the average January pool price for QLD over the last two decades. Since 2013, January pricing has been at an elevated level, creating a challenging time for QLD energy users, particularly those who are exposed to wholesale prices. However, for energy users with flexibility in their operation, this high volatility presents an opportunity to save big and leap ahead of competitors. This can be achieved by engaging in a type of Demand Response, where energy users alter their electricity consumption depending on the price in the wholesale market.
To illustrate the opportunities that were available during January, we will use Facility A and Facility B as an example.
Facility A (Flexible/Price responsive operation)
- Facility A is a manufacturer that operates 24/7. The entire load is exposed to the QLD pool price.
- At maximum production output, power usage is 11 MW.
- At minimum production output, power usage is 9 MW.
- The production process can also be completely shutdown in 30 minutes. When the Facility is shutdown, it still consumes 0.5 MW.
It would be nice if Facility A had an unlimited ability to respond to every single event in the market. However, this is simply not feasible for most energy users. Facility A’s primary obligation is to supply its customers and hence it needs to manufacture enough product to do so. The flexibility of Facility A is also limited by how much product it can store, as storage can be used to buffer changes in production.
Given these constraints, Energy Synapse utilises in-house predictive modelling of energy markets to develop an operational strategy for Facility A with the goal of minimising the cost of electricity.
Facility B (Does not respond to price)
Facility B is the reference scenario. Facility B is identical in every way to Facility A, except that Facility B does not take wholesale electricity prices into account when developing its operational strategy. Facility B operates continuously at a level that is required to meet product demand. Over the long run, Facility B can be expected to pay the market average price of electricity.
January 2017 Results: Facility A pays 37% less than Facility B ($533k saving)
The strategies employed by Facilities A and B were tested during January 2017. The total pool cost for each Facility is in Figure 2. The flexible price responsive strategy used by Facility A results in a pool cost that is $533k (37%) lower than Facility B. Remember, this saving is just for the single month of January and both Facilities use exactly the same amount of electricity. The difference is all in the timing.
Savings that can be achieved by other facilities will vary depending on their unique operational characteristics as well as the characteristics of the electricity market at the time. Feel free to get in touch with me to discover the opportunities for your sites across the NEM and WA.
This article was originally published on LinkedIn.