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Benchmark Power Curve (BPC) service launched

Cornwall Insight Australia has recently launched its new Benchmark Power Curve (CIA BPC) service to complement its already extensive set of wholesale research subscription services.

The CIA BPC is a comprehensive market and asset-level power price modelling service that delivers long-term price forecasts, informed by industry-leading regulatory, market and policy expertise, and supplemented with direct access to trusted practitioners.

Focusing on scenario-based 20-year projections of electricity prices in the National Electricity Market (NEM), coverage includes average spot prices, captured prices per technology, base volatility forecasts, and time-weighted prices presented in real values of the day and at 30-min granularity.

With the rapid and ever-changing landscape of the NEM, the scenarios not only present snapshots of future market trends, they also capture within-day commercial impacts (including volatility) of many future developments including interconnection, retirements and renewable energy zone (REZ) developments.

The CIA BPC is designed with a range of market participants in mind including lenders, equity investors, developers, operators, traders and financial advisors engaged with the NEM. It has also been developed with a technology agnostic approach, with price curves for different technologies (including future offshore and onshore wind, batteries, DSP, solar PV, and other dispatchable assets); fully reflecting price and value-capture based on the different operating regimes, load profiles, and asset portfolio of various stakeholders.

The report will also show the effect of location on different asset classes as well as the drivers behind the trends in the value they can capture from their different regions.

The service is presented quarterly with a summary report capturing the following outputs from all three scenarios:

  • 20-year generation weighted capture price forecasts for coal, CCGT, OCGT, hydro, wind, solar, batteries and reciprocating gas technologies
  • 20-year forecast of spot prices per NEM region including volatility forecast
  • Generation mix state and NEM-wide
  • 20-year installed capacity forecast
  • 20-year 30-min pricing data for the Neutral scenario (optional add-on)

The report also contains all key assumptions underpinning the modelling. Subscribers will also be able to take part in a user group forum discussing the issues and helping to frame future updates.

One notable insight from the first set of results concerns the increasing importance of intra-day pricing (and volatility) and how these dynamics are rendering forecasts lacking high-granularity obsolete. Whilst quarterly forecasts may show high level projections, they however do not provide the intelligence in pricing necessary for banking storage and co-located assets which depend on intraday volatility on the energy-side of their revenue stack.

In Figure 1, we show the results of our forecast for a region in the NEM and how our BPC performed over the last two quarters. For Q4 2019, our forecast showed an accuracy of 98.5% against the actuals whilst for Q1 2020, an accuracy of 81.5% was recorded. Whist BPC showed a high degree of accuracy in price outcomes and trends between these quarters, Q1 2020 actuals also reflect the unusually mild summer post-January with February and March averaging $45/MWh.

Going forward, new projects seeking connection are expected to have slightly bearish effects on prices, but this is not an impact we expect to be reflected across captured prices for all technologies; some technologies in certain regions gain value through time. While big swings in average quarterly prices across the NEM states are not expected, intraday pricing due to weather-dependent generation will create significant value shifts across all markets; underlying the importance of time-of-day fuel mix to value pockets in the market. This is a trend we are already seeing in the NEM as covered in our previous Chart of the Week updates.

Further, some markets will show strong signals for co-location earlier than others (early-mover advantage) with coal retirements towards the mid- to back-end of this decade making this trend more pronounced across all mainland states.

Figure 1 Average price and volatility forecast for an unspecified NEM region

Source: Cornwall Insight Australia

Interconnectors and their timings will go some way in determining both price and volatility outlooks especially in regions typically subject to islanding events. The role of interconnector timings will not only drive many renewable energy zone developments, but also access to assets lower in the merit order stack (for example EnergyConnect and access to coal in NSW). Our results also show timely development of these interconnectors would have varying success in cushioning the price impacts from retirements, with some coal exits having more significant impacts on prices than others.

For more information about Cornwall Insight Australia’s Benchmark Power Curve and our other wholesale subscription services, please contact Lumi Adisa (l.adisa@cornwall-insight.com.au) or enquiries@cornwall-insight.com.au