In our previous ‘Chart of the week’ in November 2020, we reviewed the increasing percentage of causer pays cost that solar generators bear due to their generation profiles and how this results in them paying significantly more of the causer pays cost as a ratio of the generation they provide. More than six months on, there has been a significant shift in some of the causer pays factors, mostly from coal and wind generation.
From what we can see, solar, for the most part, continues to pay the most in causer pays. The seasonal trend is broadly lower causer pays over the winter period and then higher factors over summer. Interestingly, wind in Q4 2020 and Q1 2021 had a significant spike in causer pays factors. We can see that this was driven by significantly increase factors from Telstra Energy which accounted for almost 5% of all causer pays payments in February. Dundonnell wind farm also had causer pays above 2%, accounting for ~30% of all wind causer pays for February 2021. The proportion of wind causer pays is also a factor of new generation entering the market with Collector, Moorabool, Crudine Ridge wind farms entering the market in 2021 (together they have installed capacity of over 850MW). As part of the Primary Frequency Response (PFR) rule change, most large generators >200MW are now PFR enabled, and most of the generators in the Tranche 2 (80-200MW band) are now also compliant with the PFR requirement.
We can also see a significant decline in coal causer pays factors, particularly black coal (brown coal declines from an already minimal value down to zero from December 2020). Coal units across the National Electricity Market (NEM) paid no causer pays cost in January of 2021. We can likely attribute this decline to PFR. PFR requires generators to respond to correct frequency deviations within a small deadband, which means that generators are now more likely to be over generating or under generating in the direction that would most assist in bringing frequency back to 50hz. In terms of causer pays factors, any generation deviation that assists frequency is eliminated when calculating causer pays. Accordingly, we see is causer pays significantly decline for those units, specifically coal units, that provide PFR.
Interestingly, we see a rise back to pre PFR levels in April for black coal units (resulting from factors calculated in March 2021). The increased factors are primarily from CS Energy units (which operates Kogan Creek and Callide B and trades Gladstone) and Delta Energy, which owns Vales Point. CS Energy’s causer pays increase is almost solely due to Kogan Creek. Since January and February 2021, which both entities paid no causer pays, both have averaged 1.15% and 0.75%, respectively. It will be interesting to see if these lower causer pays factors continue and if further declines result from new units participating in PFR in the future.