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“You only get one shot, do not miss your chance to [dispatch]”

We have had a number of contingency events this year that have stretched the electricity market to it limits including bushfires, high winds and high temperatures. These are all weather events that we can expect will continue into the future, putting continue stress onto electricity infrastructure (see CSIROs report). These are the events we saw this year alone:

  • 4 January – separation event between NSW and Victoria due to bushfires
  • 30 January – high demand and unexpected withdrawal of capacity due to high temperatures
  • 31 January – storm destroys transmission lines and separates SA and Victoria for 17 days

So what impact is this having on the services that balance our market? Prices appear to be on a somewhat upward trajectory and on face value seem more volatile. In Figure 1 we see the historic time of day FCAS prices for the Raise Regulation service, which is (for the most part) the most lucrative of all the FCAS services. Due to the above contingency events raise 6 second and raise 60 second FCAS markets were also very lucrative in 2020.

In 2020 NSW had the highest time of day prices which peaked at ~$134/MW/hr, excluding prices on 4, 30 and 31 Jan the highest price drops to $86/MW/hr, which significantly decreases the average time of day price down by about 15% from ~$39/MW/hr down to $33/MW/hr. This highlights the value that can be obtained from FCAS services if you are in the market at the right times but also illustrates the huge variability. During FY 2019 there was almost no difference in prices across the whole NEM except for a price spike in QLD due to the QLD/ NSW separation event (which can be seen in the FY 19 average price at ~2pm).

While not show here the volatility is even more stark in the contingency services, raise 6 second market in particular where prices were relatively flat in FY19 average ~$7.8/MW/hr and have increased dramatically in FY20 to average ~$21/MW/hr. The difference between the lowest and highest daily average prices has also more than doubled since FY19 from ~$41/MW/hr to ~$88/MW/hr.

The core issue is whether the peak price increases we have seen in 2020 will continue in 2021. While low probability events are difficult to predict exactly, I think we can expect more high priced FCAS peaks resulting from weather driven events like those seen in 2020. However, conversely, it is interesting that in raise regulation by our measure of within day volatility (difference between P10 and P90 prices during a single day averaged across the quarter) Q2 volatility is at is lowest levels since Q3 2018.

FCAS is a notoriously difficult to both interpret and predict, however, we have recently launched our FCAS Price Curves so please get in touch if you would like to find out more or email enquiries@cornwall-insight.com.au