Electricity prices rise, Hazelwood announces closing date

Electricity prices rise as Hazelwood announces closing date

A while back we wrote a blog post reporting on the announcement that Hazelwood power station was set to close its doors as early as April 2017. We predicted that word of the station’s demise would subsequently cause Victorian electricity prices to skyrocket, as was the case in South Australia in 2015 following the news of  Northern power station’s planned closure.

Recent news reports and figures released by the Australian Securities Exchange (ASX) indicate that this prediction has already eventuated.

The market response

This week ASX reported that Victorian front year baseload power strips broke through the $60 mark for the first time since 2008 as the 2017 calendar strip “rallied $4.34 to $60.89.” Meanwhile QLD front year baseload strips broke through the $70 mark, also for the first time since 2008, with QLD 2017 strips gaining $2.92 to $70.17. Rounding out the report are NSW, which rose $3.00 to $63.31, and SA up $1.61 at $104.00.

A Hazelwood update 

On Thursday, French company Engie announced that it will indeed close the Hazelwood power station, which provides more than 20 per cent of Victoria’s power and contributes “4 per cent of the electricity in the national grid.” Engie has set March 31 as the date by which the brown coal-fired power plant will cease operations, stating that it is “no longer economic to operate.”

Economics aside, the fate of what is often referred to as “the country’s dirtiest power plant” will not come as a shock to those following its emissions. The aging station has long been targeted by environmental activist groups lobbying for its closure.

What’s in Australia’s energy future?

As the end of the Hazelwood era nears, what can Australians expect to experience in terms of pricing and energy supply? Well we can count on our power bills going up. According to News.com.au, Federal Energy Minister Josh Frydenberg told Lateline that the closing of the plant will likely result in Victoria importing electricity from NSW and Tasmania, which will not be cheap. While current estimates vary – with some predicting increases setting in quickly and others forecasting no change to household bills in 2017 and then a more significant increase in 2018 – it is likely that Victorians will eventually experience an increase in their power bill between 4 and 8 per cent.

Naturally the impact of Hazelwood’s closing will not be limited to Victoria – with a 4 per cent share of Australia’s national grid, the entire country’s supply will take a hit and the strain will be especially evident in times of peak demand, such as the hot summer months.

Mr. Frydenberg stated that in order to ensure stability and security of supply in the wake of Hazelwood’s closing, additional measures may be necessary, such as assistance from AEMO (Australian Energy Market Operator) in order to “elicit sufficient generation.”

Only time will tell the full extent of the Hazelwood closure but we can be certain that costs will increase and systems will be reconfigured to compensate for the loss of supply.

Learn more

Watch the Bulk Energy blog for more news and developments on this and other important energy topics.

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