Tasmanian Energy Market Update
Hi Folks,
Welcome to our March 2021 Edition.
Goanna Energy Due Diligence Services:
Back in 2016 one of our long term Tassie clients was eagerly pursing a multi-million dollar renewable energy investment. The business had resourced up their "Major Projects Team" to develop the "Game Changing" opportunity. The internally prepared EOI had already been issued and several renewable energy providers had submitted formal bids to deliver this exciting project. As is often the case, Goanna was called into the process late by those charged with responsibility for governing the coffers. Our brief was to undertake independent Due Diligence, analysis and evaluation of the competing proposals and to make a recommendation, to enable the business to commit to the project and a successful proponent.
Our review showed the project was technically close to ideal, with both the energy and renewable energy certificate outputs closely matching the clients energy consumption and Carbon Neutral ambitions. However, we also uncovered a myriad of overly ambitious business case assumptions and contractual issues. This meant that, in our opinion the vast majority of risks sat squarely with our client, whilst the vast majority of rewards sat with the proponents. Our report highlighted the issues and uncertainties to those governing the coffers and the process came to a halt.
Fast forward 5 years and we have had the opportunity to review our advice, in light of actual market conditions which have now transpired. Bearing in mind that the first three to five years of financial performance are critical to the payback period of any major project, due to the nature of Discounted Cash Flows and Net Present Values. In summary the answer is, "Not one Cent" would have been payable to our client over the past 5 years under two out of the three proposals, with the third likely to have yielded around half of the Client revenue predicted by the seller. Why? Quite simply most of the triggers on those overly ambitious assumptions have never been met, or the ambitious energy and Renewable Energy Certificate rates have not transpired. Avid Goanna News readers may recall us ringing the bell on these overly zealous assumptions back in our Sept 2017 Edition "Sun Burns Red Hot for Solar Sellers, whilst Businesses Risk Blindness." https://us8.campaign-archive.com/?u=771eb87f9963e0e126fba1597&id=1a95f7c3dc
Despite these market conditions, to this day, this opportunity remains my Number One example of a renewable energy project that, at least technically, most closely matches the clients energy and environmental needs. I hope one day we will structure a deal that will see it built and delivering the right balance of rewards for effort, to all parties.
Photograph Goanna Principal Consultant, Marc White. Courtesy of Mitch Woolnough, ABC 7.30 Report.
If your business is pursuing energy, renewable energy or large scale battery investments from $100,000 to $100M, you need experienced, independent advice, that is "Fit for Purpose", so call Marc White now on 0418 596 162.
Tasmanian Wholesale Forward Market Tumbles to 5 year record lows
Over the past several months Marc and Kelvin have been busy issuing electricity tenders, evaluating retailer offers and negotiating Market based contracts, covering over 1,000 Tasmanian sites, for industrials, councils, agribusiness and schools, as the forward market has sunk to 5 year lows.
Graph courtesy of our analytics partners SavvyBI https://savvybi.io/
This market ruction is now being openly discussed by industry leaders, with commentary such as, “With wholesale electricity prices falling below $50 per MWh for the first time for more than five years, Origin Energy’s CEO noted that this had fallen below the cost of new-build firm generation.” Source: https://reneweconomy.com.au/origin-profits-collapse-as-it-prepares-for-messy-coal-exit-and-big-battery-plans/
Don't wait for the market to turn, call Marc now on 0418 596 162, to discuss what can be done to save money for your business. We can assist with your electricity contract review and provide you with a professional and diligent market engagement, conducted by Tasmania's leading energy advisory firm.
Solar Feed into Grid Rates collapse:
With energy buy rates at 5 year lows, those who have invested in large (>30kW >~$30,000) solar system's are about to feel the heat. This is because the value of solar energy fed into the grid follows the value of energy sold from the grid, but at a hefty discount due to it's intermittency or "Non-Firm" nature.
On top of the "Non-Firm" discount, the value of solar energy fed into the grid is also in decline due to Micro-Economics 101, which from memory of my old Monash Uni, Open Learning days, says that: If you add Supply (of Solar Energy) from S1 to S2, this will push Price down from P1 to P2 on the equilibrium, all other things being equal. I found this cool graph on the internet to explain the phenomenon:
... and guess what? It's been happening on the spot market, with reduced average spot market prices and an increasing incidence of negative price period's, as both Tasmania and Australia continue to install new solar (and wind) plants.
So what does this mean for commercial/industrial energy users? Well firstly your next energy contract is unlikely to have a "1 for 1" Feed into Grid rate anymore (where the buy rate = the sell rate of each 1/2 hour), nor is it likely to have 9c, 8c, or even 7c/kWh Feed in. It is far more likely that (if it is not being cross subsidised by a pumped up cost in your buy in rates!), that your new Feed in Rates will fall somewhere around 4c/kWh. For those seeking "Time of Use" Feed in Rates, that's about 2c/kWh on the Weekends and about 5c/kWh Mon-Friday.
For Small Scale Solar systems (<10kW single phase or <30kW Three-Phase, <~$30,000 systems) the Regulated "Fair & Reasonable" Feed in Tariff (FiT) currently sits at 8.471c/kWh until 30 June 2021. We would expect that with most of Tasmania's 40,000 Solar system owners relying on the Regulated Fair & Reasonable FiT that the Tasmanian Economic Regulator will be hard pressed to keep everyone happy come July, as the Victorian Regulator (ESC) has just reduced Feed in Rates by 34%. This could also mean that your friendly product seller will soon be knocking on your door to offer you a shiny new $10,000 + battery system to ease the pain of that solar system investment, which may not be delivering the financial returns it was promoted to! Caveat Emptor.
Again, if your business is pursuing energy, renewable energy or large scale battery investments from $100,000 to $100M, you need experienced, independent advice, that is "Fit for Purpose", so call Marc White now on 0418 596 162.
Natural Gas Market Update:
February 2021 saw the first Natural Gas invoices rendered under new Large Market Natural Gas Contracts, providing welcome price relief for Tasmania's Commercial and Industrial Natural Gas users. During 2020 Goanna was delighted to see our Gas Manager, Russell Reid swing into action and negotiate reduced cost outcomes for each and every Goanna gas client, Well done Russell!
But Russell didn't stop there. Goanna had set previous overbilling cost recovery records in 2013 with Marc securing a $120,000 cost recovery for a local council, who had been overbilled for Environmental Certificates. Marc broke his own record in 2016 with a $160,000 cost recovery of overcharged Network Demand fees for an industrial customer. Now 2020 has seen Russell swoop in to take the banner off Marc, with recovery of over $200,000 of gas charges for one very happy new Goanna client. Bravo Russell, what great attention to detail!
If you have any concerns about your businesses current gas invoice/s, or simply want to exercise due diligence in your accounts payable process, simply e-mail a copy of your business gas invoice to russell@goannaenergy.com.au
Goanna Helps TasCOSS Review Tasmanian Residential & Low Income Electricity Prices
Whilst Goanna have served the needs and advocated for the interests of Tasmania's Commercial, Industrial and Small Medium Enterprise energy users for the past 14 years, 2020 marked the first time Goanna were commissioned to help residential and low income households.
Goanna undertook a project for the Tasmanian Council of Social Services (TASCOSS) where we examined Tasmanian residential electricity prices and bills, and compared them to the rest of Australia. We also looked at the impact of the main electricity concessions provided to disadvantaged consumers across Australia to see how Tasmania’s compared. There are a number of interesting findings about Tasmanian residential electricity prices, the distinction between prices and bills, the changing impact of the current residential electricity price cap and wholesale price regulation, and the impact of concessions that have emerged from our work.
We have provided a detailed report to TasCOSS on these matters and made recommendations to them on what advocacy they could undertake based on the results. TasCOSS are currently considering the report before deciding on their response, including public release. We hope to report in more detail in a future newsletter.
This was Goanna’s first report into Tasmanian residential electricity issues and we have enjoyed both the experience and opportunity to work with TasCOSS
There is only so much one person can take on and only so much one business can resource. Peak bodies exist to advocate for the collective interests of their members and Goanna are delighted to count among our clients, many of the states leading peak industry bodies.
If you and your business face seemingly immovable energy issues, call Roman or Marc now on 03 6223 7253 to discuss if a joint approach with your peak industry body may be warranted.
High Voltage Asset Management, HV Conversions & Annual Optimal Specified Demand setting:
Around 100 of Tasmania's large Commercial and Industrial electricity users are connected to the TasNetworks system via a "High Voltage" (HV) Connection and this number has been steadily growing. Whilst TasNetworks tariffs for HV connections are generally more economical than standard Low Voltage network tariffs, the trade off is legal responsibility for these additional and specialist electrical assets, in terms of the "3 Pillars" of compliance, highlighted below:
Since leaving Transend 7 years ago, Goanna quiet achiever and electrical engineer, Sead Pasalic has been assisting our growing number of HV clients with strategic advice to both achieve and maintain compliance and to undertake strategic HV asset reviews and planning for the maintenance, upkeep and eventual replacement of these long-lived assets. Saving our clients 10's of thousands of dollars conducting competitive tenders for HV equipment, design, supply, installation, testing, commissioning, servicing and condition reporting for insurances, compliance and due diligence purposes.
Sead's recent engagements have included LV to HV conversions, business case assessments, retirement and consolidation of aging HV asset infrastructure with safe and modern equipment.
In addition to the initial Business Case covering Tariffs and Configuration options, Sead's support for HV conversions extends to minimising your actual conversion costs. Sead achieves this through competitive tendering, for both direct equipment procurement and installation services. Following this through to completion by overseeing the installation, testing and commissioning processes, including management of the TasNetworks connection process, providing your business with policy and procedure documentation, including access, training and maintenance regimes, to ensure compliance.
If your business needs professional and strategic advice on HV asset management or conversion, or simply to help you nominate the optimum least cost Specified Demand setting, which is due in each April, Call Sead or Marc now on 03 6223 7253.
Is your Business experiencing increasing Power outages or Fluctuations?
Goanna System Planning, Electrical Engineer, Sead Pasalic is working with a range of, mainly industrial clients, who are experiencing deteriorating Supply Quality, impacting on production and causing costly plant outages and restarts.
So, why is this happening now? Many of these events can be triggered by broader Network Power System Events, including significant power "swings" during high imports of power over the Basslink interconnector, into Tasmania, as has been the case over much of the past 6 months. In addition, deeper penetration of renewable energy (additional Non-Synchronous generation - Wind farms & Solar PV) will make the situation increasingly difficult to manage, as "System Inertia" is reduced and the systems resilience to "ride through" supply & demand changes becomes more fragile.
Goanna is working closely with our "Supply quality sensitive" clients, providing information, as well as technical and commercial advice, on the mitigation strategies to address these increasingly costly interruptions.
If your business has experienced costly and inconvenient power supply reliability or quality issues, call Sead or Marc now on 6223 7253 .
TasNetworks bids Farewell to Inaugural CEO Lance Balcombe
TasNetworks and Goanna will soon bid farewell to Lance after over 7 years at the TasNetworks helm. Lance presided over the amalgamation of Transend and Aurora Networks which delivered cost savings to Tasmania's energy users, as well as a safe and reliable power system. These results were achieved, despite the impacts of climate change, severe weather events, low dam levels, an extended Basslink outage and the recent challenges of record levels of non-synchronous generation (Wind and Solar power) entering the Tassie grid. Bravo to Lance and the TasNetworks team, we wish Lance well in his next adventures!
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We look forward to helping you soon, all you need to do is call us on 03 6223 7253!
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