Why You Need an Energy Procurement Strategy!
As we transition towards a more renewable future the way to procure energy has changed and for those that don’t move with the changes, it can be very costly.
Electricity and gas price increases in 2022 were unprecedented and primarily driven by surges in coal and gas prices used in electricity generation.
Recognising the volatility, the federal government introduced gas price caps in December last year. As shown in the graph below, the caps and favourable weather conditions providing increased renewable energy generation, have favourably impacted wholesale prices.
IMPORTANT - Do you have an energy procurement and management strategy?
Current Strategy Price Risk Considerations
The risk of future price volatility remains high as we continue to work towards an ambitious target requiring 50% of all electricity generation to come from intermittent renewable sources by 2030.
With no coherent national energy policy in place and additional Coal Fired generator closures, reduced plant output and a rising number of generation outages, we can expect high price volatility over the next 3-5 years.
In March and April, the extreme volatility in electricity futures prices resulted from:
- Delayed outages of QLD's Callide C coal units, delaying return to service to Q4 2023.
- Voluntary administration of Callide C's part owners, so uncertainty regarding their ability to fulfill contracts.
- Firm spot market outcomes, indicating a tight demand/supply balance, particularly with the pending closure of Liddell Power Station.
- Anticipated price increases of $30/MWh and $50/MWh in the NSW and QLD markets during Q2/Q3 from Liddell Power Station closure and existing supply restrictions,.
- NSW Labor consider acquiring Eraring Power Station to extend its operation beyond 2025.
- Brookfield agree to purchase Origin Energy, and potentially keeping Eraring Power Station open for an extended period.
RECOMMENDED ACTIONS
Considering these developments - what can you do? It is highly recommended QHA members :
- Review their energy contracts and have a procurement strategy in place.
- For any electricity agreements expiring within the next three years, be prepared to enter in to contracts from today.
- Taking proactive steps now will help secure favourable pricing and contract terms, ensuring the financial stability and smooth operations of your business.
- Should you require any further assistance or guidance regarding energy procurement, strategy and contract negotiations, our team is here to support you.
NEXT STEP
We trust the above will encourage you to get your strategy in place.
If you would like assistance, or a FREE assessment of your situation, including a check of all your current changes then please click below.
