In the nine months since introduction of the carbon
price, the average intensity of greenhouse emissions from the
National Electricity Market has reduced by about 5%, year on year,
and the average wholesale spot price of power in the National
Electricity Market has increased by 110%, year on
The Commonwealth's Carbon Price Mechanism commenced on 1July
2012, and we now have nine months of data concerning its impact on
the National Electricity Market (NEM).
Below is a graph showing the average monthly emissions intensity
of sent out electric power generation for each region of the NEM,
in the 12 months preceding the carbon price and the nine months
since the carbon price. Also shown (by the horizontal dotted line)
is the average emissions intensity across all regions of the
According to the Emissions Intensity Index published by the
Australian Energy Markets Operator (AEMO), in the nine-month period
from July 2012 to March 2013, since the introduction of the carbon
price, the average emissions intensity of the NEM across all
regions was about 0.87 tonnes of CO2e per MWh of sent out energy.
In the same nine-month period of the prior year (2011-2012),
without the carbon price, the average emissions intensity of the
NEM across all regions was about 0.92 tonnes CO2e of per MWh of
sent out energy. This translates into a reduction in emissions
intensity of about 5%.
There was also a 2.2% reduction in total demand for grid energy
from the prior year period to the current year. This, coupled with
the reduction in emissions intensity, made the total emissions from
sent out generation in the NEM, in the nine months since the
introduction of the carbon price, 7.6% less than the equivalent 9
month period in the prior year.
Part of that reduction in demand is likely attributed to a
decrease in industrial production demand for energy, and some is
likely attributable to the rapid growth in rooftop solar PV
systems, which will usually reduce grid energy imports.
More dramatic is the shift in spot prices in the NEM following
the introduction of the carbon price.
According to AEMO's price and demand tables, in the 9 month
period from July 2012 to March 2013, since the introduction of the
carbon price, the average spot price of the NEM across all regions
was about $59.74 per megawatt hour of electric energy. In the same
nine-month period of the prior year (2011-2012), without the carbon
price, the average spot price of the NEM across all regions was
about $28.26 per megawatt hour. This translates into an average
spot price increase of about $31.49 per megawatt hour, or a 111%
increase in wholesale market power prices.
There are many factors other than the carbon price which can
affect emissions intensity and spot market prices, including
weather, power demand, plant and transmission outages, fuel prices
and market behaviours generally. For instance, there was a large
shift in emissions intensity in Victoria shortly before the carbon
price commenced, due to plant outages in Victoria, which can be
seen in the first graph as having a significant effect on emissions
intensity in that state.
Also, spot market power prices are not indicative of the net
revenue received by generators or the net costs paid by power
retailers, because in most cases a large proportion of their
wholesale sales and purchases of energy are priced according to
forward hedging contracts rather than spot purchases, and the NEM
spot price mostly represents only a dispatch and balancing price,
against which those forward hedging contracts are settled.
Some of the spot market price increases, particularly the peak
that occurred in the Queensland region in January 2013, were
influenced mainly by unexpected weather impacting on generation and
localised market dynamics, rather than the carbon price. But the
trend line for NEM spot prices, and futures exchange prices,
appears to be about 90-100% above where it was prior to the
introduction of the carbon price.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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