Blue Sky Mining

Press Release 5 August 1998
Wind power ready to enter
Victorian energy market

claims local Green Power producer.

A Story of Survival: The 60-kilowatt Breamlea Wind Generator, on the Victorian coast south of Geelong has been selling all its sent out energy to retailer CitiPower Pty for nearly four years. Despite changes of ownership of both the DB and the wind turbine during that time, the commercial relationship has survived in a wholesale market which has crashed and then languished at at around $15/MWh (one-and-a-half cents per kilowatt-hour!) for the last 18 months.

Greenhouse-friendly: This survival story raises the question of what is the true value of embedded generation, how small producers should negotiate the sale of their Green Power, and to whom. There is some degree of urgency to bring more Green Power online in order to fulfill Australia's GHG reduction targets.

Stockdale's "transparent network" a reality?: The Breamlea wind energy transaction occurs through the wires of another distributor, but not formally through VicPool. The generator's owner, Michael Gunter has set up smart metering, and a data analysis system which correlates his half-hourly energy production with published VicPool prices. His data now extends to to over 50,000 records since July 1995, in database format.

Value Adding: Analysis of the data shows a positive correlation of Victorian wind energy flux with pool prices giving an 8.3% premium over time-weighted SMP (the basic measure of wholesale electricity value) between July 1995 and June 1998. This rises to a 17% premium when Adjusted Gross Energy is factored in (DLF is 1.08) "Add to that the Green Power premium which wind power attracts, and we are talking a seriously value added product," Gunter says. "A truly cost reflective network would also see a fair proportion of the TUOS savings come my way, but I'm not holding my breath for that just yet."

Vital Support: "I thank all electricity customers who have opted to pay a bit more for clean Green Power. Even my small operation would not be viable without their support of renewable technologies through retailers such as CitiPower."

Victoria - "the epicentre of OECD greenhouse gas emissions" "I think all electricity retailers, especially in Victoria - the epicentre of OECD greenhouse gas emissions - should consider wind in their portfolio. Some retailers have unfulfilled demand for Green Power, which can be met in a short time frame, at least by the larger wind farm proposals with their economies of scale."

Getting Technical: Gunter claims that the appropriate analogy for his trade is that of a second-tier customer of CitiPower in the other distributor's franchise zone. "The only material difference from that scenario is that I am 'buying negative energy' from CitiPower."

"I reckon I can legitimately sell more energy than I produce, using the formula for calculating Adjusted Gross Energy. After all, this is the real energy that does not have to be fed through the transmission system for delivery to my neighbour's load. And it is the appropriate measure of a settlement between the local distributor and CitiPower. I believe I have the tacit approval from several industry participants and regulators for this approach."

Given the current wording of the NEM Code, it will surprise many industry analysts to learn that NECA and NEMMCO have both written to Gunter, saying that they see no problem with his energy transaction continuing outside the market once NEM is proclaimed. "They seem to be turning a blind eye to the apparent Code breach in 2.2.5." says Gunter.

Critical Mass: "If I was just a bit bigger, say a 250 kilowatt machine in a 7 metre/sec wind regime, I could afford to become a Pool Participant, and sell through the pool at maximum negative bid, and hedge a reasonable strike price with my customer, anywhere in NEM. This would remove a considerable amount of remaining uncertainty about NECA doing a back-flip and telling me that the whole deal is not kosher after all. It would also clearly oblige the local distributor to settle on the Adjusted Gross Energy attributable to my output, just like any other pool trade."

"It's a good time to lock a long-term contract into place, before the Pool Prices start to rise too much," Gunter adds.

Access the data for free: Skeptics can analyse the data for themselves:

The summary data is available as a zipped Excel 5 spreadsheet "trade.xls", in (12 KB)
A synthesis of primary data is available in dBaseIII+ format for every month from July 1995 to June 1998. These monthly data files are zipped for download as (760 KB). The use in those databases of market data published by the Victorian Power Exchange is gratefully acknowledged.

Contact: Michael Gunter
Phone: +613 9376 7515