There is a lot of data and information available about energy markets, which can help you in your procurement processes. It is useful to identify the sources that are most helpful and keep abreast of what other information is available.
In this section
Why tracking energy market developments is important
Keeping informed about energy market developments requires consideration of a vast amount of information. This can be challenging, but can also be beneficial because it may:
- provide a guide for the most appropriate time to negotiate and enter into energy contracts
- inform your negotiating position when dealing with retailers
- affect the optimal duration for your retail energy supply contract
- be incorporated into your businesses budgeting process
- inform steps that you can take to reduce costs, such as improving energy efficiency or developing demand-side responses.
Useful information to monitor includes:
- movements in energy prices, changes in fuel prices or the tightening of supply capacity
- changes in network and ancillary services charges
- new regulatory arrangements which may have an impact on energy prices
Sources of information
The three main sources of information that are readily available and can help in the process are:
- the price of your current energy procurement contracts
- wholesale spot price information published on the Australian Energy Market Operator website and similar information published on the Western Australian Independent Market Operator website for the Western Australian electricity and gas markets.
- electricity futures contract price information published on the d-cypha Trade and ASX websites under Energy & Environment.
Industry Case Study – Amcor – Using data in procurement decisions
Understanding the drivers of the energy market helps you judge if the energy price listed on your bill is fair and reasonable, and will help you improve the price you can negotiate. Many companies track developments in energy markets by monitoring absolute price levels and the degree of price volatility in the wholesale market over time. They aim to make their procurement decisions at a time when they believe electricity is trading cheaper than what it is likely to trade at in the future.
For example, Amcor uses forward pricing information to trigger a request to retailers for a supply contract.
Being able to do this requires Amcor to:
- track energy prices using wholesale market spot price data from the AEMO website (or third party sites) which is particularly useful for demand-side response, and energy futures contract price information from d-cyphaTrade and forward pricing information provided by several of their retailers; and
- monitor load profiles for all major sites using half hourly metered data provided by a Metering Services Provider.
If the comparison between retail price and market prices is reasonable, Amcor accepts the offer.
There is nothing particularly sophisticated about the way Amcor uses forward pricing information. Amcor uses this information to trigger a request to retailers for a supply contract and then compares the offered price with the futures price. If that comparison is reasonable, we accept the offer.
However, we also expect the retailers to offer a compelling and attractive price. We let them know that, if they don’t offer an attractive price, we will look elsewhere.
We accept that the retailers are entitled to recover overheads they incur in providing their risk management services, but we also know the major retailers are in a position to strike good deals with major generators, and they have their own generators as well. We have a pretty good idea of what a rational investor would expect from their investment in electricity generators and we take that into account.
The situation was pretty bad, in respect of futures pricing during 2009 because of the impact of prolonged drought on both hydro and coal-fired generators, and this would have caught out users who had no choice but to seek retail offers when the futures prices were very high. The only way to get around this is to watch the market well in advance, read the signs as best you can and contract during periods of softer futures contract prices.
Amcor’s monitoring of futures contract prices suggest they are achieving retail margins for electricity of approximately $3–$4/MWh, which is considered reasonable given the reduction in price volatility risk achieved through retail contracting and the predictable load profile at Amcor’s major sites.
- Peter Dobney, Group Manager, Resources and Energy of Amcor Limited
Further reading
Both AEMO and the Australian Energy Regulator (AER) publish daily, weekly and longer-term reports on the performance of the electricity and gas markets. These reports include:
- Australian Energy Regulator - Market Reports
- Australian Energy Regulator
- Website
The Australian Energy Regulator publishes daily, weekly and longer term reports on the performance of the electricity and gas markets.
These include summaries of the wholesale spot market and electricity futures contract prices and the annual State of the Energy Market Report.
- Australian Energy Market Operator - Price and Demand Information
- Australian Energy Market Operator
- Website
The Australian Energy Market Operator (AEMO) publishes price and demand information of real time trading (30 minute) and dispatch (5 minute) price and demand data. Information is provided for each region in daily, weekly, monthly and annual formats. Some graph data is downloadable in simple csv file format.
AEMO also publishes an annual Statement of Opportunities Report which provides a 10 year forward look at expected conditions in the gas and electricity markets.