WEM Reform Price Trends
Why Commercial & Industrial customers have seen changes to their electricity bills since Oct 2023.
This report provides analysis and observations of the recent Wholesale Electricity Market (WEM) Reform that took effect on 1st October 2023 in Western Australia, with a focus on the changes to commercial and industrial customers electricity bills.
Some key points are summarised below, otherwise download the full report below:
Overall electricity prices have increased for customers and this trend seems likely to continue in the near future
There has been an increase of over 20% in $/MWh costs compared to the same time 12 months prior, increases are spread across the board but the biggest contribution comes from Energy. However, it is hard not to point out the percentage increase in ESS costs, which were often described as nominal pre-reform, and may be the biggest shock to many cosumers.
In addition to the $/MWh costs, Reserve Capacity (which is a $/MW cost and not included in the above table) has also increased in the order of 12% with an additional ~25% increase expected from Oct 2024. However, these cost increases are less to do with WEM Reform and more to do with AEMO predicting reduced excess capacity in coming years.
On top of the increases already described, the Energy Price Offer Ceiling and Market fees are projected to increase further during 2024 so it seems likely that overall electricity prices will continue to rise in the near future.
The daily average energy price spread, that is the difference between daytime minimums and evening peaks, has significantly increased
The daily average energy price trend exhibits lower daytime minimums and higher evening peaks leading to a daily average spread around $250/MWh.
This spread is an increase of over 200% compared to pre-reform and is likely to significantly change business cases for behind-the-meter programs, in particular adding incentive for evening peak curtailment and intra-day load shifting.
ESS demonstrate clear daily average price trends, largely opposite to energy price trends, with daytime peaks and overnight lows
Replacing Ancillary Services with ESS, which consists of both Frequency Co-optimised ESS (FCESS) and Non Co-optimised ESS (NCESS), is one of the biggest changes to come out of WEM Reform.
There are now half a dozen additional price signals to consider, however for convenience FCESS and NCESS average daily price trends (at least those relevant to loads) are rolled up into ESS combined and presented in the below chart.
Despite averaging around $10/MWh, the ESS price trends are anything but average. Approximately two thirds of the ESS costs are incurred between 8AM-4PM and as a result, the effect of negative energy pricing common during peak solar hours is reduced. Ironically*, the uplift of ESS prices adds incentive to business cases for the installation of behind-the-meter generation, particularly solar PV.
*Ironic as the rapid uptake of behind-the-meter solar PV is a factor in increasing ESS costs.
Hope you enjoyed some of the highlights.
Interested in more? Download the full report (PDF).
