The wholesale electricity market may sound complicated, but some basic knowledge could help you better manage your energy usage and understand your power bill.
The national energy market is constantly producing energy to meet your consumption on a real-time basis. In times of high demand, it often results in a higher market price for electricity. That's one of the reasons why your energy bill amount can change from month to month.
Let's unpack the different forms of generation that are used based on demand.
In times of low demand, plants that utilise black or brown coal generation are mainly used to produce energy. This is because their operating costs are low, and they are slow to start and shut down. Think of these as the general, run-of-the-mill energy producers most of the time.
When demand ticks up it’s known as intermediate demand or daytime demand. This energy is provided by combined cycle gas turbine (CCGT) plants. They’re quick to start, flexible and their costs tend to sit in the middle of the market.
During a blackout, the hottest day of the year, or other high-demand events, plants with low capital costs but high operational costs are used. These plants are usually run by open cycle gas turbine (OCGT) or hydro generation, and can be ramped up very quickly to meet demands. Their energy is generally the most expensive.
Depending on the demand, the network will pull from one, two or even all three of these sources at once.
The price of electricity at any given time is determined by bids made by generators, based on how much electricity they are willing to supply and the price they want to receive within a five-minute dispatch interval.
To protect the consumer, generators are dispatched to your home or business in price order from lowest to highest up to the level required to match demand – so you’re not paying more than necessary.
Today, the Australian energy market is in a period of transformation. It’s become more than a collection of centralised power generators – home solar batteries have now joined the grid.
How is this possible? One way is the AGL Virtual Power Plant (VPP) – a collection of solar batteries in homes and businesses connected to each other through cloud-based technology. Through this shared data, excess solar power in the batteries can be delivered to the grid in peak periods. It’s a way to help reduce stress on our network that’s powered sustainably by the community, for the community.
And, since it’s charged by Australian sunlight, it’s also reducing our reliance on non-renewable energy resources. The environment, the grid and the community all benefit. But so do battery owners, who get paid for any power they share with the wider network.
What does this mean for the future of our electricity market? By shifting to a two-sided market, it puts more power in your hands by allowing you to generate and share energy and get directly involved in the market.
We’re always looking for solutions that make energy use more efficient and affordable.
That’s why, in addition to the VPP, we also have the Peak Energy Rewards program. It helps you save by alerting you of peak energy usage events. If you use less power during those times, you could receive bill credits and save.
