New entrant costs and pool price projection, 2000
Abstract
This Technical Paper provides an updated view of the New Entrant costs for large scale grid connected generators in the NEM, along with a view of the consequential pool price outlook in the NEM.
Similar outlooks were provided in 1998 (ESAA conference) and 1999 (ACA conference) and this paper is an update of these earlier discussions.
Sinclair Knight Merz presented a paper at the ESAA's power generation conference in 1998 on the anticipated new entrant cost for a large, advanced technology, combined cycle plant.
Further discussion/update on this parameter plus on potential pool price outlooks consistent with this new entrant price assessment was provided at an Australian Cogeneration Association seminar in Melbourne in November 1999.
In this paper we:
- update our expectations for the new entrant plant,
- provide our expectations for other new entrant configurations and issues in this assessment, and
- provide an indication of the impact of these new entrants on the regional pool prices in the NEM using pool price projection models.
The assessment of the new entrant cost is fundamental to an assessment of the medium to long term pool price outlook. If a potential new entrant assesses that a price at or above his assessed long-run-marginal cost is available in the market, after allowing for the impact of his plant on the market, the new entrant will enter the market. In general terms then, prices should trend up to the new entrant cost as supply and demand come into balance.
For this year’s update, we have chosen to conduct the new entrant cost assessment by looking at what has changed in our assessment since last year.
The key elements in a build-up of new entrant costs are:
- Capital cost,
- Cost of capital,
- Fuel cost, and to a more minor extent,
- Operating and maintenance costs
Note that only a single scenario is analysed in this assessment with respect to new entrants and interconnectors. The impact of greenhouse gas responses (including the 2% renewables measure) are not included (discussed below). Costs and prices noted are real, $2000.
The assessment presented on an annual average price outcome basis which does not capture the detail of volatility and price excursions at maximum system load.
For a complete copy of this Technical Paper, please click on the SKM Technical Papers link in the 'For further information, contact' area below.