The transfer capacity on the Heywood Victoria to South Australia interconnector has increased by 70MW. This increase is the first stage of the long planned increase in transfer capacity between the states from 460MW to 650MW which is scheduled for completion by mid-year.
The relatively low transfer capacity of the Heywood interconnector has been cited as one of the reasons behind prices in the South Australian market trading consistently higher than in Victoria, which benefits from lower cost generation plants and enjoys the lowest retail prices for electrical energy in the National Market. This pricing issue has become increasingly acute in recent months with the announced closure of several South Australian power stations acting to drive prices to historical highs. Commencing in mid-2015 the Energy Action Price Index, which measures the cost of electricity supplied under retail contracts excluding network charges, has risen from 0.06c/kWh to over 0.10c/kWh and now stands at its highest level since records began in mid-2006.
Another factor contributing to high retail prices in South Australia has been the difficulty in retailers securing adequate volumes of fixed price wholesale contracts to cover their retail load. Whilst the interconnector upgrade when fully complete is expected to bring some downward pressure on prices, it will not in itself increase the quantity of available wholesale contracts, so its impact might be muted.
Fortunately spikes in the retail price in South Australia have commonly subsided within around six months of their emergence. It remains to be seen if the current spike shows any signs of abating in the near term.