Australian Energy Market Summary - August 2021

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The National Electricity Market

Spot prices reduced significantly in all States in August back to levels closer to those we were seeing before the major plant outages seen over the last couple of months. Prices remain elevated in NSW and QLD relative to where they were 12 months ago, contributed to by the on-going outage of a unit at Callide power station and higher fuel costs. TAS, VIC and SA spot prices were all lower than they were 12 months earlier. The table below shows the average spot prices for the month and also the average peak price. Peak prices were not as divergent from average price this month reflecting reduced price volatility this month, however the long term trend is increasing volatility especially with more extreme pricing occurring during morning and evening peak periods.  

The following graph shows the daily Average Spot Price for the last 6 months, with the current month highlighted for clarity. The decrease in spot prices in all States in August relative to the last few months is clear to see.

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Electricity Generation Mix

Total generation for August decreased by 8.7% from July levels due to milder weather across Eastern States and reduced demand due to Covid lockdowns

All fuels apart from Solar were down on the previous month. Solar output increased by 2.9% as we had longer, clearer days. After some record wind output in July, wind generation declined 10% in August.

Gas Generation

Gas generation decreased in August, dropping 20% on July levels as lower demand and increased availability of coal generation pushed back the need for as much gas. It was also significantly less (17%) than in August last year. Gas generation decreased in most States, though most significantly in TAS, which had no gas generation in August, NSW (-72%) and QLD (-25%). VIC was the only State where gas generation increased (5%).

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Hydro Generation

Water storage levels in Hydro Tasmania’s system continued to rise through August with sustained high inflows into the catchment areas. Hydro generation remained high, however it did little to impact increasing storage. Storage at the end of the month finished at 6,615GWh (46% full), an increase of 660GWh over the month. This is now well above the 5 year average as shown in the following chart.

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Snowy Hydro’s storage levels increased substantially during August with increased inflows and reduced requirement to generate, with lower demand and increased availability of other fuel sources. Snowy finished the month 37% of full (1,953Gl). Levels are still 7% below the 5 year average, however it is now well above the minimum levels seen in the last 5 years.

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Climate outlook overview (from BOM)

Spring (September to November) rainfall is likely to be above median for the eastern two-thirds of Australia, extending into south-east WA. However, below median rainfall is likely for parts of western WA and south-west Tasmania.

Maximum temperatures for spring are likely to be above median for the northern tropics and the far south-east of Australia. Below median daytime temperatures are more likely for other areas of southern and central Australia, and southern Queensland.

Above median minimum temperatures for spring are very likely for all of Australia, except southern WA. The chances of warmer or cooler than median nights are roughly equal for some parts of southern WA, but likely to be below median in south-west WA.

The negative Indian Ocean Dipole is forecast to continue for spring, and large parts of the eastern tropical Indian Ocean are warmer than average. This can favour above average spring rainfall for parts of Australia. The El Niño–Southern Oscillation is neutral and forecast to remain so, despite cooling of the tropical Pacific likely in the coming months. This cooling may also be increasing the chances of above average spring rainfall for much of eastern and northern Australia.

New Renewable Generation

Renewable generation (wind and solar, including roof-top solar) increased again in August, with increased solar more than offsetting a reduction in wind generation. Overall renewable generation was 5.7% more than in July and close to 20% more than the same month a year ago. The following chart shows the monthly energy produced for each of these renewable types since 2017. As we move into the windier spring months, we would expect to see new records being set in total renewable generation in the coming months.

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The Electricity Futures Market

CY22 contract prices were static in NSW during July, dropping slightly in all other States, following sharp increases in recent months.

CY23 and CY24 contracts were also flat apart from SA in CY24 which stepped up in price in the middle of the month.

The greater risk assigned to NSW is clearly seen in all years with prices about $10 -15/MWh higher than all other States. 

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The Gas Market

Domestic prices eased dramatically during August with milder temperatures and expectations of reduced demand due to Covid lockdowns driving a nearly 40% drop in prices at the Wallumbilla Gas Hub, down to $7.6/GJ.

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Local prices bucked the international trend as LNG netback prices increased again in August, ending the month at $14.85/GJ – marginally up on last month. Prices remain more than six times the Covid induced lows of the middle of 2020. The futures market also rose sharply with average prices for the rest of 2021 now between $21 -$24/GJ (compared to $17.5 – 19.5/GJ last month) and nearly $15.5/GJ in 2022 (compared to $13/GJ last month).

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Gas storage is an important factor in the gas market, especially during the colder winter months in the southern States. The main storage facility at Iona recovered somewhat during August with lower gas demand. It ended the month at 11.4 PJ – a 15% increase. Storage is now back within a range that would normally be expected this time of year.

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The Coal Market

Like gas, the price of coal can flow through and have an impact on the electricity market. Coal, especially black coal, is often the marginal generator in a number of States. Thermal coal is also an internationally traded commodity so what happens in international markets can be important.

The following graph shows international prices for thermal coal over the last 10 years. Prices continued to increase during August, ending the month at a fresh 10 year high of $174.6USD/T – a 25% increase over the month. Prices have more than doubled in 2021.

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Environmental Certificates

The following graph shows environmental certificate spot prices over the last 12 months.

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During August VEEC prices continued to climb, ending the month at $72.5/certificate – up more than 10% over the month, and up well over 100% on a year earlier.

ESC prices also continued to increase during the month reaching a high of $38.4 at the end of August – an increase of $2.3 over the month.

LGCs stayed relatively flat during the month, increasing $0.50 over the month to close at $34.75. Calendar 2021 also finished at $34.75, up $0.50 on the prior month. Calendar 2022 closed $0.75 higher at $30.00 while Calendar 2023 closed at $26.25, down $0.50. 2024 certificates gained $0.75 closing at $23.25. Calendar 2025 increased the most, closing at $16.25, up $1.50.

STCs increased slightly during the month, closing at $38.9 – up $0.4 on the month.

About this Report

This energy market summary report provides information on wholesale price trends for all regions within the National Electricity Market (NEM) and environmental scheme certificates.

Please note that all electricity prices are presented as a $ per MWh price and all certificate prices as a $ per certificate price.

All NEM spot prices are published by the Australian Energy Market Operator (AEMO). Futures contract prices are sourced from ASX.

Further information can be found at the locations noted below.

• NEM Spot market – AEMO publishes a range of detailed information which can be found here: https://aemo.com.au/Electricity/National-Electricity-Market-NEM/Data-dashboard
  

• Weather and Climate data – The Bureau of Meteorology publishes a range of weather related information which can be found here: http://www.bom.gov.au/climate/

Disclaimer

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