The National Electricity Market
December saw the Wholesale Market continue the large falls seen in recent months. Prices are now back close to (and in Victoria and Queensland’s case below) what they were 12 months ago. High levels of renewable generation, and reduced reliance on gas and coal, coinciding with reduced demand contributed to average spot prices being significantly lower than their winter peak levels.
The following graph shows the published average monthly spot price for each State since the middle of 2019. The States all had falls varying from 24 -47% in December. Average spot prices were within a range of $31 (VIC) to $85.5/MWh (QLD)
High fuel costs and generation availability, both thermal and renewable, continue to be risks to the reliability and costs of the electricity system, especially heading into the typically high demand January / February period.
Electricity Generation Mix
Total grid-scale generation for December increased by 3.9% from November levels. Some of this (about 3%) will be due to there being one more day in the month. The underlying increase would have largely been driven by hotter weather during the month lifting gross demand, offset somewhat by increased behind the meter, roof-top solar generation as the days get longer and sunnier.
Utility scale solar increased again last month – up 21% on November levels. Gas use fell another 22% after similar falls in recent months, while hydro also reduced by 21% as they looked to conserve water while spot prices were low. Coal use increased by 7% as units returned from maintenance outages.
Gas Generation
As noted above gas generation decreased again in December – down 22% from November levels. It has now reduced 74% from its winter peak. Compared to 12 months ago gas generation was 32% lower than it was in December 2021.
Gas generation decreased in all States. It fell 41% in NSW, 33% in SA, 15% in VIC and 13% in QLD. It was also down 32% in TAS (very low levels compared to other States).
Hydro Generation
After being at historically high levels for the last few months, in December hydro generation decreased by 21% to be back close to the 5 year average level as shown below.
Water storage levels in Hydro Tasmania’s lakes decreased in December. Storage ended the month at 6,546 (45.3% full), a decrease of 106GWh over the month. This is 7% lower than the same time last year but remained close to the 5 year average level as shown in the following chart.
Snowy Hydro’s storage levelled off during December with reduced inflows during the month. Snowy finished the month 71% of full (3,759Gl) – up 2% over the month. Thanks to La Nina, levels remain well above the highest they have been in the last 5 years as shown in the following chart.
Climate outlook overview (from BOM)
Large parts of Australia have close to equal chance of above or below median rainfall for the period February to April.
Above median rainfall is likely (greater than 60% chance) for southern coastal parts of New South Wales, far eastern Victoria and parts of eastern Tasmania.
Below median rainfall is likely (greater than 60% chance) for parts of Western Australia, central Australia and almost all of South Australia, with areas of South Australia and Western Australia having an increased risk of unusually dry conditions (bottom 20% of historical totals).
February to April maximum temperatures are likely to very likely (60% to 80% chance) to be warmer than median for almost all of Australia. Below median temperatures are likely (greater than 60% chance) for the New South Wales central coast and for far eastern Victoria.
February to April minimum temperatures are likely to very likely (greater than 60% to 80% chance) to be warmer than median for almost all of Australia, except over north-eastern New South Wales, and around the Great Australian Bight, where there is an equal chance of above or below median minimum temperatures.
This forecast reflects the status and forecasts for several climate drivers, including La Niña, positive SAM and warm ocean temperatures around northern Australia.
New Renewable Generation
As anticipated it was another record month for renewable generation (wind and solar, including roof-top solar), up a further 10.6% on the previous all-time record set last month. Total renewable generation was 6,088GWh – up 17% on the same month a year ago. Wind generation was up 4% in December compared to November but up 15% compared to December last year. Utility Scale Solar generation was up 21% from November levels and up 21% over the same month last year. The following chart shows the monthly energy produced for each of these renewable types since 2017.
The Electricity Futures Market
In December the Federal Government announced its long awaited and well telegraphed price caps on gas and coal. Leading into the announcement and in the time after it was made electricity prices in the Futures markets dropped, at times dramatically, as traders evaluated the likely flow-on impacts the caps would have on electricity prices.
NSW prices dropped in all CYs - CY23 dropped 39.5% closing at $127, CY24 fell 37% to $104, while CY25 closed at $102 - down 30% over the month.
Calendar Year Contracts for New South Wales
QLD prices tracked similarly to NSW, down 44% at $121 for CY23, dropping 35% in CY24 closing at $93, and CY25 finishing at $88 – down 25%.
Calendar Year Contracts for Queensland
VIC futures prices started much lower than its neighbours to the north but also had significant drops through December. CY23 closed at $89 – down 32%, CY24 was down 30% at $68 while CY25 was down even more at nearly 35%, closing at $64
Calendar Year Contracts for Victoria
SA has much less liquidity in the futures markets than other States so changes tend to be lumpier and less a true reflection of the underlying market. Still the steep falls were evident here as well. For completeness we have included the graph below.
Calendar Year Contracts for South Australia
The Gas Market
Global energy prices continued the falls we have seen in recent months, but continue to be at levels well above what we would have considered to be very high only 12 months ago. Lack of investment in new gas supply internationally over a number of years had already resulted in price increases, before the conflict in Europe accelerated those impacts.
LNG netback prices increased in December ending the month at $41.11/GJ – up 22% from last month but not as high as some were expecting as we move through the northern hemisphere winter. Forecast 2023 netback prices are $34.37 – down 20% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $31.09 – down 6% compared to November.
Domestic spot gas prices dropped considerably through December as demand reduced – particularly due to less gas fired electricity usage, and with increased domestic supply due to planned maintenance at one of the LNG export terminals reducing the amount of gas being exported. The Government cap on gas prices in theory should not apply to spot market gas, however it may have also contributed to some of the spot gas price reductions.
The following graph shows the 30 day rolling average price at Wallumbilla gas supply hub – ending the month at $14.8/GJ, a 29.5% decrease from November levels, and still well below LNG netback levels
Gas storage at the key Iona storage facility increased through December. Storage ended the month at 18.9 PJ – a 28.6% increase over the month and now more than anything we have seen at this time of year for the past 5 years
The Coal Market
The global energy crisis has been as much about coal as it has gas. The war in the Ukraine has driven energy prices, including coal, up. Prices were flat during December ending the month unchanged at close to $US400/T.
These prices remain well above anything seen in the last 10 years as shown in the following graph.
High international coal prices continue to be an important driver of high electricity prices especially in the States most reliant on black coal generation – ie QLD and NSW. As anticipated last month price caps were applied to coal – capped at $125/T, a significant discount to international prices. The danger of course with any form of price control, and which has been widely publicised since the caps were introduced, is that they may discourage investment and therefore, longer term create an issue with supply shortfalls. It will be very interesting to see how it all plays out.
Environmental Certificates
The following graph shows environmental certificate spot prices over the last 2 years.
Spot LGCs declined significantly during December – down 13% at $57 per certificate, while ESCs and VEEC both fell about 5% over the month. STCs were flat close to the price cap of $40 while ACCU increased 4% to $33.75
Future dated LGC certificate prices all decreased significantly during December. CAL 22, 23, 24 and 25 all reduced 13 – 17% from November close.
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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