The National Electricity Market
January saw the Wholesale Market correct itself from last month’s lows – increasing after a number of months of falls. The following graph shows the published average monthly spot price for each State since the middle of 2019. The States all had increases varying from 14 -61% in January. Average spot prices were within a range of $48 (VIC) to $99/MWh (QLD).
Electricity Generation Mix
Total grid-scale generation for January increased by 7.3% from December levels. This increase would have largely been driven by hotter weather during the month lifting gross demand.
Utility scale solar decreased slightly last month – down 3% on December levels, as did Wind – down 5%. Gas use increased 37% from December lows, while Coal also increased by 10%. Hydro increased in line with the overall increase in demand.
Gas Generation
As noted above gas generation increased in January from the very low levels seen in December – up 37%. It has still reduced 64% from its winter 2022 peak. Compared to 12 months ago gas generation was 28% lower than it was in January 2022.
Gas generation increased in all States. It rose 108% in NSW, 88% in VIC, 32% in SA, and 27% in QLD. It was also up 219% in TAS (very low levels compared to other States).
Hydro Generation
Hydro generation increased in January by 7% from December levels to be well above the 8 year average as shown below.
Water storage levels in Hydro Tasmania’s lakes decreased in January. Storage ended the month at 5,979 (41% full), a decrease of 567GWh over the month. This is 7% lower than the same time last year but remains well above the 8 year average level as shown in the following chart.
Snowy Hydro’s storage reduced slightly during January with reduced inflows during the month. Snowy finished the month 69% of full (3,686Gl) – down 2% over the month. Thanks to La Nina, levels remain well above the highest they have been in the last 8 years as shown in the following chart.
Climate outlook overview (from BOM)
For February to April, much of the country has close to equal chances of above and below median rainfall, but with a chance (60 to 70%) of below median rainfall on the west coast and some parts of inland Australia. Above median rainfall is moderately likely (60 to 70% chance) for Tasmania, the eastern Top End, and northern Cape York Peninsula.
February to April maximum temperatures are likely to very likely (60% to greater than 80% chance) to be warmer than median for large parts of Western Australia, southern Queensland, and Tasmania, and moderately likely (60 to 70% chance) for parts of the northern and southern coasts and central Australia. There is a chance of below median maximum temperatures (65 to 75% chance) for areas of coastal New South Wales and eastern Victoria.
February to April minimum temperatures are likely to very likely (greater than 70% chance) to be warmer than median across most of the country, but chances are close to average for areas of inland southern mainland Australia.
This forecast reflects the status and outlook for several climate drivers, including La Niña in decline.
New Renewable Generation
Total renewable generation (wind and solar, including roof-top solar) in January ended up being just short of the record set in December. Total renewable generation was 5,809GWh – down 4.6% on last month but up 14% on January 2022. Wind generation was down 5% in January compared to December and only up 2% compared to January last year as new wind projects in the last 12 months dried up. Utility Scale Solar generation was down 3% from December levels but up 23% 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
NSW prices increased in all calendar years - CAL23 increased 8% closing at $133, CAL24 rose 19% to $123, while CAL25 closed at $129 - up 25% over the month. CAL26 also increased 9% to $124.5.
Calendar Year Contracts for New South Wales
QLD prices had smaller increases than NSW, up 4% at $122 for CAL23, increasing 8% in CAL24 closing at $100, and CAL25 finishing at $92 – up 5%. CAL26 increased 1% to $89.
Calendar Year Contracts for Queensland
VIC futures prices started much lower than its neighbours to the north but also had similar sized increases through January. CAL23 closed at $92 – up 6.5%, CAL24 was up 7.5% at $74 while CAL25 was up 5%, closing at $69. CAL26 increased just 0.5% to $70.
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. 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 reversed the price increases of last month, decreasing in January, ending the month at $33.42/GJ – down 19% from last. Forecast 2023 netback prices are $25.76 – down 25% on what the ACCC was forecasting last month. Forecast prices for 2024 are now sitting at $22.61 – down 27% compared to December.
Domestic spot gas prices continued the large drop observed last month, largely driven by reduced demand – particularly due to less gas fired electricity usage. 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 $12.3/GJ, a 17% decrease from December levels, and still well below LNG netback levels.
Gas storage at the key Iona storage facility increased again through January. Storage ended the month at 21 PJ – an 11% increase over the month and now more than anything we have seen at this time of year for the past 6 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 dropped considerably during January ending the month at $US236/T, down over 40%.
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.
Environmental Certificates
The following graph shows environmental certificate spot prices over the last 2 years.
Spot LGCs declined significantly again during January – down another 13% at $50 per certificate, while STCs and VEEC were close to flat. ESCs and ACCU both increased by close to 10% - to $32.5 and $37 respectively.
Future dated LGC certificate prices decreased again during January for CAL23 and 26 – down 4% in both years, but rebounded for CAL24 and 25 up 5% and 9% respectively.
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/
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