Australian Energy Market Summary - June 2021

The National Energy Market

Spot prices increased significantly in all States in June, from already high levels in May. Average spot prices in June were 6 times what they were in June 2020 in QLD, 3 times in NSW, 100% more in VIC and TAS and 50% more in SA. This was largely due to the explosion at Callide power station in late May, the impacts of which were felt throughout most of June, particularly in QLD and NSW. As Callide units were gradually returned to service through June, average spot prices gradually reduced. The table below shows the average spot prices for the month and also the average peak price. The significant divergence between average spot price and average peak price highlights the impact the outage had on volatility with the more extreme pricing typically occurring during morning and evening peak periods. The other significant market event occurred in Victoria after flooding that occurred in the La Trobe valley resulted in Yallourn power station operating at a reduced capacity due to concerns that the coal mine that supplied it may be breached and flooded. This resulted in elevated spot market prices across VIC, TAS and SA as more expensive plant had to be dispatched in its place.

The following graph shows the daily Average Spot Price across the last 6 months, with the current month highlighted for clarity. The increase over the month compared to previous months is clear to see.

Electricity Generation Mix

Total generation for June increased by 4.6% from May levels as demand increased with the cooler weather across all eastern States increasing heating loads.

Solar output declined by 27% as we moved into the shorter, cloudier winter months, but this was largely offset by an unexpected and welcome 5% increase in wind (unexpected as winter months are typically calmer months). Hydro and gas output increased markedly in June making the most of the higher prices this month brought on by the outage at Callide Coal-fired Power Station, and the reduced capacity at Yallourn.

Gas Generation

Gas generation increased markedly in June, rising 72% on May levels. It was also significantly more (43%) than in June last year, displacing unavailable coal generation. Generation increased in all States, though most significantly in NSW (241%) and VIC (198%) – both on relatively small volumes. QLD also had a significant increase (more than 80%) on much larger volumes.

Hydro Generation

Water Energy storage levels in Hydro Tasmania’s system increased mid-June as high inflows entered the catchment area, but then decreased in the second half of the month as hydro generation was pushed hard to make the most of high wholesale prices in the NEM. Storage ended the month close to the 5 year average at 5,259GWh (up 75GWh over the month) or 36.4% of full storage.

Snowy Hydro’s storage levels dropped for the 8th month running finishing the month at 14% below the 5 year average and approaching minimum levels seen in the last 5 years. Again releases for hydro power stations generating hard to make up for outages at coal-fired stations, more than balanced inflows, resulting in the drop in storage over the month.

Climate outlook overview (from BOM)

July to September rainfall is likely to be above median for most of Australia, though areas in western WA, coastal south-east Australia, and western Tasmania are tending towards a more neutral rainfall outlook. July and August rainfall show a similar pattern though the chances of exceeding the median are not as high in August.

Maximum temperatures for July to September are likely to be above median for the northern tropics and parts of south-west and south-east Australia, while below median daytime temperatures are more likely for a broad area extending from SA across western NSW and into southern Queensland. July and August show a similar pattern, although July is likely to be below median more broadly for much of the southern two-thirds of the mainland.

Above median minimum temperatures for July to September are likely Australia wide. Likewise, July and August outlooks indicate above median minimum temperatures for most parts of the country.

Large parts of the eastern Indian Ocean are warmer than average, and a negative Indian Ocean Dipole event is looking increasingly likely, which can favour above average rainfall for parts of Australia. The El Niño–Southern Oscillation is currently neutral.

New Renewable Generation

Renewable generation (wind and solar, including roof-top solar) reduced again in June. Wind generation increased slightly but this was more than offset by the decline in solar generation as we moved into shorter, less sunny winter days. The following chart shows the monthly energy produced for each of these renewable types since 2017.

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Total generation from these 3 sources was 3,136 GWh in June – 6.3% down on last month, and well below levels seen over the last 9-10 months. It was however still 24% more than June last year.

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The Electricity Futures Market

CY22 contract prices increased again during June as volatility continued in the Wholesale market and the impact of a potential long term outage for the Callide C unit that exploded was factored into Futures pricing. CY22 prices are now up to 50% above their February lows.

CY23 and CY24 contracts were reasonably static across all States during June, apart from SA which increased more than 10% in both years.

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

Contracts for the 2022 Calendar Year (CY22)

Contracts for the 2023 Calendar Year (CY23)

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Contracts for the 2024 Calendar Year (CY24)

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The Gas Market

Prices rose during June by a staggering 42.6% to $10.02/GJ at the Wallumbilla Gas Hub – the biggest monthly increase since December 2016, and the highest price since November 2018. Part of this increase was undoubtedly down to the increased demand for gas for generation, but part would also be due to international prices for gas as discussed further below.

LNG netback prices increased again in June, ending the month at $11.74/GJ – over 20% more than last month. The futures market also rose sharply with average prices for the rest of 2021 now between $14 -$16/GJ (compared to $11 – 12/GJ last month) and over 11/GJ in 2022 (compared to $9.5/GJ last month).

Gas storage is an important factor in the gas market, especially heading into the colder winter months in the southern States. The main storage facility at Iona was drawn down hard during June to provide for increased gas generation, as well as typically higher winter heating demand. It ended the month at 14 PJ – a 36% drop and is now well below its lowest point for this time of year in recent years – as shown in the following chart.

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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. And coal is 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 have increased again over the last month from around $110USD/T up to $132USD/T – an increase of 20%. This follows a similar increase last month. Prices are now at the highest levels seen in the last 10 years

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Environmental Certificates

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

During June VEEC prices climbed to peak at $65 before falling to end the month at $61.25/certificate – still up almost 100% on a year earlier.

ESC prices climbed during the month reaching a high of $33.75 before dropping back at the end of the month to close at $32.25 – an increase of $1.35 over the month.

LGCs continued their fall dropping from $35 at the start of the month to close at $33.25. Calendar 2021 finished at $33.50, down $1.50 on the prior month. Calendar 2022 closed $1.00 lower at $27.00 while Calendar 2023 closed at $22.75, up $1.75. 2024 certificates gained the most closing at $15, up $2.75. Calendar 2025 closed at $7.90, up $0.60.

STCs traded in a narrow band between $38.60 and $38.85, closing at its high – up $0.25 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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