The National Electricity Market
After the significant falls in the Wholesale Market in August, spot pricing was relatively stable through September and October before falling again last month. The continuation of milder weather, improved renewable generation and lower gas prices all 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 17 -41% in November. Average spot prices were within a range of $58.6 (VIC) to $121.5/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 summer period.
Electricity Generation Mix
Total grid-scale generation for November decreased by 6.4% from October levels. Some of this (about 3%) will be due to there being one less day in the month. The underlying decrease would have largely been driven by milder weather during the month and increased behind the meter, roof-top solar generation as the days get longer and sunnier.
Utility scale solar increased – up 25% on October levels. Gas use fell another 16% after similar falls in recent months. Coal use also fell by 11% as overall demand dropped and renewable generation increased.
Gas Generation
As noted above gas generation decreased again in November – down 16% from October levels. It has now reduced nearly 70% from its winter peak. Compared to 12 months ago gas generation is now almost the same as it was in November 2021.
Gas generation decreased in all states. It fell 58% in VIC, 51% in NSW, 4% in SA and 3% in QLD. It was also down 83% in TAS (very low levels compared to other states).
Hydro Generation
After falling in October, last month hydro generation bounced back, increasing by 4% as high inflows continued through the month. Generation remained near the maximum seen over the last 5 years as shown below.
Water storage levels in Hydro Tasmania’s lakes increased in November. Storage ended the month at 6,652 (46% full), an increase of 288GWh over the month. This is still 12% lower than the same time last year but close now to the 5 year average level as shown in the following chart.
Snowy Hydro’s storage levels had yet another big increase during November with high inflows during the month. Snowy finished the month 69% of full (3,679Gl) – up 24.5% 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)
December to February rainfall is likely (greater than 60% chance) to be above median in eastern parts of the eastern states. Below median rainfall is likely for parts of Western Australia.
December to February maximum temperatures are likely (greater than 60% chance) to be warmer than median for most of Tasmania, and most of northern and western Australia. Below median temperatures are likely for south-eastern parts of Queensland, central and eastern New South Wales and most of Victoria.
December to February minimum temperatures are likely to very likely (greater than 60% to greater than 80% chance) to be warmer than median for most of Australia. Below median temperatures are likely for parts of north-east New South Wales.
This wet outlook over northern and eastern Australia is consistent with several climate drivers, including La Niña, a rapidly decaying negative Indian Ocean Dipole event, a positive phase of the Southern Annular Mode, and record warm waters around Australia.
New Renewable Generation
Renewable generation (wind and solar, including roof-top solar) rose to a new all-time record in November. Total renewable generation was 5,504GWh – up 13% on October and up 27% on the same month a year ago. Wind generation was down 3% in November compared to October but up 7% compared to November last year. Utility Scale Solar generation was up 25% from October levels and up 63% over the same month last year. The following chart shows the monthly energy produced for each of these renewable types since 2017.
December may bring a new record as an extra day in the month, and daylight hours extending further, should see increased generation across all renewable types.
The Electricity Futures Market
All States apart from SA continued the drop in futures prices from their October highs.
NSW prices dropped in all CYs - CY23 dropped 2.5% closing at $210, CY24 fell 3.75% to $166, while CY25 closed at $146 - down 13% over the month.
Calendar Year Contracts for New South Wales
QLD prices tracked similarly to NSW, down 1% at $216 for CY23, dropping 10% in CY24 closing at $142.5, and CY25 finishing at $117 – down 15%.
Calendar Year Contracts for Queensland
VIC futures prices started much lower than its neighbours to the north but also had significant drops through November. CY23 closed at $130.5 – down 5%, CY24 was down 12% at $97 while CY25 was down even more at nearly 15%, closing at $98.
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 dropped again in November ending the month at $33.74/GJ – down 24% from last month. Forecast 2023 netback prices are $42.97 – down nearly 30% on what the ACCC was forecasting 2 months ago. Prices for 2024 are also now being published, sitting at $31.09 at the moment.
Domestic spot gas prices remained relatively stable through November but at elevated levels considering the reduced level of demand as winter heating demand declines, and gas fired generation for electricity reduces. The following graph shows the 30 day rolling average price at Wallumbilla gas supply hub – ending the month at $20.9/GJ, a 4% increase from October levels, but still well below LNG netback levels. Everyone seems to be waiting to see what type of price control or regulation that the Federal Government will implement – an announcement is expected before Xmas.
After the significant increase seen in gas storage in October, this flattened out through November. Storage ended the month at 14.9 PJ – a small 0.8% increase over the month and remaining near the top end of what we have seen for 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 increased during November ending the month back up close to $US400/T – up 14%.
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. If price controls are implemented on gas it would seem to make sense to put caps on domestic coal prices as well – otherwise there may be major distortions in electricity generation as gas would potentially be cheaper than coal generation, triggering possible gas shortages.
Environmental Certificates
The following graph shows environmental certificate spot prices over the last 2 years.
Most certificate prices were largely flat during November. ESC prices decreased 9% over the month, down to $32, while ACCU’s increased by about the same amount – up to $32.5.
Future dated LGC certificate prices have mainly decreased from the high levels they were at two months ago. CAL 23, 24 and 25 have all reduced around 10% from October levels. CAL 22 has remained at close to $66 per certificate, while CAL 26 is the only year to have an increase – up 19% to $39.
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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