The National Electricity Market
After the significant falls in the Wholesale Market in August, spot pricing was relatively stable through September. The continuation of milder weather, increased coal fired generation, 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 southern States all had falls varying from 8 -15% in September, while NSW and QLD both increased by 4% and 18% respectively. Average spot prices were within a range of $112 (VIC) to $157/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, though moving into the typically lower demand, spring period has eased some of those pressures. Summer will be the next challenge.
Electricity Generation Mix
Total grid-scale generation for September decreased by 9.7% from August levels. Some of this (about 3%) will be due to there being one less day in the month, and there being some public holidays during the month. This 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 14% on August levels. Wind generation was down 19% in the month and gas use fell another 29% after similar falls last month. Coal use fell in line with overall drop in demand.
Gas Generation
As noted above gas generation decreased again in September – down 29% from August levels. It has now reduced nearly 60% from its winter peak. Compared to 12 months ago gas generation was only 8% above September 2021. Gas generation decreased in all States. It fell 55% in VIC, 29% in QLD, 18% in SA and 5% in NSW. It was also down 40% in TAS (low levels compared to other States).
Hydro Generation
Hydro generation remained at similar levels to last month – just 3% down on August levels. However it was back to near the maximum seen over the last 5 years as we typically expect generation to be reducing at this time of year.
Water storage levels in Hydro Tasmania’s lakes decreased slightly in September. Storage ended the month at 5,741 (40% full), a decrease of 45GWh over the month. This is still 19% lower than the same time last year and below the range seen at this time in the last 5 years as shown in the following chart.
Snowy Hydro’s storage levels increased again during September with high inflows during the month. Snowy finished the month 56% of full (2,956Gl) – up 9% 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)
October to December rainfall is likely to be above median for the eastern half of Australia, but below median for the west coast and the northern and central Western Australia.
For the fortnight 3 to 16 October, above median rainfall is very likely (greater than 80% chance) for much of the eastern half of Australia, decreasing to moderately likely (60% to 70%) for the Kimberley and Eucla districts of Western Australia and the south-east of the Northern Territory. For western parts of the South West Land Division of Western Australia, there is a moderately likely chance of below median rainfall.
October to December maximum temperatures are likely to be above median for the northern tropical coastline, the Kimberley district and west coast of Western Australia, and Tasmania; cooler than median days are likely across much of the south-eastern half of the mainland, with chances greater than 80% around the Bight, most of New South Wales and southern Queensland.
Minimum temperatures are generally likely to be warmer than median for October to December for northern Australia, the west coast of the mainland, and south-eastern Australia; cooler nights are likely for south-east parts of Queensland, north-east parts of New South Wales and the south-east interior of Western Australia extending into far west South Australia.
La Niña, a negative Indian Ocean Dipole event, a positive phase of the Southern Annular Mode and warmer waters around Australia are all contributing to wetter outlooks over large parts of Australia.
New Renewable Generation
Renewable generation (wind and solar, including roof-top solar) decreased slightly in September with increased solar more than offset with a decline in wind generation. Total renewable generation was 4,668GWh – down 4% on August and up 6% on the same month a year ago. Wind generation was down 19% in September compared to August, but up 4% compared to September last year. Utility Scale Solar generation was up 14% from August 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.
Expect new renewable generation records to be broken in the next few months as wind generation increases around the equinox and the days become longer and brighter, increasing solar generation.
The Electricity Futures Market
At odds with the general declines in the spot market in the last couple of months, futures prices increased in all years reflecting that energy traders may be expecting fuel prices to remain higher for longer, and potential delays in new renewable supply coming into the system.
CY23 NSW prices increased to close to $240 before falling to end the month at $224 – up 11% in the month. QLD prices increased to $223 before dropping to $216 – up 13% in the month. VIC again increased early in the month to $153 before falling and rising again to end the month at $154 – up 19%. SA increased throughout the month finishing at $193 – up 28% in the month.
CY24 increased between 20 – 28% in all States through September. NSW remained the highest priced State, up 20% at $166. VIC increased 21% to $100, SA up 28% to $151, while QLD increased 23% to $139. CY25 had NSW up 12% at $149. SA was up 27% at $134, while QLD was up 18% at $109. VIC remained the lowest priced CY25 State at $90 – up 13%.
Contracts for the 2023 Calendar Year (CY23)
Contracts for the 2024 Calendar Year (CY24)
Contracts for the 2025 Calendar Year (CY25)
The Gas Market
Global energy prices remained high during September as on-going lack of supply in Europe, brought on by the strong post COVID lockdowns economic recovery, followed by the war in the Ukraine, has continued to result in elevated wholesale prices for gas and electricity.
LNG netback prices increased again in September ending the month at $66.99/GJ – up 19% from last month. Expected prices for the rest of 2022 have fallen slightly, the average for the year down now to 43.55/GJ (a 7% decrease on last month). Forecast 2023 netback prices increased 4% to $61.07/GJ – well above historical levels.
Domestic spot gas prices bounced back up in September. The following graph shows the 30 day rolling average price at Wallumbilla gas supply hub – ending the month at $20.6/GJ, a 28% increase from August levels, but still less than a third of netback levels.
Gas storage decreased at the start of the month but then increased ending the month at 12.2 PJ – a small 2% decrease over the month and within the normal operating range 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 hovered around the $US435/T all of the month, dropping at the end of the month, closing at $US404/T – down 7%.
These prices remain well above anything seen in the last 10 years as shown in the following graph.
We have been saying for some time in these reports that high coal prices are part of the driver for higher spot and futures electricity prices, however in the last 6 months a number of issues have really emphasised the impact of these high international prices. Some coal fired generators have had problems with their supply of coal not being able to meet contracted volumes. Some of this has been caused by flooding at various coal mines. These generators have been forced to either buy significant volumes of coal at spot prices – which we know to be very high, or to reduce the availability of their generation, both of which put price and reliability pressure on the wholesale electricity market.
Some of the coal supply issues brought on by flooding have eased in the last 2 months, however a forecast repeat of last year’s La Nina event and accompanying high rainfall is raising some concerns of a recurrence of last winter’s events.
Environmental Certificates
The following graph shows environmental certificate spot prices over the last 2 years.
LGCs had another significant uplift through September peaking at $70 before ending the month at $64.5 – up 10%. The market appears to be anticipating increased demand for LGCs from companies attempting to meet net zero obligations. ESCs and ACCUs also increased by around 7% over the month. Both VEEC and STC prices were flat.
Future dated LGC certificate prices had significant increases in all years apart from CAL 26 which was flat. CAL 22 and 23 both increased by around $6 (10%), while CAL 24 and CAL 25 increased by $2.5 (5%) as shown in the following graph.
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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