Energy Market update September 2020

An opportunity opens up.

Spot Market electricity prices were down in August, reflecting lower demand due to milder weather and the on-going impacts of Victoria’s lockdown, and from increased renewable generation.

But there’s other good news as well.

Futures prices in August have remained relatively static compared to the large reductions we have seen over the last 12 months. These reductions have been largely driven by increased renewables forecast to come into the market, with little corresponding expected reduction in thermal (coal) generation until 2023 when Liddell (2,000MW) is due to be retired. There has been a widening of the gap between QLD and other States as the renewable energy target there is pushing additional generation into an already, at times, saturated market – pushing down expected prices. By 2023 NSW prices are now clearly expected to be the most expensive in the NEM due to the uncertainty created by the retirement of Liddell.

The gas market has also reduced considerably over the last 12 months, with spot prices currently at levels we have not seen for many years. Contracted prices, while lower than they have been recently, still do not fully reflect the reductions we have seen in the spot market, or in the longer term forecasts for LNG that our domestic gas prices are increasingly linked to.

Time to lock in?

The lower future electricity prices are creating an opportunity for buyers to lock in lower energy costs for the next two to three years. Even end users who previously contracted at higher prices, but who have a year or two remaining on their contracts, may be able to negotiate arrangements with their retailers to enable them to reduce their costs now.

If you are currently in the market for electricity or gas, or if you want to look at your ability to negotiate a better deal now, don’t hesitate to contact us.