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The National Electricity Market
Spot prices increased in NSW and QLD in October, while reducing in all other States – increasing the North / South divide that has become apparent in recent months. The increases in NSW and QLD are being driven largely by fuel cost increases, these States being more reliant on thermal generation, while in the South increases in renewable energy supply are putting downward pressure on prices. Peak prices (7am to 10pm) in all States in October were less than the overall average – an event that would have seemed impossible a few years ago! This shows the impact of high levels of solar generation (both grid scale and roof-top), often leading to negative pricing during the middle of the day (prices in SA were zero or negative nearly 40% of the time during October) High prices in the evening peak are not doing enough to counter the low pricing at other times, thus leading to this once unlikely event.
The following graph shows the daily Average Spot Price for the last 6 months, with the current month highlighted for clarity. The increases in QLD and NSW is apparent as is their divergence from the other States in the NEM.
Electricity Generation Mix
Total grid-scale generation for October decreased by 3% from September levels. Even though there was an extra day in the month this was more than negated by reducing operational demand, with the milder days and increased roof-top solar generation. New minimum demand records were set on October 31st for SA and VIC, and for the NEM as a whole on the 17th October.
Gas generation and wind reduced most during the month. Wind due to a combination of less wind resource and more economic curtailment (switching off) when negative prices meant they would have been paying to run. Solar output increased by 18% as over 1,000MW of new utility scale solar generation is currently being commissioned across the NEM, and we had longer, clearer spring days. Renewable generation (excluding roof-top solar) again made up nearly 30% of the total. Interestingly coal generation increased by 2%, going against the overall reduction in demand.
Gas generation decreased again in October, dropping a further 8% on September levels as lower demand and increased renewable generation pushed back the need for as much gas. Compared to October 2020, gas usage was 29% lower this year. Gas generation decreased compared to September in all States apart from QLD (31% increase). October decreases by State were NSW (-38%), VIC (-46%), SA (-26%) and TAS (-54%).
Hydro generation increased slightly in October but remained close to the 5 year average as shown in the following chart.
Water storage levels in Hydro Tasmania’s system continued to rise through October with sustained high inflows into the catchment areas. Storage at the end of the month finished at 7,580GWh (52.5% full), an increase of 443GWh over the month. This is now 18% more than the same time last year and well above the highest levels seen, at any time of year, in the last 5 years as shown in the following chart.
Snowy Hydro’s storage levels also increased again during October. Snowy finished the month 47% of full (2,475Gl), up 9% over the month. Levels are now 6% above the 5 year average as shown in the following chart.
Climate outlook overview (from BOM)
November to January rainfall is likely to be above median for much of the eastern two-thirds of Australia, extending into eastern parts of WA.
Extreme climate outlooks show November to January is 1.5 to 3.0 times more likely than normal to see rainfall in the top 20% of historical records for much of Australia away from the west. The month of November has stronger likelihoods, with parts of southern Australia 3.0 to 4.0 times as likely to see rainfall in the top 20%.
Maximum temperatures for November to January are likely to be above median for much of western WA, parts of the north-east coastline, and far south-east Australia. However, below median daytime temperatures are more likely for central Australia, extending into north-west and south-west parts of Australia, as well as eastern NSW extending into southern Queensland.
Above median minimum temperatures for November to January are very likely for almost all of Australia, with roughly equal chances of warmer or cooler than median nights for southern WA.
The tropical Pacific continues to cool, with La Niña thresholds likely to be reached in November and maintained until at least January 2022. This may be increasing the chances of above average rainfall for much of eastern and northern Australia. The Indian Ocean Dipole is expected to return to neutral during November.
New Renewable Generation
Renewable generation (wind and solar, including roof-top solar) increased to another new record level in October of 4,599GWh beating the previous record of 4,393 set last month. Overall renewable generation was up 4.7% in September, and 24% more than October 2020. Wind generation dropped in October, but this was more than made up for by increased solar generation with utility scale solar up 39% on last year, and roof-top solar up 34%. The following chart shows the monthly energy produced for each of these renewable types since 2017. As we move into the sunnier summer months, we would expect to see more new records being set for solar generation.
The Electricity Futures Market
CY22 contract prices increased sharply again in QLD during October reflecting continuing concerns around thermal plant availability in the state, and higher fuel costs. They peaked at $70 – almost double their low point in February, before easing slightly back to $67. VIC and SA prices dropped over the month while NSW was relatively constant.
CY23 showed an uptick in prices in NSW as well as QLD, while SA softened slightly. VIC was flat. CY24 contracts showed a similar trend to CY23. CY25 has just started to be reported with pricing at, or slightly under $50 for all States except NSW which is sitting around $65/MWh.
The greater risk assigned to NSW is clearly seen in all years with prices about $10 -15/MWh higher than all other States, though QLD has eliminated the gap in CY2022 and is narrowing it in CY2023.
Contracts for the 2022 Calendar Year (CY22)
Contracts for the 2023 Calendar Year (CY23)
Contracts for the 2024 Calendar Year (CY24)
The Gas Market
Global energy prices remained in the news during October with a lack of gas storage / supply in Europe leading into their winter meaning that demand for LNG stayed high. However Asian markets have been outbidding them for scarce supply, meaning that there is the real potential of energy supply shortages in Europe over the winter. LNG netback prices increased again in October, ending the month at $39.35/GJ – another extraordinary increase of 77% on last month, following on from a 50% increase the month before! However the forward prices showed some signs that prices may have peaked. Prices for the remainder of the year are expected to fall while next year prices are expected to average $19.75 (compared to $23 last month).
Domestic gas prices have not yet reflected what is happening globally. Spot prices actually reduced slightly (-2.6%) during October to $8.3/GJ, but this level is almost at an 80% discount to LNG netback pricing. If the LNG netback price remain elevated – even at the forecast $20/GJ mark for next year, we would expect this to eventually flow through to the domestic gas and electricity markets.
Gas storage is an important factor in the gas market. The main storage facility at Iona increased slightly during October with lower gas demand. It ended the month at 12.7 PJ – an 8% increase. Storage is now back within a range that would normally be expected this time of year.
The Coal Market
The global energy crisis has been almost as much about coal as it has gas. Thermal coal prices increased again at the start of October, peaking at $240USD/T before falling off a cliff in the middle of the month when the Chinese Government intervened in their market, forcing domestic companies to increase supply while at the same time introducing a cap on the price. International prices ended the month at close to $150USD/T, down 34% in the month, but still around twice what they were at the start of the year.
The following graph shows international prices for thermal coal over the last 10 years.
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. We believe these higher coal prices are part of the driver for higher spot and futures prices in QLD and NSW.
The following graph shows environmental certificate spot prices over the last 18 months.
During October VEEC prices remained high, however the end of the month saw an announcement from the Essential Services Commission which caused VEEC prices to slump. Among other things the ESC allowed the deadline for shutting down the creation of certificates from domestic lighting upgrades to extend to the end of January 2023, and they said that they would be monitoring market prices going forward. Prices immediately dropped from around $75 to $70 – ending the month at $69.75, a 12% drop. However they are still twice what they were a year ago.
ESC prices eased to $36.5 – down $1.6 over the month.
LGCs eased slightly during October for near dated periods, while they increased for later periods. Spot LGCs decreased $0.60 over the month to close at $39.80. Calendar 2021 also decreased finishing at $40, down $1.00 on the prior month. Calendar 2022 also fell – ending $0.85 lower at $39.10. Calendar 2023 bucked the trend closing at $36.40, up $2.90. 2024 certificates gained $2.15 closing at $30.50. Calendar 2025 closed at $22, up $2.00. The first reported trades in a while for Calendar 2026 occurred during October – up $3.90 at $16.50.
STCs gained slightly during the month, closing at $38.95 – up $0.2 on the month.
Australian Carbon Credit Unit (ACCU) pricing continued its rapid increase first commented on in last month’s report. Prices are now at $37 ($26.5 last month), up 40%. ACCU prices have doubled over the last 6 months.
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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