Smart Power Energy

The National Electricity Market

The electricity spot market saw significant falls in prices during August. Milder weather, increased coal fired generation, improved renewable generation and lower gas prices all contributed to average spot prices decreasing by more than 50%.

The following graph shows the published average monthly spot price for each State since the middle of 2019. All States showed falls of more than 50%. QLD and VIC had the biggest decreases to $133 (66%) and $121 (64%) respectively. NSW was not far behind with a 60% drop to $148. TAS and SA both fell 54% to $149 and $173 respectively.

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 should ease some of those pressures.

Electricity Generation Mix

Total grid-scale generation for August decreased by 6.3% from July levels. This 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.

Both utility scale solar and wind had significant increases during August – solar up 7% and wind 14%. This and the reduced demand allowed all other forms of generation to back off – most notably gas (-36%) and hydro (-16%).

Gas Generation

As noted above gas generation decreased in August – down 36% from July levels. Compared to 12 months ago, for the first time in several months, gas generation was close to August 2021. Gas generation decreased in all States apart from Tasmania. It fell 63% in NSW, 39% in SA, 28% in VIC and 26% in QLD. Gas generation was up 471% in TAS (low levels compared to other States).

Hydro Generation

After the large output of recent months, hydro generation backed off significantly (15%) in July as increased wind and solar generation, and reduced demand provided some more respite to the system. However hydro generation was still close to the average level seen over the last 5 years as shown in the following chart.

For the first time in many months, water storage levels in Hydro Tasmania’s lakes increased significantly in August. Storage ended the month at 5,695 (39% full), an increase of 977GWh over the month. This is still 14% lower than the same time last year and just at the bottom of the range seen at this time in the last 5 years as shown in the following chart.

Snowy Hydro’s storage levels increased during August with reduced generation and high inflows during the month. Snowy finished the month 51% of full (2,703Gl) – up 13.5% over the month. Thanks to La Nina, levels remain above the highest they have been in the last 5 years as shown in the following chart.

Climate outlook overview (from BOM)

September to November rainfall is likely to be above median for the eastern two thirds of Australia, but below median for south-western Tasmania and south-west Western Australia.

September rainfall is likely to be above median for much of Australia, with the chance of above median rainfall more widespread in September than later in the season.

September to November maximum temperatures are likely to be above median for the tropics, south-west Western Australia, and Tasmania; cooler than median days are likely across much of the mainland south of the tropics excluding the west of Western Australia and much of Victoria.

Minimum temperatures generally likely to be warmer than median for September to November over much of Australia, although there is roughly equal likelihood of warmer or cooler nights along the New South Wales central coast northwards to south-eastern Queensland, and through much of central to southern Western Australia and western South Australia.

The negative Indian Ocean Dipole event, increasing chance of La Niña emerging during spring, positive Southern Annular Mode index, and warmer than average waters around northern Australia are likely to be influencing this outlook.

New Renewable Generation

Renewable generation (wind and solar, including roof-top solar) increased in August with increased solar and wind generation. Total renewable generation was 4,858GWh – up 16% on July and up 18% on the same month a year ago. Wind generation was up 14% in August compared to July, and up 23% compared to August last year. Utility Scale Solar generation was up 7% from July levels and up 20% over the 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

After the huge increases in futures prices over earlier months, August saw a significant drop early in the month followed by increases later in the month with prices ending the month, in most calendar years, at similar levels to what they began.

CY23 NSW prices dropped to $176 before climbing to end the month at $202 – up 5% in the month. QLD prices fell to $166 before increasing to $191 – up 3% in the month. VIC again decreased early in the month to $113 before rising to end the month flat at $129. SA also dropped early to $135 and again increased to end the month at $152 – down 2% in the month.

CY24 NSW remained the highest priced State, but was only up 2% at $138. VIC and SA both increased 5% - VIC to $90, SA to $118. QLD increased the most – up 7% to $114. CY25 had NSW up 5% at $133. SA was up 3% at $105, while QLD was up 9% at $92. VIC remained the lowest priced CY25 State at $80 – up just 1%.

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 August as on-going lack of gas storage / supply in Europe has continued to result in elevated wholesale prices for gas and electricity. On top of that the war in the Ukraine and the potential for Russia to use critical gas supplies to Europe to apply economic pressure on Ukraine’s allies has added to the uncertainty and therefore further added to energy prices.

LNG netback prices increased again in August ending the month at $56.26/GJ – up 15% from last month. Expected prices for the rest of 2022 and 2023 have also increased. 2022 netback prices are now expected to average $46.74/GJ (a 9% increase on last month) while 2023 netback prices also increased 19% to $58.89/GJ – well above historical levels.

Domestic spot gas prices decreased significantly in August driven by reduced demand as we head out of the winter heating period, and with reduced gas fired electricity generation required in the NEM. Outages at LNG export hubs also increased local supply putting downward pressure on prices. The following graph shows the 30 day rolling average price at Wallumbilla gas supply hub – ending the month at $16.1/GJ, a 60% drop from July levels, and back to being well below netback prices.

Reduced gas demand and increased supply also enabled gas storage to recover significantly. The main storage facility at Iona increased, ending the month at 12.4 PJ – a 22% increase 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 $US400/T all of the month, increasing at the end of the month, closing at $US435/T – up 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 few 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 month.

Environmental Certificates

The following graph shows environmental certificate spot prices over the last 2 years.

LGCs had a significant uplift through August ending the month at $58.4 – up 15%. Other certificates had small or no increases during the month. VEECs were relatively quiet compared to recent months with a small (2%) increase. ACCU prices also increased by 2% over the month.

Future dated LGC certificate prices had significant increases in all years apart from CAL 26 which was flat. CAL 23, CAL 24 and CAL 25 all increased by almost $10 (more than 20% each) 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/

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