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The National Electricity Market
Average spot prices increased again in QLD, NSW and TAS in February. Very high prices in QLD continued – a 16% increase on average from the already elevated January levels.SA and VIC prices dropped increasing the separation which has become more apparent in recent months between the Southern States and the Northern States (QLD and NSW).
The following graph shows the daily Average Spot Price for the last 6 months, with the current month highlighted for clarity. A high price event on the 1st February when the average daily price was $1,600/MWh in QLD can be clearly seen as well as elevated prices (above $100/MWh) later in the month. There were less days when the average price was negative in February – only occurring once in SA on the 2ndFebruary.
Electricity Generation Mix
Total grid-scale generation for February decreased by 12.5% from January levels. Most of this (10%) can be put down to there being less days in the month. The remainder will be a combination of cooler weather reducing demand and the return to work after January closures offsetting some of these reductions.
Wind and utility scale solar both increased their share of total generation last month signalling better conditions for them – sunnier and windier than January. Due to this each of coal, gas and hydro all decreased their share of total generation.
As noted above Gas generation decreased in February – down 13% from January levels. As in January, compared to February 2021 gas usage was up, 23% higher than 12 months ago. Gas generation decreased compared to January in NSW (-5%), VIC (-5%), SA (-17%) and QLD (-15%), while TAS increased gas generation by 20%.
Hydro generation decreased in February, down 7% but still slightly above the average seen over the last 5 years for February as shown in the following chart.
Water storage levels in Hydro Tasmania’s system continued the downward trend that developed at the end of November last year. Storage ended the month at 5,812 (40.3% full), a decrease of 618GWh over the month. This is still6% more than the same time last year and remains close to the highest levels seen, at this time of year, in the last 5 years as shown in the following chart.
Snowy Hydro’s storage levels reduced slightly during February. Snowy finished the month 52% of full (2,769Gl), down 1% over the month. Thanks to La Nina levels remain at the highest they have been in the last 5 years asshown in the following chart.
Climate outlook overview (from BOM)
March to May (autumn) rainfall is likely to be above median for parts of central and eastern Australia. Elsewhere there are roughly equal chances of above or below median autumn rainfall.
March to May maximum temperatures are likely to be above median for most of Australia. Only a small area of the central NSW coastline is likely to have below median temperatures, with areas surrounding the Great Australian Bight, and the rest of eastern and central NSW having roughly equal chances of warmer or cooler autumn days.
Minimum temperatures for March to May are likely to be warmer than median Australia wide.
Climate influences include the current La Niña in the Pacific Ocean.
New Renewable Generation
Renewable generation (wind and solar, including roof-top solar) was lower in February in line with the reduced number of days. Total renewable generation was 4,532GWh – down 10.6% on January but up 23% on the same month a year ago. Wind generation was down 8% in February compared to January, solar generation was also down – 10% for utility scale solar and 13% for roof-top solar. The following chart shows the monthly energy produced for each of these renewable types since 2017.
The Electricity Futures Market
Two big pieces of news during February had major impacts on Futures prices. First Origin Energy announced that its coal fired Eraring Power station (2,880MW) in NSW would be retired seven years earlier than expected in 2025. This was followed a week later by the Brookfield / Cannon-Brookes take-over bid of AGL and their proposed early retirement of AGL’s coal-fired fleet. The bid was subsequently rejected by AGL’s Board, however the market was spooked particularly for 2024 and 2025 prices.
In the shorter term the war in the Ukraine and the impact that is having on world energy prices has contributed to higher Futures prices in States most impacted by them – namely NSW and QLD.
CY22 contract prices continued the accelerating separation between States observed over the last few months. NSW prices increased by 8% in February ending the month at $90.QLD prices dropped but then rebounded to end the month down 4% at $103. SA prices were up 3% to $72.5 while VIC also increased 7% to $57.
CY23 also showed significant increases in all States. NSW remains the highest priced State at$93 – up 9%. QLD is at $78 – up 3%, while SA was up 5 % to $67. VIC was also up, ending the month at $51 – an increase of 4%. CY24 contracts also had increases. NSW ended the month up 9% at $84. QLD and SA both trended up, ending the month at $66 (+8%) and $62 (+3%) respectively. VIC also rose ending at$50.5 (+6%). CY25 was most impacted by the Eraring announcement and again mostly in the northern States. NSW increased by $17/MWh (23%) to $90 while QLD had a similar had a similar uplift of $16 (29%) to $72. The increase was more subdued in VIC ($7 / 15% to $54) and SA ($4.5 / 9% to $55.5).
Contracts for the 2022 Calendar Year (CY22)
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 February 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 sanctions on critical gas supplies from Russia has added to the uncertainty and therefore further added to energy prices.
LNG netback prices reduced in February as the European winter drew to a close, but remained high compared to historical levels at $30.06/GJ – a 23% decrease on last month. Prices for the remainder of 2022 are expected to average $36.3/GJ (the same as last month) while 2023 netback prices increased to $25.80/GJ ($23.71/GJ last month)
Domestic gas prices increased through February with the 30 day rolling average price at Wallumbilla ending at $10/GJ – up from $9/GJ at the end of January, a 10% increase. This is a 67% discount to LNG netback pricing. If the LNG netback price remains elevated we would expect this to eventually impact on the domestic gas and electricity markets.
Gas storage is an important factor in the gas market. The main storage facility at Iona increased significantly during February. It ended the month at 19.8 PJ – a 19% increase – 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. After the increase in prices last month due to Indonesia (the world’s largest coal exporter) banning all coal exports, this month saw that ban overturned at the start of February. However this provided little price relief as the outbreak of the war in the Ukraine has seen a refreshed rally in prices – now exceeding $US300/T – a further 35% increase in the month over levels that were already at record highs.
These prices are well above anything seen in the last 10 years as shown in the following graph.
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.
Australian Carbon Credit Unit (ACCU) pricing had the biggest change in February reversing some of the increases of the last few months. Most other certificate prices were largely flat over the month.
Future dated LGC’s continued their upward trend in February 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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