Australian Energy Market Summary - January 2021

This report brings together an overview of the National Energy Market along with some factors such as weather patterns which may have influenced both the generation of electricity and how it was used throughout the month and some indicators on potential trends and influences in future months.

Market News & Influences

In the News

International LNG prices spiked to unheard of levels in early January. An Australian cargo of LNG reportedly changed hands for an incredible price of $US37 per million BTUs, more than 18 times higher than the price about 6 months ago. The recent high spot prices for LNG have been driven by freezing temperatures in the Northern hemisphere, shipping logjams and some outages at LNG exporting plants.

Mild conditions during January resulted in wholesale prices in Victoria heading into negative territory several times during the month. On Sunday 17th Jan scheduled demand dropped below 2900MW at about 1:30pm – a new record low for January. Unseasonably cool conditions and additional roof-top solar contributed to the reduction in scheduled demand.

Hydro Tasmania announced the first ever deal for the trade of stored energy. They signed with Macquarie Group and Shell to sell the rights to power stored in Hydro’s system during the highest priced part of the day protecting Macquarie and Shell from exposure to spiking wholesale prices.

The Federal Government's new agreement with Queensland LNG exporters was released in the middle of the month. The agreement requires producers to offer gas first to domestic users before shipping it overseas to the spot market therefore increasing supply and putting downward pressure on price. However large users were not happy with the agreement with many wishing that a price link to the US Henry hub had been included.

In late January it was reported that the Federal Government was all but resolved to building a gas-fired power station in the Hunter Valley, NSW. Angus Taylor accused the NSW Energy Minister, Matt Kean, of scaring away private investment after both AGL and Energy Australia put on hold their own plans to develop gas-fired generation. This was after NSW introduced legislation to meet its own energy plan late last year that involved underwriting large-scale renewable energy projects – effectively favouring battery and pumped hydro storage over gas. The Federal gas fired plant would be via its company, Snowy Hydro, and would be up to 1000MW capacity.

Demand Trends

As can be seen in the graphs above, demand increased compared to December in most States as we moved into what is typically the warmest month of the year. QLD was the exception where demand decreased compared to the previous month. All States had less demand than January 2020, continuing the downward trend since January 2019.

Demand is expected to reduce now as the summer comes to an end and due to the on-going impact of this La Nina summer. This does not mean that we may not still encounter the odd heat-wave that may raise demand (and prices) in a State for a period of time.

Weather – Review & Forecast


The national mean temperature for January was 0.26 °C warmer than average for Australia as a whole – however it was considerably cooler than January 2020 which was the 3rd highest on record. 

The mean maximum temperature was close to average for January at +0.05 °C. The mean minimum temperature was above average for January at +0.46 °C.

The mean maximum temperature for January was below average across a large area of Western Australia covering most of the southeastern quarter of the State, most of the western half of South Australia, and much of the southern half of the Northern Territory. Maximum temperatures for the month were also below average in a band extending through eastern Queensland from Cooktown south, but only inland of the ranges between Capricornia and the southeast of the State, and extending into northeast New South Wales inland of the coastal strip.

The mean maximum temperature for January was warmer than average for most of the coast of Western Australia, pockets in the western Top End and on the southern coast of the Gulf of Carpentaria, and in far western Queensland.

The mean minimum temperature for the month was above or very much above average for large areas covering northern and western Queensland, the north and east of the Northern Territory, areas of the coastal Kimberley and all of the northwest and west coast of Western Australia. Minimum temperatures for the month were also above average for southern Victoria and the northeast of Tasmania. Mean minimum temperatures were below average for an area of the southwest of the Northern Territory and the adjacent northern interior of Western Australia, and also for some pockets of New South Wales on the inland slopes and plains. Some stations in New South Wales had their lowest January mean minimum temperature for at least 20 years.


January rainfall was below average for Australia as a whole.

Rainfall for the month was below average for parts of Queensland's east coast between Fraser Island and Mackay, and across an area extending from inland northwestern Queensland through the Gulf Country and the Barkly and Victoria River districts of the Northern Territory. Rainfall was also below average for pockets scattered across southwest Western Australia, the central Top End, eastern New South Wales, and the south of Tasmania.

Rainfall for the month was above average for much of Victoria, New South Wales mostly inland of the ranges, large parts of the southern half of South Australia away from the southeast and Eyre Peninsula; coastal northern and northeastern Tasmania; large parts of Queensland's Cape York Peninsula; parts of the Northern Territory's Top End; and parts of the western Kimberley and southeast of Western Australia.


February to April rainfall is likely to be above average for northeast Queensland.

Daytime temperatures for February to April are likely to be warmer than average over Tasmania and around much of the Australian coastline.

Overnight temperatures for February to April are very likely to be above average across nearly all of Australia.

La Niña remains active in the tropical Pacific. The event has likely reached its peak strength but is expected to continue to influence Australian rainfall patterns until at least early autumn.

Electricity Generation Mix

Total generation for January increased by almost 2% from December levels as we moved into what is typically the warmest month of the year.

Renewables (not including roof-top solar) again accounted for more than 20% of total generation. Hydro increased its share while solar maintained its share of generation and wind declined slightly. Coal carried most of the increased generation due to the overall increase in demand – increasing output 3% from the previous month while gas generation declined by 6%. 

Gas Generation

Gas generation eased again in January dropping 6% on December. Gas generation continues to be considerably lower than in the corresponding period of 2020 by around 30%. Generation increased significantly in VIC (20%) and TAS (30%) – both on small volumes, but dropped particularly in QLD (-12%).

Hydro Generation

Water Energy storage levels in Hydro Tasmania’s system decreased through January but remained above the 5 year average. Energy in storage at month end was 5,597GWh or 38.7% of full storage. 

Hydro Tasmania has been utilising stored energy, generating at times of high wholesale prices and storing energy when prices are low. January is typically a time of greater price volatility so hydro operators will be looking benefit from that volatility. They will also be aware of the forecast higher than average rainfall in summer that may also impact their view on appropriate levels of storage to maintain.

Snowy Hydro’s storage levels dropped in January and finished over 22% higher than January 2020 but still 10% below the 5 year average.

New Renewable Generation

Renewable generation (wind and solar) dropped slightly in January due to reduced wind generation. The following chart shows the monthly energy produced for each of these renewable types since 2017.

Total generation from these 3 sources was 4,237 GWh in January – 0.2% less than December but more than 32% above 12 months ago. The following is a list of new entrants in the NEM during Q4 of 2020. These sites will have contributed most of the increased renewable generation observable during this last quarter.

Volume weighted prices for solar dropped in all States apart from SA. Prices were only a fraction of what they were 12 months ago when volume weighted prices for solar were as high as $200 in NSW. Prices have dropped more than 80% from those January highs in NSW, VIC and SA.

With significantly more new renewables committed, as shown in the following table from AEMO, we expect this to put increasing downward pressure on prices and to increase spot price volatility.

The National Electricity Market

Spot prices decreased in January in NSW and QLD due to less forced outages and cooler weather than expected. Spot prices rose in SA with a couple of days having high price events, while in VIC and TAS prices were on a par with December.

The following graph shows the daily Average Spot Price across the last 6 months, with the current month highlighted for clarity.

The Gas Market

Prices dropped for the first time in 6 months during January. The Wallumbilla Gas Hub price averaged $6.73/GJ – a 4% decrease from December. Prices are still over double their low point set in June.

LNG netback prices jumped considerably in January to end at almost $20/GJ, more than double the December price and a staggering 10 times the level 6 months ago! This was brought on by a severe cold spell in the northern hemisphere and supply constraints. The futures market shows that spike is expected to recede quickly once the northern winter demand drops off. However expectations are now that average prices for 2021 are close to $9/GJ (compared to $6/GJ two months ago) and nearly $7/GJ in 2022.

The Contracts Market

CY21 contracts dropped sharply during January due to the low spot prices in that month. January has been the month with the highest spot prices and the greatest volatility over the last few years, so getting through that month without high prices has dramatically de-risked the rest of the calendar year.

The low January prices also fed through into CY22 & CY23 significant falls in all States. The greater risk assigned to NSW is clearly seen in both years with prices about $15/MWh higher than all other States.

We have just started to publish CY24 and we await to see how the trends develop. All pricing for CY24 is questionable at the moment with low volumes and liquidity this far out. 

Contracts for the 2021 Calendar Year (CY21)

Contracts for the 2022 Calendar Year (CY22)

Contracts for the 2023 Calendar Year (CY23)

Contracts for the 2024 Calendar Year (CY24)

Emissions Trading Schemes

The LGC market was relatively steady during January with small increases in most years apart from Cal 2021.

Spot markets opened the month at $39.55 and increased to $41.90 before closing the month at $40.00 on a volume of 880,000 certificates traded.

The Calendar 2020 contract merged with spot this month ahead of the surrender of 2020 obligations in the middle of next month. Volume of Calendar 2020 for the month was 785,000 with a similar pricing pattern as spot and settling at $40 after opening at $39.90.

Calendar 2021 reversed the trend of Cal 2020 and other calendar years, finishing at $34.50 down $3.40 on the prior month with 428,000 traded. Calendar 2022 dealt 205,000 certificates and closed $0.15 higher at $26.75 while Calendar 2023 closed at $19.50, up $0.50 on a volume of 380,000 turnover. 2024 certificates closed at $9.85, up $1.35 on 65,000 traded.

VEEC activity remained strong with 424,800 new certificates registered. Prices continued to increase over the month as the market reacted to the announcement of targets and penalty rates for 2022 – 2025. Prices finished the month at $48.90 which was an increase of $6.15 over the month.

ESC creations totalled 190,400 for the month. Trading was in a very tight band with prices rising from the opening of $28 to close at its high point of the month of $29.50 – an increase of $1.50. 248,000 ESCs were traded in the month.

STC creations totalled 3,683,000 for the month. However there was very little movement in price despite the increased volumes and the price actually ended up higher at month end. STC’s closed the month at $38.35, a rise of $0.35 on 1,273,000 STCs traded.

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). NEM contract prices are sourced from ASX. 

Further information can be found at the locations noted below.


This document has been prepared for information and explanatory purposes only and is not intended to be relied upon by any person. This document does not form part of any existing or future contract or agreement between us. We make no representation, assurance or guarantee as to the accuracy of information provided. To the maximum extent permitted by law, none of Smart Power Utilities Ltd, its related companies, directors, employees or agents accepts any liability for any loss arising from the use of this document or its contents or otherwise arising out or, or in connection with it. You must not provide this document or any information contained in it to any third party without our prior consent. 

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