Australian Energy Market Summary - March 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

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.

In the News

A report commissioned by the gas industry indicated that power generation costs would be reduced by $7.5 billion a year if gas was retained in a system aiming for net zero emissions. The report from Frontier Economics produced for the Australian Pipelines and Gas Association said a shift to very high usage of renewables could be economically detrimental and therefore hamper decarbonisation efforts.

The financial fallout from winter storms in Texas that plunged millions into darkness continued with the largest co-operative power generator filing for bankruptcy protection. Brazos Electric Power Cooperative – a generation and transmission company that serves co-operatives across the state, many of which serve poorer rural areas – said it faced more than $US2.1 billion ($2.7 billion) in bills for power it bought at surging prices during the storm. The figure was more than three times what it paid in all of 2020. The extreme electricity prices and wide-scale blackouts triggered by last month’s deadly freeze in Texas are expected to prompt a re-examination of the risks of extreme weather on Australia’s power grid, which is already under huge pressure due to the rapid rise of renewables.

Confectionery maker Mars, one of Australia’s biggest manufacturers, has shifted its six factories and two offices to renewable energy by plugging into Victoria’s biggest solar farm as part of the multinational’s goal to cut its global emissions. The maker of the Mars and Milky Way chocolate bars and food brand Masterfoods will receive the equivalent of all its electricity needs from the first stage of the Kiamal solar farm near Ouyen in Western Victoria.

Energy Australia advised that it has brought forward the planned retirement of its Yallourn brown coal plant by 4 years from 2032 to mid-2028. Yallourn currently supplies about 20% of Victoria’s electricity generation. A confidential “safety net” agreement struck with the state government is intended to prevent an even earlier closure of the ageing generator which, like other coal-power plants, has been slammed by wholesale power prices that have sunk to six-year lows amid an influx of cheap renewables.

AGL Energy, Alinta Energy and Origin Energy have struck deals to supply electricity to Alcoa’s Portland aluminium smelter in Victoria, securing the plant’s future operation until July 2026 with the help also of federal and state government support. The federal government will provide up to $19.2 million a year for four years to support the smelter through a power market scheme that will pay it to be prepared to provide emergency cover for the electricity market when required to free up power to avoid blackouts. The Victorian government has agreed to match the federal funding, Alcoa said on Friday, without commenting on any conditions involved. That signals the federal and state support and subsidies amount to almost $155 million over four years

AGL Energy has struck deals to buy two of the country’s largest commercial rooftop solar businesses, Epho and Solgen Energy Group, from Anchorage Capital Partners. CEO Brett Redman said that the acquisitions will make AGL the largest commercial solar provider in the country.

The $NZ2.96 billion ($2.7 billion) price tag paid by AGL Energy’s renewable energy fund and Mercury NZ to snare Tilt Renewables against competition from multiple rivals is evidence of keen appetite for renewable energy M&A in the growing market, says stockbroker Morgans. Powering Australian Renewables (PowAR), which is 20 per cent owned by AGL alongside partners QIC and the Future Fund, and Mercury will pay $NZ7.80 per share in cash for Tilt, which owns operating wind farms in Australia and New Zealand as well as a large and varied range of undeveloped projects.

Andrew Forrest’s LNG import terminal in Port Kembla will help push out Victoria’s expected shortfall in local gas supplies until 2026, although the operator of Australia’s energy market is warning of shortages as early as winter 2023 if the project is delayed and demand is high. Without the plant, which is under development at a former NSW coal terminal, the decline in gas flows from mature fields would leave the south-east heavily reliant on storage and increasingly squeezed pipelines to meet demand, the Australian Energy Market Operator said in its closely watched annual outlook for the gas market.

Investors believe a full demerger is on the cards for Australia’s oldest energy utility after AGL Energy said it would hive off its huge coal power plants into a separate business. This will allow the core retailing activities to emerge as a zero-carbon electricity supplier. The proposed division, which chief executive Brett Redman said was demanded by the accelerating winds of change in the electricity market, will have “New AGL” created from the retailing business and the clean and flexible plants, while “PrimeCo” will be the country’s largest electricity generator, dominated by coal power.

AGL Energy faces a hunt for new gas supply sources after the Victorian government skewered its plan to build a $250 million LNG import terminal on the Mornington Peninsula in the wake of a sustained community campaign against the development.

Demand Trends

As can be seen in the graphs above, demand increased compared to February due to the greater number of days in the month. Compared to previous years, however, demand was closer to 2020 levels. VIC and NSW had very similar demand to March 2020, QLD and TAS were up on last year, while SA was down on 2020. All States were substantially down on March 2019 levels. Overall demand was closer to “normal” compared to the very low demand we had seen, year on year, over the summer.

Weather Review & Forecast


The national mean temperature for March was 0.21 °C warmer than average for Australia as a whole.

The mean maximum temperature was close to average for March at +0.03 °C. The mean minimum temperature was above average for March at +0.39 °C. None of the States or Territories ranked in the top or bottom 10 warmest or coolest for their respective maximum or minimum March temperature ranks.

Mean maximum temperatures for March were cooler than average for large areas of mainland Australia extending from the north-west of Western Australia, taking in the East and West Kimberley, Pilbara, and north-eastern Interior District, through the south-west of the Northern Territory and far north of South Australia, to New South Wales, and also covering most of Victoria except the far west, and the southern border region of Queensland. This area of cooler than average mean maximum temperatures largely followed the band of above average rainfall.

Maximum temperatures for the month were very much below average (decile 1) for large parts of New South Wales, mostly along and inland of the Great Dividing Range, extending into parts of the north-west of the state.

The mean maximum temperature for March was warmer than average for much of the northern half of Queensland, extending along the coast into the Wide Bay and Burnett District, and also for pockets of the Northern Territory in the Top End and east of Tennant Creek, and for parts of Western Australia in the western Gascoyne, western Interior, and along the southern coast.

The mean minimum temperature for the month was above average for much of the west and inland south of Western Australia, the northern half of the Northern Territory, far north-east New South Wales, and most of Queensland away from the Channel Country District and central Cape York Peninsula. Mean minimum temperatures were below average for some areas, including inland New South Wales away from the west, and in Western Australia in the central Pilbara and between the central Kimberley coast and the north-east of the Interior District.


March rainfall was above average for Australia as a whole.

Rainfall for the month was above or very much above average for most of New South Wales and the southern half of Queensland, the southern half and west of the Northern Territory, the northern half and central south of South Australia, the Kimberley and much of the west of Western Australia, parts of central and eastern Victoria, and the east coast of Tasmania.

Rainfall for New South Wales was more than double the average rainfall for March, coming in as the second-wettest March on record for the state, behind March 1956. Rainfall for the month was in the highest 10% of historical records (decile 10) for most of the eastern half of the state and much of the north, extending into parts of southern Queensland and Central Australia. Areas of extensive flooding resulted throughout eastern New South Wales.

Rainfall for the month was below average for the southern half of Queensland's Cape York Peninsula, and a few small pockets in both the Top End in the Northern Territory and south-east South Australia.


April to June rainfall is likely to be above average for the far north of Australia, however this signal is mostly from April. The three months are also likely to be drier than average for large parts of the eastern mainland of Australia.

In May, a broader drier than average pattern is present, with a drier month likely for much of the mainland, except the south-east.

Maximum temperatures for April to June are likely to be warmer than average for most of Australia, except the NT's Top End.

Minimum temperatures for April to June are likely to be warmer than average for much of Australia, except broad areas of the inland east and into central Australia.

La Niña has faded, with the El Niño–Southern Oscillation now in a neutral phase.

Electricity Generation Mix

Total generation for March decreased by 8% from February levels largely due to the increase in number of days in the month

Renewables (not including roof-top solar) again accounted for more than 20% of total generation. Gas and Hydro increased their share while solar declined as we moved into autumn.

Gas Generation

Gas generation increased for the first time in nearly 6 months – rising 17% on February levels. Gas generation continues to be considerably lower than in the corresponding period of 2021 by around 30%. Generation increased in all States, though most significantly in NSW (1000%) and TAS (42%) – both on small volumes.

Hydro Generation

Water Energy storage levels in Hydro Tasmania’s system again decreased through March but remain well above the 5 year average. Energy in storage at month end was 5,243GWh or 36.3% of full storage.

Hydro Tasmania has been utilising stored energy, generating at times of high wholesale prices and storing energy when prices are low. With summer now having ended and wholesale prices having been so low over the summer, the opportunities to benefit from any very high prices have now receded. The hydro operators now appear to be trying to generate harder to pull down storage heading into the winter.

Snowy Hydro’s storage levels dropped for the 5th month running finishing the month at 9% below the 5 year average. However this level was still 17% above where they were 12 months ago.

New Renewable Generation

Renewable generation (wind and solar) was steady in March – a little surprising given the increased number of days in the month. Wind generation was again low indicating a relatively calm month while solar generation dropped as we moved into shorter, less sunny autumn days. The following chart shows the monthly energy produced for each of these renewable types since 2017.

Total generation from these 3 sources was 3,689 GWh in March – 0.5% more than February but more than 16% above 12 months ago.

Volume weighted prices for solar increased in March in SA and VIC to about $20, while they dropped slightly in NSW and QLD to about $30. These prices are still less than half what they were just over 12 months ago and would be struggling to recover investment costs

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

The National Electricity Market

Spot prices increased in all States in March apart from TAS where prices dropped slightly. SA had a huge price spike on the 12th March to an average daily price of more than $1,300, and then plummeted into negative territory for the next two days, averaging -$150 on the 14th. The large price spike on the 12th also resulted in a tripling in the average price for the month in SA. Prices also spiked on regular occasions in QLD especially during the first half of the month.

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 have held steady during March averaging just under $6.0/GJ at the Wallumbilla Gas Hub.

LNG netback prices dropped again in March, ending the month at just under $6.5/GJ – almost 25% less than last month. The futures market however has risen with average prices for 2021 now close to $9/GJ (compared to $8/GJ last month) and almost $8/GJ in 2022 (compared to $7/GJ last month).

The Coal Market

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. And coal is an internationally traded commodity so what happens in international markets can be important.

The following graph shows international prices for thermal coal. It can be seen that after a slump in pricing during the pandemic, prices have returned to close to levels last seen in 2019.

The Contracts Market

CY21 contracts evened out during March apart from SA which jumped with the impact of the high spot prices that occurred on the 12th March. This will be the last month we show CY21 as we are so far into the year that the relevancy is diminishing.

CY22, CY23 & CY23 all showed increases over the month coming off the lows of February. The greater risk assigned to NSW is clearly seen in all years with prices about $10 -15/MWh higher than all other States. 

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 fell during the first couple of weeks of March but then increased to finish close to, if not above, opening levels.

Spot markets opened the month at $33.10, increased to $34 but then fell late in the month to close at $32.75 on a volume of 456,000 certificates traded.

Calendar 2021 finished flat at $33.25 unchanged on the prior month with 541,000 traded. Calendar 2022 dealt 314,000 certificates and closed $0.75 higher at $26.25 while Calendar 2023 closed at $18.4, up $0.55 on a volume of 440,000 turnover. 2024 certificates closed at $9.50, up $0.50 on 125,000 traded. Calendar 2025 closed at $6.40, up $0.10 on 60,000 traded.

VEEC activity remained very strong with 855,500 new certificates registered. Prices increased over the month reaching $52.10 at one stage before dropping to finish at $51.75, an increase of $6.85 over the month.

ESC creations totalled a very healthy 560,100 for the month (Tomago smelter created 102,000 on its own in one week). Trading was in a very tight band with prices rising from the opening of $29.50, reaching $30.20 at months close – an increase of $0.70. 380,000 ESCs were traded in the month.

STC creations totalled 4,706,000 for the month. During the month it was announced that the STP for 2021 was set at 28.8%, a surrender obligation of 50.665 million STCs. With the surplus from last year of 8.565 million being brought forward, which assumes a creation figure of 42.1 million certificates for the year. This comes to around 810,000 per week. So far this year the weekly number is about 960,000 so this would imply a comfortable surplus of just under 8 million for the year, not far from last year’s figure. The target was as expected but the market reaction saw prices rally across the curve. Prices peaked at $39.40 before falling to close at $38.90, an increase of $0.20 for the month.

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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