Australian Energy Market Summary - May 2021

Market News & Influence

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

The Victorian State Government released their long delayed interim targets for the path to net zero emissions by 2050, including a cut in emissions of between 28 and 33% of 2005 levels by 2025 and 45-50% by 2030. The government committed to invest more than $100 million to cut emissions in transport, including offering up to $3000 for Victorians who buy zero emissions vehicles.

Energy Australia committed to build a 316MW gas-fired generator in NSW. The Tallawarra B power station finally got the go ahead after deals were signed for more than $80 million of government money. It will be the country’s first carbon-neutral power station, with green hydrogen to be part of the fuel mix, while carbon emissions from gas use will be offset. It will come online in time for the summer after the closure of AGL Energy’s Liddell coal power generator in NSW.

The Federal government allocated more than $100 million to three green hydrogen pilot projects in a bid to kick-start the industry. The three grants were awarded to two projects in Western Australia (Engie Renewables Australia and ATCO Australia) and one in Victoria (Australian Gas Networks Limited).

APA Group will embark on a major expansion of its east coast gas pipeline grid after signing a new three-year gas transportation deal with Origin Energy. The $270 million expansion will increase the capacity of APA’s pipelines ability to transport Queensland gas to southern markets by 25 per cent and will help head off a shortage in winter gas supply in Victoria forecast to hit by 2023 or 2024.

The Federal government will pay the country’s two remaining oil refineries up to $2.3 billion to stop them closing down, a move that would have cost 1250 jobs, increased the cost of petrol, and left Australia entirely reliant on imported petrol and diesel. The money, to be shared between the two refiners, consists of a $2 billion subsidy to manufacture petrol and diesel over the course of this decade and $302 million to help upgrade their facilities.

Snowy Hydro expects its 750MW gas power plant at Kurri Kurri, near Newcastle in the NSW Hunter Valley, which is being pushed forward by the federal government, will generate power just 2 per cent of the time and will run on both gas and diesel. Planning documents say the power generator will cost about $610 million. It is expected to come online by the end of 2023.

A huge explosion and fire took out the 2,000MW Callide power station in Central Queensland on the 25th May, causing a widespread blackout and extreme spikes in power prices. The cause of the fire remains unknown but the outage will have major ramifications for the state’s energy industry and the National Electricity Market. The 405MW unit that exploded may be out of action for up to a year while the other units will be brought back over the first couple of weeks of June. Prices across the NEM but particularly in QLD and NSW have remained high while all units have been out of action and forward prices for 2022 jumped.

The proposed $3.5 billion second electricity interconnector between Tasmania and Victoria looks set to go ahead under fast-tracked reforms to regulatory rules that would spread the cost more widely to customers including those in NSW.

A $2 billion-plus power cable will be built between South Australia and NSW to handle a huge influx of renewable energy thanks to a last-resort deal with the federal government’s green bank that has raised worries about funding for other needed transmission projects. The 900-kilometre interconnector, the first new one for 15 years, will also reduce the risk of South Australia being “islanded” when its sole existing connection to the national grid – through Victoria – is lost. Paul Italiano, chief executive of NSW grid owner TransGrid which is building the NSW part of Project EnergyConnect, pointed to over 3 gigawatts of new renewable generation capacity that have applied to connect into the NSW section.

Demand Trends

As can be seen in the graphs above, demand increased compared to March in all States, especially the southern States as we approached the cooler winter months. Compared to previous years demand was above 2020 levels when demand was depressed due to Covid lockdowns. Overall demand was closer to pre-Covid “normal” with consumption in line with 2019 levels, except in Tasmania where demand was notably higher.

Weather– Review & Forecast

May rainfall was well below average for Australia as a whole

Rainfall for the month was below average for most of northern Australia, the west of New South Wales and Victoria, Tasmania, southern South Australia, and the east of Western Australia

Rainfall for the month was above average for the west of Western Australia, eastern Victoria and south-eastern New South Wales

Mean maximum temperatures for May were warmer than average for most of Australia, but close to average for much of New South Wales, southern Queensland and South Australia

Mean minimum temperatures for May were warmer than average for most of Western Australia, but cooler than average for the Kimberley and large parts of the Northern Territory, and scattered areas of the eastern mainland, mostly in inland New South Wales


Winter (June to August) rainfall likely to be above average for much of northern, central, and eastern Australia extending into SA. Parts of western WA are likely to have below average winter rainfall. The outlook for June is very similar to winter, with slightly lower chances of a drier month in western WA.

Maximum temperatures for winter are likely to be above average for northern, south-western, and south-eastern Australia.

June maximum temperatures are likely to be above average for northern and eastern Australia, and far south-west WA, with central parts of WA likely to be cooler than average.

Minimum temperatures for winter are very likely to be above average for most of Australia; parts of western WA show a more neutral outlook.

The El Niño–Southern Oscillation is neutral. Large parts of the eastern Indian Ocean are warmer than average, which can favour above average rainfall for parts of Australia.

Electricity Generation Mix

Total generation for May increased by 8.9% from April levels due to the longer month, the Easter and cooler weather in the southern States as we moved toward the winter heating season.

Renewables (not including roof-top solar) bounced back this month with a 24% increase in wind output more than offsetting a 10% decline in utility scale solar. Hydro and gas output increased in May making the most of the higher prices this month and the outage at Callide Coal-fired Power Station towards the end of the month. The Callide outage also led to the 825% increase in liquid fuels generation.

Gas Generation

Gas generation increased again in May, rising 26% on April levels. However it was still 27% down on the same month last year. Generation increased in all States, though most significantly in TAS (343%) and VIC (127%) – both on relatively small volumes. SA and QLD also had significant increases (close to 20%) on much larger volumes.

Hydro Generation

Water Energy storage levels in Hydro Tasmania’s system dropped at the start of May but then increased to end the month at much the same level as it started, but close to the 5 year average. Energy in storage at month end was 5,184GWh or 35.9% of full storage.

Hydro Tasmania has been utilising stored energy, generating at times of high wholesale prices and storing energy when prices are low. Hydro generators worked hard during May at peak demand times when the wind was not contributing much to the grid. They also worked hard once Callide went off-line towards the end of the month when spot prices approached maximum levels.

Snowy Hydro’s storage levels dropped for the 7th month running finishing the month at 11% below the 5 year average and approaching minimum levels seen in the last 5 years.

New Renewable Generation

Renewable generation (wind and solar, including roof-top solar) reduced in April. 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 3,392 GWh in May – 3.2% up on last month but still well below levels seen over the last 7-8 months. It was still almost 16% more than 12 months ago.

Volume weighted prices for solar increased in May in all States but particularly in QLD and NSW because of the incidences of high spot prices that occurred in those States. SA and VIC were close to $35/MWh while QLD and NSW leapt to close to $50/MWh. The markdown that solar achieved compared to average spot prices increased from last month and was between 50% (SA and VIC) and close to 60% (QLD and NSW). This demonstrates that while the prices achieved for solar generation increased, their ability to capitalise on the high spot prices was limited due to the timing of the high price events (ie when the sun was not shining)

With significantly more new renewables committed, as shown in the following table from AEMO, we expect this to put increasing downward pressure on prices, to increase the level of markdown applied to both solar and wind generation, and to increase spot price volatility.

Note that since the last update there has been a decrease in the committed wind as about 800MW has shifted to “Existing”. There has also been a significant drop in the proposed solar (down from 23,278MW) and an increase in proposed wind (up from 15,746MW)

The National Electricity Market

Spot prices increased significantly in all States in May, particularly in NSW and QLD where the average spot price more than doubled. This was largely due to the explosion at Callide power station discussed earlier and the disruption to supply since then. VIC and SA were also impacted with average spot prices increasing about 50%. The following chart clearly shows the impact of the explosion in QLD on the 25th and the higher prices observed in both QLD and NSW since that date.

The following graph shows the daily Average Spot Price across the last 6 months, with the current month highlighted for clarity. The increase over the month compared to previous months is clear to see.

The Gas Market

Prices rose slightly during May averaging $7.03/GJ at the Wallumbilla Gas Hub – 1.7% more than April levels.

LNG netback prices increased in April, ending the month at $9.73/GJ – almost 29% more than last month. The futures market also rose with average prices for the rest of 2021 now between $11 -$12/GJ (compared to $10/GJ last month) and almost $9.5/GJ in 2022 (compared to $9/GJ last month).

Gas storage is an important factor on the gas market, especially heading into the colder winter months in the southern States. The main storage facility at Iona is still currently near the top of its recent operating range for this time of year, however it was significantly drawn down through May – as shown in the following chart.

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 over the last 5 years. It can be seen that after a slump in pricing during the pandemic, prices are now approaching 5 year highs. Over the last month prices have stayed increased markedly from around the $90USD/T level up more than 20% exceeding $110USD/T.

The Contracts Market

CY22 contracts increased again during May as volatility continued in the Wholesale market and the impact of a potential long term outage for the Callide C unit that exploded was factored into Futures pricing. CY22 prices are now up to 30% above their February lows.

CY23 and CY24 also showed increases as the market continues to rebound from the lows of February – up 25% in QLD for CY23 and 16% in QLD again for CY24.

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 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 little changed during most of May across all years.

Spot markets opened the month at $34.25, increased to $38.30 but then fell late in the month to close at $35.00 on a volume of 546,000 certificates traded.

Calendar 2021 finished at $35.00, unchanged on the prior month with 420,000 traded. Calendar 2022 dealt 615,000 certificates and closed $0.50 lower at $28.00 while Calendar 2023 closed at $21.00, up $0.25 on a volume of 485,000 turnover. 2024 certificates closed at $12.25, up $0.75 on 360,000 traded. Calendar 2025 closed at $7.30, up $0.30 on 120,000 traded.

VEEC activity remained very strong with 844,500 new certificates registered. Prices were volatile through the month reaching $65.00 at one stage before dropping to finish at $63.30, an increase of $5.15 over the month.

ESC creations totalled a much reduced 264,300 for the month. Trading was again in a tight band with prices rising from the opening of $30.25, reaching $31.00 at one stage before closing at $30.90 at months end – an increase of $0.65. 419,000 ESCs were traded in the month.

STC creations totalled 3,652,000 for the month. Prices were in a narrow band between $35.55 and $38.90. They closed at $38.60, unchanged 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.

  • Weather and Climate data – The Bureau of Meteorology publishes a range of weather related information which can be found here:


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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