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Energy Action

Energy Market Wrap

Monthly Edition Released: 1 July 2023

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    Renewable Energy to Reduce Energy Costs

    Current market conditions remain highly sensitive to supply disruptions. Prices have increased by approx 30% to 40% since recent lows with the potential for further disruptions placing upward pressure on retail electricity prices.

    Electricity Contract Market

    Wholesale electricity prices reflect the underlying cost for C&I customers to contract their electricity at fixed prices, in the retail market. We chart and track these prices for contract years 2024, 2025, and 2026 to help our customers know when to contract and how long to contract.

    Current pricing continues to reflect the highly sensitive link between electricity supply and market pricing, along with periods where a lack of reserve capacity, interconnector constraints, and the availability of baseload generation have resulted in a rising market price trend.

    Demand is also a critical factor in determining prices. Short-term influences such as colder weather and longer-term supply disruptions continue to place greater upward pressure on prices.

    While prices remain in an uptrend, recent movements show the market is trading in a sideways pattern. We continue to caution organisations thinking prices will return to 2021 levels.

    Current market conditions continue to support a longer-term strategy to secure fixed-price electricity contracts.

    Although average prices increased in Victoria, the market was much less volatile than NSW.

    Victorian baseload generators produced over 65% of the energy mix during June. Renewables supply dropped to approximately 30%. Reliance on gas generation and the mitigating effect of Hydro remain the key issues impacting the price outlook

    The electrical supply from batteries almost doubled during the month but still represents less than 0.5% of output. This source remains extremely costly, averaging over $200/MWh in NSW.

    Spot market results show how renewable generation’s average monthly costs were $115 /MWH,  coal generation averaged $130/MWh and gas-fired generation averaged $247/MWh.

    These average costs reveal how the energy mix determines average monthly spot prices and influences the price for forward contracts.

    Wholesale prices for Cal 2024:
    • VIC $84.31 /MWh
    • SA $116.87 /MWh
    • NSW $135.99 /MWh
    • QLD $121.79 /MWh

    Wholesale prices for Cal 2025:
    • VIC $79.00 /MWh
    • SA $111.52 /MWh
    • NSW $122.76 /MWh
    • QLD $96.25 /MWh

    Wholesale prices for Cal 2026:
    • VIC $79.00 /MWh
    • SA $131.73 /MWh
    • NSW $130.65 /MWh
    • QLD $92.50 /MWh

    NSW wholesale energy pricesQLD wholesale Energy PricesVic Wholesale Energy Prices JulySA Wholesale Energy Prices in July
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    East Coast Gas Market

    Gas spot prices trended lower during June. Victorian spot gas averaged $12.26/GJ.

    Retail gas market conditions remain concentrated with unfavorable supply conditions forecast for 2024 and 2025.

    Recent media reveals the industry’s dissatisfaction with the government’s price cap regulation and the impact this form of regulation is having on investment in improving the supply of gas.

    Corporates continue to see “take-it or leave-it” pricing along with increased demand for gas-fired ‘firming’ which is acting to resist any significant decrease in gas contract prices.

    Large users should expect gas pricing of $18-$22 /GJ for supply agreements during calendar years 2024 and 2025 while smaller users can expect to pay $22-$26/GJ.

    Monthly Average Gas spot prices in JulyAnnual Average Gas Spot Price July

    Electricity Spot Market

    Monthly average spot prices decreased significantly during June. Prices remain extremely volatile and reflect supply disruptions, interconnection constraints, seasonal weather conditions, and increased hydro generation in the fuel mix.

    Supply from baseload sources and hydro increased, while weather conditions saw a significant drop in renewable generation output.

    Average monthly spot price electricity in July

    Generation by Fuel Type

    The following chart shows the proportion of electrical generation, by fuel type, during the month of June 2023.

    Wind and solar conditions during the month were unfavorable with a 6% reduction in output.

    Over 10% of electricity generation was sourced from gas-fired generation, an increase of almost 5% compared to last month.

    Output from baseload generation increased from 58.2% to 59.8% during June.

    Hydro-sourced electricity also increased by over 5% compared to last month, driving monthly average spot prices lower across all states.

    Generation by fuel type July

    Source: Open NEM

    Environmental Certificate Market

    • LGCs are currently trading at $54.50/certificate
    • ACCU’s traded at $31.85/certificate
    • VEEC prices continue to trend upwards with recent trading at $82.00/certificate
    • ESC prices are currently trading at $29.00
    • STC’s continue to trade just below the retail price cap at $39.90/certificate.
    • PRC (Peak Reduction Certificates) continue to trade at $1.80/certificate.

    LGC Futures Market

    LGC prices represent the cost of renewable electricity.

    LGC future prices continue to move in line with the electricity price trend:

    • 2023 LGC’s traded higher at $58.25
    • 2024 LGC’s traded higher with recent prices reaching $51.00
    • The calendar year 2027 LGC’s traded at $25.80

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