Jul-21 Energy Market Report

Carl Daley -

Overview

The largest electricity Price Shock has occurred to the market in Queensland and NSW, while carbon prices continue to surge in all related certificates and there have been no stopping gas prices. The long awaited Stockyard Hill wind farm finally connects.

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Electricity spot prices:

  • QLD and NSW continued to see considerable half hour spot volatility, albeit to a lesser degree than the previous month. The QLD average spot price for July was $65/MWh lower than the previous month at $135/MWh, while NSW was $36/MWh lower at $124/MWh
  • VIC and SA had a cold start to the month causing demand to elevate pushing daily average prices above $200/MWh, but then had softer prices in the second half of the month. The average VIC and SA price for July was just slightly higher than the previous month at $91/MWh for both regions
  • TAS average spot price fell to just $38/MWh from $67/MWh the previous month. The substantial price drop was due to lower high price volatility and a record levels of half-hour negative prices of 12.2%

Consumption and Demand

  • Total energy consumption was 2-3 per cent higher than the same time last year for all regions in the NEM
  • Maximum Demand was also higher than the same time last year across the NEM. Maximum Demand was almost 10% higher in SA, around 5% higher for NSW, QLD and VIC, while TAS was just marginally higher than the same time last year

Weather

  • Average temperatures were historically low to the north in QLD and NSW. Further south in VIC, SA and TAS average temperatures for July were slightly higher than the same time last year but lower compared to historical levels
  • Cooler weather in QLD and NSW resulted in higher Heating Degree Days, while the other regions to the south, experienced lower Heating Degree Days
  • Weather sensitivity was higher than the previous month for all regions and higher than the same time last year for all regions except Tasmania

New Generation

New generation for 2021 continues to gather momentum with more than 1GW of new capacity added during July taking new connected generation capacity for 2021 to almost 1,900MW, compared to just over 1,500MW the same time last year.

New generation connections for the month were:

  1. Three new grid battery energy storage systems connections including two in Victoria: Bulgana Green Power Hub (20MW) and the Victorian Big Battery (300MW), as well as Wandoan BESS (100MW) in QLD.
  2. The 511MW Stockyard Hill Wind Farm in western Victoria finally achieved grid connection and did so in early July.
  3. Suntop Solar Farm (150MW) near Wellington connected to NSW during the last week of July.

Generation Trends

  1. Wind Generation was at record levels during July with an average 3,273MW for the month
  2. Black Coal generation had its biggest month for the year with an average 11,765MW, although low for July compared to past year's
  3. Brown Coal generation was substantially higher than previous years with an average 4,254MW during July
  4. Gas generation during July was significantly lower than the previous month and lower than past year's with an average 1,847MW
  5. Clearer skies saw Rooftop and Utility Scale Solar generation pick up from the previous month and considerably higher than past year's due to new capacity added over the past twelve months. Average Rooftop Solar generation for July was almost 2,000MW while Utility Scale Solar was 695MW
  6. Hydro generation was lower than the previous month but a similar level to past years with an average of just over 2,000MW

Forward Prices

The wholesale electricity forward market continued to rally during July. Final Cal-22 prices for all regions were stronger for all regions at the close of the month.

  • QLD Cal-22 forward price closed $3/MWh higher at $57.25/MWh
  • NSW Cal-22 climbed almost $5/MWh to $65/MWh
  • VIC, SA and TAS forward prices for Cal-22 all rallied more than $5/MWh during July. VIC closed at $53/MWh, SA at $56/MWh and Tas closed the month at $55/MWh.

Looking at all other tenors, forward prices as of 31 July indicate a softening of forward prices over the coming years with a significant drop following Cal-22.

Enviro certificates

  • In the national environmental certificate spot market, Large-scale Generation Certificate (LGC) spot prices climbed $1.50/certificate to close at $34.75/certificate, while Small-scale Technology Certificates softened slightly to close at $38.55/certificate
  • State certificate spot prices continued to rally during July. Victorian Energy Efficiency Certificates (VEECs) rallied by $4/certificate to close at $64.45/certificate and NSW Energy Saving Scheme Certificates (ESCs) rose more than $3/certificate to just over $36/certificate

Key Features

This month's key features include:

2.1  Biggest Price Shock since 2007

The Price Shock experienced over the May to July period in QLD and NSW has been the biggest shock since 2007. The spot prices over this 3-month period have been the highest in history for each of these regions, as shown in the chart below.

The month of May began with the threat of extreme prices helped along with cold weather driving demand, calm winds, and then as the month progressed evening peak prices began to bite with persistent cold weather. On May 25,  the Callide C catastrophic event occurred causing a tidal wave on the day and then many after-shocks for many weeks to follow: