Market Report

Electricity spot prices remained high across the NEM in July as very low temperatures drove strong demand. SA experienced extreme price volatility late in the month as cold temperatures coincided with very low wind generation. East Coast gas spot prices also remained high averaging above $13/GJ.

The NEM added 311MW of new generation capacity in July. Calm and cold weather conditions in SA, VIC, and TAS at the end of the month led to low wind output and market volatility. Gas generation increased to compensate. VIC exports to TAS reached record high levels for July.

NEM fossil fuel generation ramped up to offset the lowest wind generation for June in seven years. In Tasmania, hydro generation fell to the lowest level since 2009, Tamar Valley fired up for the first time in five years, and energy imports from VIC were the highest for June since 2017.

Electricity and gas spot price volatility intensified in June. The portion of electricity spot prices around $300/MWh swelled pushing average monthly prices beyond $150/MWh. Average daily gas hub prices hit $28/GJ in Sydney and Melbourne after AEMO announced a gas supply risk for the coming months.

There were 861MW of new generation connections in May. Despite rising wind and solar Generator-Weighted-Average prices, most NEM regions continued to have large discounts to their Time-Weighted-Average prices. Additionally, most NEM regions reported lower wind and solar curtailment rates.

May was marked by extreme price volatility in NSW where the CPT was exceeded on 8 May triggering Administered Pricing, while low wind generation contributed to high average spot prices in the southern states despite lower demand levels. Gas spot prices soared averaging above $13/GJ for all regions.

The month of May once again reflected a change in perceptions of the future electricity prices, and continued the history of being the most heavily traded month along with November, each calendar year.

The NEM continues to wait for the first new generation connection for 2024, marking the longest stretch with no new connections since 2018. Wind and solar generators performance fell in April with larger discounts to the spot price. In brighter news, wind and solar curtailment continues to fall.

Spot prices strengthened in April with a very high portion of price outcomes between $100 to $300/MWh pushing the NEM average April price to $85/MWh compared to $75/MWh for Q1-24. Forward prices significantly rallied during the month. Gas spot prices also strengthened but averaged just below $12/GJ.

Based on our probabilistic spot forecast for Q2-24, we recognised that the forward market was likely to be under-valued. As events have played-out, this proved to be true and the market rallied, not only for Q2-24, but through the whole forward curve.

Q1-24 marked the first time in six years that the NEM had no new generation connections. March also saw lower generation and GWA prices for wind and solar farms across most NEM regions, except for SA. Curtailment of VRE was in seasonal decline but remained high for March in SA and VIC.

The electricity forward market rallied in the southern states as news of potential gas shortages for Victoria circled in the media. Q1-25 traded most heavily during the quarter, especially for QLD which remains stubbornly high despite the return of Callide C3 and the expected return of C4 this July.