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The Australian energy market faces significant challenges with reduced wind and solar generation increasing reliance on costly alternatives like Gas-Fired Generation (GPG) and battery storage. Origin's decision to scale back operations at Eraring has heightened uncertainty regarding baseload supply, while the imminent expiration of the Coal Price Cap is expected to elevate coal prices and introduce market volatility. Transmission constraints exacerbate regional pricing disparities, underscoring the need for infrastructure investment.

We advice businesses to focus on implementing robust risk management strategies, which include diversifying energy sources and hedging against price fluctuations.

Image by American Public Power Association


Futures pricing has increased in all states and all future years since April, primarily driven by a number of factors including:

  • Substantial reductions in wind and solar generation

  • The Eraring Announcement

  • The Coal Price Cap ending June 30th

  • Transmission and Interconnector constraints



The substantial reduction in grid-scale wind and solar generation:

  • The market is now so reliant on these fuel sources for grid stability and favourable pricing outcomes, that any unforeseen weather events are resulting in the ramp-up of Gas-Fired Generation (GPG), pumped hydro and Frequency Controlled Ancillary Services including battery storage. These 3 alternative generation sources are consistently ranking among the most expensive fuels on a cost-to-serve $/MWh basis, so while thankfully they are not required for much of the time, their underlying costs are continuing to be felt by the market.



The Eraring Announcement:

  • During the last month, Origin has finally released their much-anticipated announcement regarding the delayed closure of the Eraring Power Station in NSW. While it provided some confirmation as to the future security of limited baseload supply in the NEM for at least another 2 years, it also fell well below what the market was expecting, and futures pricing has reacted accordingly in recent weeks.

  • It had been anticipated that all 4 Eraring units would remain available, with full production capacity at the ready (14TWh), and that this may also signal an extension to the Coal Price Cap which was due to expire June 30th. Instead, Origin Energy announced that only 2 units would consistently remain online, with a profit/loss sharing arrangement with the NSW government on just 6TWh (less than half full capacity). There was also no mention of ensuring adequate supply during the most critical peak times, nor did it provide any comfort that bidding behaviour after the Coal Price Cap is due to expire on June 30th would result in more favourable market pricing outcomes.

  • The market had already been pricing in 2 units remaining online and a potential extension to the Coal Price Cap. This announcement fell disappointingly short of market expectations and thus, has created more uncertainty and volatility with futures contracts across the NEM.



The Coal Price Cap Ending June 30th:

  • The Coal Price Cap was implemented by the Federal Government during the Russia-Ukraine conflict, in conjunction with the NSW and QLD governments, to cap the price of coal sold to domestic generators at $125/MWh. This was due to expire June 30th, 2024, and there was some hope amidst the Eraring announcement that this price cap would be extended. As of July 1st, however, there will be no extension to this cap which will result in the end of subsidies for coal, increases to the underlying coal price and cap price as well as potentially more aggressive bidding behaviour by Origin as of July 1st (Q324) which the market is closely monitoring.



Transmission and Interconnector constraints:

  • Network limitations have been experienced in recent weeks, with transmission interruptions between VIC-SA, VIC-NSW and SA-NSW. At times, this has rendered interstate flows to 0MW each way, resulting in the further ramp-up of state-specific alternative fuel sources and the inability to import/export energy between states. These events have often coincided with sharp falls in renewable generation, causing widespread and ongoing spot price volatility to manifest itself into consistently higher consumer pricing outcomes – particularly on the back of the aforementioned longer-term supply concerns.


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AEMC's recomendations for failed retailers’ electricity and gas contracts

The Australian Energy Market Commission (AEMC) released a final report on June 20, 2024, detailing improvements to the Retailer of Last Resort (RoLR) scheme for electricity and gas contracts.


The report includes ten recommendations aimed at simplifying and enhancing the RoLR framework, which would benefit both consumers and designated RoLRs. Key recommendations for gas contracts focus on expanding triggers and timeframes to better protect designated RoLRs, simplifying negotiation processes, and ensuring continuity of gas supply from storage.


The report also proposes reforms to reduce costs associated with RoLR events and improve regulatory oversight to prevent misuse of the scheme. The RoLR scheme, designed to manage retailer failures and ensure uninterrupted energy supply for customers, has become more critical following multiple retailer failures triggered by market challenges in 2022. However, it poses financial risks to designated RoLRs, particularly in volatile market conditions with high wholesale prices.

Image by Alessandro Bianchi
Solar Power Plant

QLD is investing in renewable energy

QLD Governement to invest in natural hydrogen study

The 2024–25 State Budget of Queensland allocates $4 million to investigate the potential of the natural hydrogen industry in the state, alongside green hydrogen, as part of efforts towards achieving net zero emissions.


Queensland's Minister for Resources and Critical Minerals, Scott Stewart, emphasised that this investment aims to position Queensland at the forefront of new industries and technologies amidst global decarbonisation trends. Natural hydrogen extraction, an emerging sector nationally and globally, is seen as integral to Queensland's renewable energy goals, including a target of 70% renewable energy by 2032.


The $4 million study forms part of a broader $90 million commitment in the budget to support Queensland's resources and natural resources sectors. Julieanne Gilbert, Mackay MP, highlighted the budget's potential to alleviate living costs through cheaper energy and transport options, as well as job creation via investments in emerging industries like clean hydrogen.

Qld Gov announces $40M funding for LREZ pilot

The Queensland Government has allocated $40 million for a Local Renewable Energy Zone (LREZ) pilot project in Caloundra, aimed at enhancing local renewable energy generation.


Partnering with Energy Queensland’s network-connected batteries, the LREZ will enable households with rooftop solar to store excess energy during the day for use at night, benefiting renters and residents in unit complexes who typically lack access to solar power. Scheduled to commence in January 2025, the project will deploy up to 8.4MW/18.8MWh of battery storage, alongside additional solar PV and demand management capabilities, benefiting residential and commercial customers in Caloundra.


This initiative is part of a broader $240 million commitment to expand Energy Queensland’s network-connected batteries across the state, supporting job creation, cost reduction, and Queensland’s renewable energy goals, while empowering communities to actively participate in sustainable energy practices.

QLD Budget invests $92M in CleanCo renewables projects

The Queensland Government's 2024-25 Budget includes a significant $92 million investment for CleanCo to advance up to 2.3GW of new wind and solar projects in Central Queensland, aiming to bolster the region's renewable energy capacity.


Additionally, the budget earmarks $266.3 million for major renewable energy initiatives and allocates $107.3 billion for statewide infrastructure projects. Key expenditures include $174.3 million for jointly acquiring the 228MW Boulder Creek Wind Farm near Rockhampton, supporting renewable energy goals. Infrastructure-wise, $39.5 million will upgrade the critical Rockhampton–Yeppoon Road, while $311.1 million funds the Fitzroy to Gladstone Pipeline for water supply and $26.4 million supports the Mount Morgan Pipeline.


These investments are expected to create approximately 4,000 jobs in Central Queensland, reflecting the government's focus on economic growth, renewable energy expansion, and essential infrastructure development across the state.

Clean Energy Council's Q1 Renewable Projects Quarterly Report

The Clean Energy Council's Q1 2024 Renewable Projects Quarterly Report reveals significant progress in Australia's renewable energy sector. It marks the strongest quarter for financial commitments to large-scale renewable generation projects since late 2022, with five projects totaling 895MW securing funding.


Energy storage projects also thrived, attracting over $1 billion in investment for the fourth consecutive quarter. Looking ahead, the report stresses the need for continued investment, aiming for 6-7 GW of new large-scale generation projects annually to meet the Federal Government's target of 82% renewables by 2030.


Clean Energy Council CEO Kane Thornton expressed optimism, attributing the sector's recovery to recent government commitments fostering investor confidence in Australia's clean energy future.

Solar Panels on Trees
Image by Frédéric Paulussen

AEMO CEO speech at Australian Energy Week 2024


At Australian Energy Week, Australian Energy Market Operator's (AEMO) CEO highlighted the agency's pivotal role in Australia's energy system and market, emphasising their responsibility in overseeing real-time energy operations and managing challenges such as extreme weather events.


Despite setbacks like storm-induced transmission failures in Victoria and Western Australia, AEMO successfully navigated these crises, demonstrating the resilience of Australia's energy infrastructure amidst evolving climate conditions.


The CEO underscored the importance of ongoing investment and collaboration to support the nation's energy transition, citing the Integrated System Plan as a crucial roadmap towards achieving secure, reliable, and cost-effective energy for all Australians.

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