ELECTRICITY MARKET UPDATE & FUTURE PRICING
March 2022
VICTORIA
Over the past month, average Victorian wholesale electricity contract prices across calendar years 2022-25 increased by approximately 6%. The largest price increase was for calendar year 2025, which spiked 15% following Origin’s announcement on 17 February that it intends to close the 2.88 GW Eraring plant in NSW (Australia’s largest power station) seven years early to Q3 2025. On 19 February following this announcement, AGL received a takeover bid by tech billionaire Mike Cannon-Brookes and the Canadian investment firm Brookfield. The intention of Cannon-Brookes is to have AGL’s entire coal-fired generation fleet fully decommissioned by 2030 and replaced by renewables. Although their initial bid was rejected by AGL, it is still possible a more attractive offer will be considered. Prior to receiving this takeover bid, AGL announced on 9 February that they will bring forward the closure dates of two large generators, Bayswater by 2-5 years and Loy Yang A by 3-8 years. This will potentially leave a gap of nearly 5,000 MW of baseload generation in the market. These recent announcements clearly indicate a growing momentum in the private sector towards decarbonising the Australian electricity market. Despite this being a step in the right direction for action on climate change, the loss of baseload capacity will likely have an upward impact on prices.
NEW SOUTH WALES
Over the past month, average New South Wales wholesale electricity contract prices across calendar years 2022-25 have increased by approximately 13%. The largest price increase was for calendar year 2025, which spiked 29% following Origin’s announcement on 17 February that it intends to close the 2.88 GW Eraring plant in NSW (Australia’s largest power station) seven years early to Q3 2025. Generator availability remains a concern in the state and there is a widening gap between demand & supply during the early evening hours as renewable generation ramps down and the market’s reliance on expensive gas & coal fired baseload power increases. Should the current global energy crisis deepen and international coal & gas prices continue to rise, it is very possible we will see further upward movement in electricity prices. Furthermore, Liddell Power Station (more than 10% of NSW power supply) is set to close its first unit (500 MW) in April this year and the remaining three units (1,500 MW) in April 2023. This loss of baseload capacity will likely have an upward impact on prices.
Over the past month, average Queensland wholesale electricity contract prices across calendar years 2022-25 increased by approximately 9%. The largest price increase was for calendar year 2025, which spiked 29% following Origin’s announcement on 17 February that it intends to close the 2.88 GW Eraring plant in NSW (Australia’s largest power station) seven years early to Q3 2025. Since the explosion at Callide power station in late May last year, generator availability has remained a concern and Queensland is heavily relying on expensive liquid fuel generation to meet evening peak demand. Low gas storage levels, limited gas field production and rising international oil & LNG prices have all contributed significantly to price increases. The January heatwave in QLD combined with unplanned generator outages and the high cost of coal & gas for power generation had sent Q1-2 2022 electricity prices through the roof. However, prices for 2022 contracts eased by approximately 7% over the past month. More recently, extensive flooding in south east Queensland and northern NSW has left approximately 50,000 properties without power. Local distributor Energex is currently working to restore power while Red Cross teams are on the ground in evacuation centres on the Fraser Coast, Sunshine Coast, Moreton Bay, Lockyer Valley, Ipswich, Brisbane and Gold Coast local government areas.
QUEENSLAND
Over the past month, average South Australian wholesale electricity contract prices across calendar years 2022-25 increased by approximately 4%. Since SA decommissioned its last coal-fired power station in 2016, the state has relied primarily on renewable generation and electricity imports from Victoria to meet demand. When renewable generation is low and imports from Victoria are insufficient during periods of peak demand, expensive liquid fuel peaking generation is dispatched. This has resulted in significant real-time spot price volatility that has flowed into retail energy rates.
SOUTH AUSTRALIA
Western Australian retail electricity prices are expected to flatten and remain soft over the short term due to increasing uptake of rooftop solar and a growing number of large scale solar and wind projects putting downward pressure on demand. Over the short to medium term, however, it is likely we will see a significant portion of coal-fired generation exit the market starting with the staged closure of all but 2 units at Synergy’s coal-fired Muja Power Station between late 2022 and 2024. This loss of baseload capacity suggests electricity prices in WA will experience a gradual increase over the next 1-2 years.