TTEG COMMENTARY
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Recent developments in the electricity market have posed challenges for both suppliers and consumers. The surge in electricity futures, driven by a combination of planned and unplanned generator outages, reduced renewable energy output, transmission constraints, and increased exports, has resulted in price hikes.
It is essential to diversify energy sources and investing in technologies like battery storage to mitigate the impact of future market fluctuations. Additionally, staying informed about market trends and regulatory changes will be crucial for making informed decisions in this dynamic environment.
TTEG offers comprehensive assistance in navigating the challenges posed by recent developments in the electricity market. Our focus on transparency ensures competitive pricing while avoiding hidden charges, and our proactive approach to regulatory compliance and strategic planning helps you stay ahead of market trends and optimise your energy procurement practices for long-term success.
ELECTRICITY FUTURE PRICING CHARTS
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WHOLESALE MARKET UPDATE
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- Electricity Futures have ballooned in recent weeks on the back of a number of planned and unplanned generator outages, a significant reduction in grid-scale wind and solar output, interconnector constraints between NSW-QLD and NSW-VIC, transmission line trips in NSW, increased exports from TAS and lower wind harvest in SA. Combined, these factors have led to substantial spot price volatility – particularly in NSW – which has flowed through to the remainder of the market.
- The start of CAL24 was blessed with unusually reliable generation, no major outages or supply constraints and an abundance of renewable penetration into the market. This kept futures pricing low – even in the face of sustained heatwave conditions in QLD and NSW in the summer months.
- In light of these broader market forces, pricing outcomes to consumers have therefore been heavily influenced by the increased reliance on gas and pumped hydro to fill the supply void, as well as Frequency Controlled Ancillary Services (FCAS) such as battery storage. CAL24 has so far seen gas, pumped hydro and batteries all rank among the top three most expensive generation sources across all NEM states.
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Pricing pressures could ease in the coming weeks, with the return to service of a number of major generator units in NSW and QLD providing much needed supply and grid stability.
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However, these may yet still be counteracted by the ongoing reduction of grid-scale wind and solar, especially considering that the overall productivity of solar has begun its average annual 4-month low season from May to August, with the market recently demonstrating its reliance on these fuel sources as being key components in minimising upward pricing pressures.
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GAS UPDATE
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Thankfully, large gas wholesale pricing has remained near its recent lows and there have been no major domestic supply shortages of coal or gas.
The federal government's Future Gas Strategy must ensure Australia's future gas needs
The gas industry expansion in Australia has sparked conflict between different factions. The government wants to balance reducing emissions with boosting manufacturing by advocating for more gas. However, environmental groups oppose further extraction, preferring to keep gas in the ground.
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Despite the need for gas in the energy transition, the focus should shift to ensuring enough domestic supply rather than preserving reserves. Australia, a major global gas exporter, faces domestic shortages due to government mistakes and industry decisions. Global price surges, triggered by events like the Ukraine crisis, worsen domestic issues, causing inflation and energy market instability.
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Efforts by successive governments, like threats of export controls and price caps, haven't adequately addressed looming gas shortages expected from 2027. Unlike competitors, Australia hasn't maximised government revenue from gas exports.
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Western Australia stands out with its gas reservation policy, ensuring domestic market allocation and lower prices. To revitalise manufacturing and ensure energy affordability, the federal government must prioritise domestic gas supply over merely expanding extraction.
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AEMO Quarterly Energy - Dynamics Q1 2024
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AEMO Q1 2024 report includes insights into market dynamics, trends, and outcomes during the first quarter of 2024 (January 1st to March 31st). It compares results for this quarter with those of recent quarters, particularly Q4 2023 and Q1 2023. Geographically, the report covers the National Electricity Market (Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia, and Tasmania), the Wholesale Electricity Market, and domestic gas supply arrangements in Western Australia, as well as gas markets in Queensland, New South Wales, Victoria, and South Australia.
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Report Summary:
In the first quarter of 2024, the National Electricity Market (NEM) experienced increased demand and volatility in wholesale prices. High temperatures drove operational demand to its highest level since 2020, particularly in Queensland, where a record demand was recorded. Despite this, wholesale spot prices decreased by 8% compared to the same period in the previous year. Renewables saw a significant increase in output, reaching 39.0% of total NEM supply, with grid-scale solar and distributed photovoltaics leading the rise. Meanwhile, gas prices slightly declined, with increased demand driven mainly by Queensland LNG exports. Western Australia also saw record electricity demand due to heatwaves, with renewables playing a larger role in meeting this demand. Despite some supply disruptions, domestic gas production increased, but net withdrawals from storage resumed after a quarter of injections.
NSW government extends operation of Australia's largest coal plant by 2 years till 2027
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The New South Wales government has reached an agreement with Origin Energy to keep Australia's largest coal-fired power station, Eraring, operational for at least two more years beyond its scheduled closure in August 2025. This move aims to prevent electricity shortages until more renewable energy sources are developed.
Under the deal, taxpayers will underwrite the plant's operation, limiting potential losses to Origin Energy. Talks between the government and Origin began last year amid concerns over the pace of renewable energy development.
While some view the extension as necessary for energy security, critics argue it could delay emissions reduction efforts and set a costly precedent. Environmental groups are disappointed by the decision, citing concerns over the environmental impact of the power station, including its contribution to heavy metal pollution and coal ash disposal issues. Despite the extension, there are calls for long-term plans to diversify the region's economy beyond coal.
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