TTEG COMMENTARY
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As shown in the Wholesale Market Update and the associated charts below, the energy market has spiked in recent weeks on the back of a number of aligning factors, including:
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Wild weather in South Australia destroying infrastructure.
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Load-shedding in NSW.
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Interconnector constraints between VIC and NSW.
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A significant portion of the nation’s baseload generation fleet either coming offline as scheduled, remaining offline for longer than expected or shutting down unexpectedly - for various periods of time.
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Elevated late-year procurement activity.
Energy contracting is fundamentally about managing pricing risks. Monitoring the market allows you to secure favourable long-term energy contracts.
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But when is the best time to act?
As we’ve discussed in previous updates, we strongly recommend establishing an Energy Procurement Plan that begins at least 18 months (preferably 2 years) before your current contract’s end date.
The Plan should include ongoing market monitoring, factoring in the operational status of key power stations and other variables, and adjusting energy strategies as needed.
Timing is critical when navigating the energy minefield. Nearing your contract end date during a price spike could lock you into higher rates.
If you don’t yet have an Energy Procurement Plan, are unsure of its effectiveness, or would like advice, we’re here to help.
WHOLESALE MARKET UPDATE
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Overview:
Futures pricing remains delicately poised across mainland NEM as we head into summer 2024. Owners of fossil fuel generation assets have used Spring to shut down a significant portion of the nation’s baseload fleet for scheduled (and unscheduled) maintenance, which remains ongoing in VIC, NSW and QLD in particular until at least December.
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Regional Highlights:
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Victoria: Over the last fortnight there have been unscheduled outages at 3 of Yallourn’s 4 units, while currently only the Loy Yang 4 unit is un-operational. VIC has remained blessed with an abundance of reliable baseload generation coupled with state-wide minimum operational demand records being set on a weekly basis at times. This has benefited wholesale pricing outcomes as the supply-demand equation has remained firmly in the oversupply realm, however SA and NSW have faced recent supply difficulties leading VIC to net export to these states where possible, in recent weeks.
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New South Wales: Futures pricing has remained elevated on the back of the highest percentage of baseload generation in the country remaining offline for maintenance and lower renewable output. A recent severe storm in SA lead to interconnector constraints between SA-NSW and VIC-NSW. It also lead to the market operator warning of load-shedding in south-west NSW as backup diesel generators were deemed inadequate to supply the required region.
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Queensland: The country’s largest solar farm has come online and is slowly ramping up. Recent falls in renewable harvest have been offset by large generation coming back online, however there are still a number of large generators coming offline over the next month for their maintenance.
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Looking Ahead:
During Summer we should expect large-scale solar and wind output to increase significantly, which historically has had the effect of lowering wholesale pricing as less demand is placed on the underlying baseload fleet. However, the bureau’s prediction is for a hotter and drier summer than previous, which can lead to increased supply reliability risk – particularly at times of maximum (summer) demand.
ELECTRICITY FUTURE PRICING CHARTS
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Queensland regional councils and utility companies were not consulted before plans for a nuclear power plant in their area were publicly announced, a parliamentary inquiry has revealed. Despite the lack of consultation, many central Queensland residents, including business owners and farmers, expressed support for nuclear energy, viewing it as preferable to renewables.
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Opinions in the region remain divided. Some fear premature closure of the coal-fired Callide power station, which employs 250 people, while others welcome nuclear power for its potential to replace large-scale renewable projects that impact farming land. Local leaders, including the Banana Shire mayor, called for more consultation and detailed information, particularly regarding costs and international experiences with nuclear facilities. The inquiry will continue with a public hearing in Nanango.
East Coast gas crisis strains Australia's market
Australia’s eastern seaboard faces mounting energy challenges, with declining gas supply from the Bass Strait and increased demand exacerbated by Queensland’s LNG export terminals, which have stretched domestic resources.
While the transition to renewables progresses, the lack of reliable storage solutions leaves the energy market vulnerable, particularly during winter peaks. Energy economist Bruce Mountain highlights that balancing export commitments and domestic needs is a delicate task, complicated by high global gas prices and underperforming coal seam gas production.
Policy responses, from export curbs to proposals for nuclear energy, remain contentious, with renewable energy and storage seen as more viable long-term solutions. As Australia navigates these complexities, maintaining energy security, affordability, and international trade relationships poses a significant challenge for policymakers and consumers alike.
Boosting Australia's EV Future
The Australian Government is advancing electric vehicle (EV) adoption by funding initiatives to improve charging infrastructure and battery technology.
New fast-charging stations, installed by the NRMA with a $39.3 million government grant, now connect Melbourne and Adelaide via sites in Wycheproof, Ouyen, Mildura, and Marong, with others recently opened in Ararat, Port Pirie, and Mataranka.
The National EV Fast-Charging Network aims to install chargers every 150 km on highways, with over 1000 already operational and more planned. Additionally, a $4 million investment through ARENA supports Australian company AnteoTech’s development of silicon anode technology to make lithium-ion batteries lighter, cheaper, and more energy-dense, enhancing EV driving ranges.
Renewables Power Australia's Emissions Cuts and Energy Shift
A report by the Clean Energy Council and Green Energy Markets highlights that Australia’s emissions have dropped by 30% since 2015, thanks to significant renewable energy investments that have avoided over 200 million tonnes of CO2 emissions.
By 2025, emissions are projected to be 40% lower, saving 340 million tonnes over the decade. Renewable energy now generates over 40% of Australia’s electricity, up from 16% in 2015, with investments enabling emissions reductions equivalent to removing all cars, light commercial vehicles, and planes from Australia’s roads and skies.
Clean Energy Council CEO Kane Thornton emphasises that renewables not only decarbonise the electricity sector—the nation’s largest emitter—but also support decarbonisation of other industries. If current projects and rooftop solar growth continue, emissions savings could reach 998 million tonnes by 2030, with renewable energy supplying 60% of electricity and advancing Australia’s 43% emissions reduction target.
Cost Overruns and Delays Hinder Australia's Clean Energy Transition
Australia's transition to clean energy is facing cost blowouts and delays, with the price of three major electricity transmission projects doubling to at least $16 billion. These projects, including the Central-West Orana Renewable Energy Zone, Queensland’s CopperString line, and the HumeLink transmission line, are vital to decarbonisation and connecting renewable energy sources to the grid.
Rising construction costs, material shortages, and inflation, combined with increasing demand for electricity, are raising concerns about impacts on consumer power bills. The Australian Energy Market Operator estimates nearly 10,000 kilometres of new transmission is needed by 2050, with half required within the next decade to replace retiring coal plants.
Despite government initiatives like the $20 billion Rewiring the Nation program, challenges in planning, community opposition, and global competition for resources are complicating efforts. Renewable energy developers warn that higher transmission costs may deter investment, while experts emphasise the need for coordinated government and private sector collaboration to ensure timely and cost-effective delivery of these critical projects.
Origin Energy to Expand Eraring Battery to Largest in Australia
Origin Energy has announced a third stage for its Eraring battery project, which will expand its storage capacity to make it Australia's largest battery and one of the biggest in the world.
The third stage will add 700 MWh of storage, increasing the battery's total capacity to 2,800 MWh by 2027. This will allow the facility to better meet evening demand peaks, powering up to 150,000 NSW households annually.
Despite controversies surrounding the continued operation of the aging Eraring coal plant, this expansion positions Eraring as a key part of the grid's future, with further investments in wind, solar, and battery projects planned by Origin. The project is set to be completed by 2027, alongside other major energy initiatives across the country.
Installation of Australia's Tallest Turbines Co-Owned by Queensland Coal Giant
The Wambo wind farm in Queensland’s Western Downs has reached a major milestone with the installation of its first turbine tower, marking the beginning of its 500 MW project.
The first stage, comprising 42 Vestas turbines, will generate 252 MW and features Australia's tallest turbines, with a tip height of 247 metres—17 metres taller than the current record.
The second stage will add another 254.2 MW, bringing the total capacity to over 500 MW. The project, which could also include a 40 MW/200 MWh battery, is a joint venture between Cubico Sustainable Investments and Stanwell Corporation, backed by a $192.5 million state investment.
