June 2024 Electricity Market Review

Market Commentary

In June 2024, electricity spot prices climbed in all states across the National Energy Market excluding New South Wales as low renewable output and unplanned generator outages bite. 

For the fourth consecutive month, low wind, solar and hydro output have caused prices to spike across the states of Queensland, South Australia and Victoria.  

The only state to experience a drop in prices was New South Wales, but this was only because the previous month was a rollercoaster for the state where unplanned outages and abysmal renewable output caused prices to go through the roof in May. 

The month-on-month increase in spot prices did not translate into the wholesale futures market, where prices dropped in all states except South Australia. SA relies heavily on gas generation, battery discharge, and interconnector imports when renewable energy is low, giving the state quite distinctive characteristics to the rest of the NEM. 

End of Financial Year Spot Prices Comparison 

As we close the end of the financial year for 2023-2024, it is worth noting that electricity spot pricing in all states making up the National Energy Market registered significantly cheaper prices on the spot market than in the previous financial year. 

Prices dropped in all states:  

End of Financial Year Wholesale Futures Prices Comparison 

Wholesale futures prices did not follow the same trajectory as the spot pricing market as prices across the NEM increased from the end of the last financial year to this one. 

Supply-Demand Tightness in Q2 

Throughout the second quarter (Q2), the electricity market experienced supply-demand tightness due to prolonged wind lulls, increased heating demand from cold temperatures, low hydro production, a rise in coal production, and unplanned outages at various generators throughout the NEM. 

East Coast Gas System Notice 

Supply issues are further compounded by potential gas shortages. AEMO issued an ‘East Coast Gas System Risk or Threat Notice’ on June 19, forecasting ongoing supply challenges until September 30. 

High gas-powered generation demand and production constraints have depleted storage inventories, impacting gas supply adequacy. 

Generator Outages Impacted demand and supply 

Increased demand and low renewables supply put a squeeze on prices in June and these were further affected by outages at several generators across the NEM. 

These outages collectively strained supply conditions in affected regions, contributing to increased spot prices and highlighting challenges in maintaining grid stability during periods of heightened demand.  

CS Energy also announced that the staged return of Callide C4, which was originally slated for the beginning of June, has been pushed back. It was due to return to full capacity by 31 July, but it looks like a partial return may be around that date with all return pushed into August. 

1. Eraring Unit 1 (NSW):
   • Outage Start: Offline since June 8th, 2024, due to ID Fan limitations. 
   • Return: June 10th, 2024. 
2. Eraring Unit 2 (NSW): 
   • Upcoming Outage: Scheduled for unplanned maintenance in the second week of June. 
   • Decision: Initiated on June 7th, 2024. 
3. Yallourn Unit 3 (Victoria): 
   • Outage Start: Offline since June 7th, 2024, due to an Economiser Tube Leak. 
   • Repair Status: Under maintenance with expected return pending repairs. 
4. Kogan Creek (Queensland): 
   • Outage: Experienced outage on the morning of June 20th, 2024. 
   • Return to Service: Returned to service on the evening of June 21st, 2024. 
5. Tarong Unit 3 (Queensland): 
   • Outage: Came offline late afternoon on June 21st, 2024, due to unplanned reasons. 
   • Current Status: No immediate timeline for return, under observation for further updates. 
6. Mt Piper Unit 1 (NSW0: 
   • Outage: Offline due to boiler tube leak since June 18th, 2024. 
   • Expected Return: Scheduled to be back online by June 24th, 2024, with repairs ongoing. 

Low renewable output causes spot price upticks 

For the fourth consecutive month, lower than usual renewable energy generation plagued the National Energy Market, contributing to higher spot prices. 

Demand and Supply Dynamics 

The chilly winter temperatures in major cities such as Brisbane, Sydney, Melbourne, Adelaide, and Hobart have significantly escalated heating demand, leading to increased overall energy consumption.  

Additionally, low wind yields and reduced hydro production in South Australia, Victoria, and Tasmania further strained the available generation capacity, affecting market conditions. 

Wind Lulls 

• Wind Lull #1 (April 13th to April 20th): Notable underperformance in Victoria (VIC), New South Wales (NSW), and parts of South Australia (SA). 
• Wind Lull #2 (May 13th to May 18th): Significant underperformance in South Australia (SA) and Victoria (VIC). 
• Wind Lull #3 (May 22nd to May 28th): Widespread underperformance in Victoria (VIC), South Australia (SA), New South Wales (NSW), and parts of Tasmania (TAS). 
• Wind Lull #4 (June 5th to June 11th): Marked underperformance in Queensland (QLD), South Australia (SA), and Tasmania (TAS). 

Lower Hydro Output impacted prices further 

Hydro production in Q2 2024 was one of the lowest compared to the past 10 years, potentially ending as the second lowest. 

Historical comparisons indicate 2008 Q2 had the lowest production, followed by 2007 Q2, closely matched with 2012 Q2 and 2024 Q2. 

Higher prices during midday in Q2 2024 might have reduced time-shifting opportunities for pumped hydro plants like Wivenhoe, Shoalhaven, and Tumut. 

AEMO stresses that renewables, batteries, and gas are the lowest cost electricity sources as coal retires 

In its 2024 Integrated System Plan, The Australian Energy Market Operator has again confirmed that renewables, battery, and gas are the lowest cost electricity sources as coal retires. 

As coal-fired generation retires, renewable energy, supported by transmission, storage, and gas-powered generation, is identified as the lowest-cost method for electricity supply. 

This approach supports Australia’s transition to a net-zero economy. 

• Optimal Development Path (ODP): 
  The ODP is the lowest-cost pathway to meet energy policies on emissions reductions, with an annualised capital cost of $122 billion by 2050. 
• Transmission Projects: 
  Seven new transmission projects have reached ‘actionable’ status since the 2022 ISP (Integrated System Plan). 
  Investment in these projects will reduce costs for consumers, recoup $16 billion in investment, save an additional $18.5 billion in avoided costs, and deliver $3.3 billion in emissions reductions. 
• Government and Industry Support: 
  The ISP aids governments and industry in planning and investing in necessary infrastructure for the energy transition. 
  It ensures reliable, affordable electricity by adapting to economic, technical, and policy changes. 
• Exclusion of Nuclear Power: 
  The ISP does not include nuclear power, as it is not permitted under current Australian laws. 

Coalition touts nuclear as the solution to the country’s electricity problems 

The Federal Coalition has made a pledge to invest in nuclear power generation if elected to government at the next general election. 

It has proposed seven sites for potential nuclear power plants, sparking extensive debate on energy policy and environmental considerations. 

New South Wales

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

New South Wales electricity futures prices for 2025* started the month at $136/MWh, dipping to $128 in the third week of the month, closing almost where they started at 135/MWh. 

Prices for 2026/27 followed the same trend. Prices have come down since the crisis in October 2022 and are $12/MWh costlier than the same period last year.  

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Commentary:

• New South Wales spot prices dropped significantly from an astronomical $274/MWh in May, to $157/MWh. Although this was a 47% drop, spot prices are still substantially higher than average.  
• Spot prices are substantially higher than June 2023, when the average price was $105/MWh. 
• Although June saw consistently soaring prices on the spot market in New South Wales, there were no extreme pricing events with a high of $1,117/MWh. The bulk of trading took place at around the $150/MWh mark. There were very few Incidences of negative pricing, around 100, with a maximum low of -$47/MWh.  
• Renewables shares in June 2024 dropped by almost 4% from a lacklustre 26.8% to a measly 23% of the generation mix. Reliance on gas increased from 3.3% (already high) to 4.8%. Coal contribution made up for the drop in renewables, climbing by almost 3% to 72.4% of the generation mix.   
• Batteries remained at a contribution of 0.2% of the state’s energy, dropping from an exorbitant $767/MWh to $246/MWh. Gas generation also dropped drastically in price from an average of $815/MWh to $240/MWh. Renewables cost an average of $127/MWh, and coal $161/MWh – dropping in price to be closer to their usual generation costs.  

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Victoria

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Victoria futures prices opened the month at $81/MWh (2025), climbing to $86/MWh in the second week of the month, closing at $83/MWh. Prices for 2026 and 2027 followed the same pattern but at a cheaper cost.  

Electricity prices have come down significantly since the crisis in October 2022 but are $7/MWh higher than the same period last year.  

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Commentary:

• Victorian average spot prices also increased substantially from $132/MWh at the end of May to $166/MWh at the end of June 2024, a 25% jump.  
• Electricity spot prices are $112/MWh costlier than in the same period for 2023.  
• The trend continued in Victoria. No extreme pricing events, but consistently high spot prices with a high of $1,096/MWh. The bulk of trading occurred around the $150/MWh mark.  
• Incidents of negative pricing dropped to around $300 with a low of -$49/MWh. 
• The share of renewables generation remained low at 28%, identical to the previous month. Coal generation remained static at dropped by two percentage points to 64%. Gas increased from an already high 5.5% to 7.2% of the generation mix.   
• Battery supply accounted for 0.5% of electricity, and generation cost an average of $222/MWh. Renewables cost an average of $132/MWh, while coal cost $167/MWh and gas cost $247/MWh.  

Queensland

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Queensland futures electricity prices for 2025 opened at $111 at the start of June, closing off the month higher at $114/MWh. Prices for 2026 and 2027 followed the same trend but at a cheaper cost  

Electricity prices have come down since the crisis in October 2022 but are $17/MWh costlier than the same period last year.  

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Commentary:

• Queensland electricity spot prices increased by $33/MWh over the previous month at an average of $126/MWh for June 2024.  
• Queensland spot prices are costlier than they were in June 2023, when the average price was $102/MWh.  
•  Queensland – usually one of the more volatile states – experienced a stable month with the highest spot prices set at around $760/MWh. There were fewer negative pricing events, around 1,000 with a low of -$47/MWh. The bulk of trading occurred at the $115/MWh mark.  
• Renewables in Queensland have performed poorly in 2024 and a fifth consecutive drop from 24.2% to 21.9% was registered. Coal generation remained static with a 70% contribution. Gas increased from 5.8% to 7.6% the energy mix.   
• Batteries supplied 0.1% of total generation. Battery energy cost $208/MWh in June. Gas averaged a cost of $200/MWh, coal $135/MWh and renewables $60/MWh.   

South Australia

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

As usual, South Australia’s wholesale electricity futures prices for June 2024 displayed a different trend to other states, due to its different energy mix, of which the majority are renewables and the rest gas.  

2025 futures started the month at $113/MWh, climbing in abrupt fits and starts, closing the month at $116/MWh. Prices for 2026 and 2027 were initially significantly cheaper, but then spiked to close high at the end of the month. 

Prices have come down substantially since the crisis in October 2022 and are $6/MWh costlier than last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!

Commentary:

• SA’s average electricity spot prices increased significantly from $135/MWh in May to $178/MWh in June – a jump of 47%.  
• Electricity prices are much higher than the same period last year when they were averaged $88/MWh. 
• Notorious for pricing volatility, SA has one market cap event where pricing hit $16,600/MWh. Like other states, pricing was consistently high throughout the month of June. 
• Around 500 negative pricing incidents were recorded during June 2024 with four incidences of pricing falling to -$189.  
• Renewables dropped even further to 54% of generation when they are usually in the high 70s mark. Conversely gas generation increased further to 44% when it usually sits at around 20% of the generation mix.  
• Battery contributed more than 1% for the second time on record at 1.2% and averaged a cost of $240/MWh. Gas costs an average of $227/MWh, and renewables at $124/MWh.  

Take Control of Your Energy Costs 

Spot prices climbed across the National Energy Market, except in New South Wales, due to low renewable output and unplanned generator outages. For the fourth consecutive month, low wind, solar, and hydro output caused prices to spike in Queensland, South Australia, and Victoria. 

Depending on your business’s risk appetite, now could be a good time to secure a new energy contract. 

Act now! Reach out to one of our experienced energy consultants today and gain valuable insight into the potential costs that may lie ahead. Don’t wait, take control of your energy expenses now! 

We hope you have found our electricity market update for May 2024 informative and helpful. We understand that these are challenging times and we are here to support you. If you would like to delve deeper into the energy market’s previous months, you can find our monthly energy market reviews here.   

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Explainer:  Why we focus on Wholesale Futures Prices

Wholesale Futures Price: This reflects what the market expects wholesale electricity spot rates to be in future periods. The offers that commercial and industrial (C&I) customers receive via Leading Edge Energy are closely correlated to wholesale prices on the ASX Energy futures market; this is why we focus on these prices in our commentary.

Spot Price: This represents how much the spot market is charging for electricity currently based on demand and supply. Spot prices go up when demand is high and supply is tight. You can view live Spot Prices here. 

You can learn more about the difference between wholesale electricity futures and spot prices in our blog section.

Disclaimer: The information in this communication is for general information purposes only. It is not intended as financial or investment advice and should not be interpreted or relied upon as such.

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