Apr-20 Energy Market Wrap

Apr-20 Energy Market Wrap
Table of Contents
Table of Contents

Australia has now endured its third month of COVID-19 affecting the energy market. Soft power and gas spot prices emerge reaching levels not seen for many years. Softening forward power prices are also following suit, despite the arrival of new renewable supply being threatened by a falling Aussie dollar, higher construction costs and connection challenges.

Electricity Spot Prices

Less human mobility, seasonally low demand, abundant run-of-river generation and the continued low domestic gas price all contributed to low electricity spot prices.

April average prices were:
– The lowest since 2015 in Qld, NSW and Vic
– the lowest in SA since 2012
– and TAS the lowest on record

Region Month Qtr
NSW $40.37 $40.09
VIC $34.83 $34.43
SA $33.50 $33.64
QLD $36.99 $32.82
TAS $23.37 $23.61

Forward Power Prices

Forward power prices softened during the month despite a mid-month rally, and an end of month rally. Prices remain below $50/MWh for QLD and under $60/MWh for the rest of the NEM for FY-20/21.

Domestic Gas Prices

Domestic gas spot prices continue to soften across the nation to historically low levels with the average price across the wholesale market falling to an average price of about $4.60/GJ. QLD, despite a slight increase in the average gas spot price in April, continues to have the lowest average price at $4.40/GJ.

LGC Prices

The LGC spot price increased during April over the previous months and finished the month at $31.13/certificate. The forward price also saw a slight increase over the previous month.

During the month AEMO release Part 1 of its Renewable Integration Study which evaluates the security and reliability of the NEW under the assumptions forecasted in the ISP. The study outlines the requirements and actions necessary to accommodate high penetration of wind and solar. The Report concluded that:
  – If the recommended actions from the RIS are taken up, the NEM could operated securely with up to 75% instantaneous penetration of wind and solar.

  – If the recommendations were not taken up, operational limits would constrain wind and solar generation to between 50% and 60%.

Other news:

  – AEMO’s final draft for Marginal Loss Factors gave favourable revisions to a number of wind and
solar farms.
   – Tasmania outlined a 200% Renewable energy target by 2040.

   –  Residential Solar PV installation enquires have decreased since the onset of COVID-19.

   – The AEMC’s 5 minute settlement rule due to be implemented in July 2021 has been delayed until 2022 due to COVID-19 challenges.
   – The is landing event of the SA region in the Q1-20 has cost an estimated $229m in FCAS cost, equating to 74% of the total $310m of FCAS costs for the quarter.

  – AEMO’s assumptions for the ISP are under review as feedback received indicated that the assumed cost of batteries were too high and cost for pumped Hydro to low. Review of transmission costs have also been revised up by 30%.

  – SavvyPlus joined Goanna Energy and the Tasmanian Small Business Council with financial support from the ECA, to submit a detailed evaluation of the proposed Marinus Link. Our submission expressed concerns regarding the assumptions and methodology of the TasNetwork’s evaluation, leading to the conclusion that we are unconvinced Marinus Link is in the best interests of consumers. 

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