After every NSW quarter last year settled below its 2024 counterpart and January 2026 spot delivered the weakest in five years, the market mood has turned bearish. Put-option volume has more than doubled year on year. Will today’s predicted extreme spot price break that pessimism?
New South Wales steps into today’s evening-peak period with a classical dramatic pre-dispatch curve seen a number of times this year, but not yet realised. At 8:00am this morning, spot is projected to drift into the mid-$30/MWh band around midday, then vault past $12,000/MWh at 17:00 before jump at or near the the Market Price Cap of $20,300/MWh at 19:00 and hold for an hour. Late yesterday, many hours were predicted at the Market Price Cap level, but since then has been tempered.
Should the Market Price Cap materialise or deliver near the level for a reasonable period, it would deliver the sharpest intraday swing of the year and NSW’s first bona-fide cap event since winter 2025. But the derivatives trading is flashing a very different signal with a softening forward curve and a wall of put-option buying reveal deep scepticism about New South Wales’ ability to sustain genuine scarcity pricing.
This scepticism has been growing since mid last year and has been reinforced by January this year, when NSW’s average spot price delivered a modest $69/MWh. Its weakest New-Year month since 2021 and the second-lowest in a decade. Even the “extreme” day on 10 January stalled below a $500/MWh daily average, reinforcing the view that the structural changes noted in Victoria, have also impacted New South Wales (and Queensland for that matter), and blunted volatility. Moreover two other testing days in New South Wales during February (i.e. 5th and 6th) have not lived-up to forecast extreme price events.
