Feb-22 Energy Market Report

Feb-22 Energy Market Report

February 2022 delivered much stronger electricity spot price outcomes and despite global pressures, steady gas spot prices. Next winter forward electricity prices surged and longer dated forward prices rallied driven by recent trends, the Russian invasion, and early power station retirements.

1.0  Overview

February 2022 has been another profound month in the industry with major announcements of earlier power station closures by AGL and Origin Energy, and then the global impact on energy prices due to the Ukraine invasion by Russia.

Forward prices have rallied for the next 3-years in all Regions, although those Regions mostly impacted were the black coal-fired generation States of NSW and QLD. The forthcoming winter prices are now at a level that have only ever been surpassed a few times in history.

East coast gas spot prices continue to be immune from the Asian LNG gas market upward price movements that have been impacted by the tightening global gas, coal, and oil markets. Exports to China continue to decline.

Higher baseload outages in QLD, NSW and VIC aided stronger February average spot electricity prices with QLD delivering the second highest on record, only exceeded in 2017. Meanwhile:  

  1. NSW's average monthly price was the fourth highest on record, more than double the previous year
  2. VIC's average was also more than double last year's and was the 6th highest on record, and the highest since 2019.
  3. SA recovered from last year's lowest February since 2003 and was in the middle of the pack of historical prices.
  4. TAS also recovered and was the highest since 2019, and the 5th highest in history.

Negative prices remained low again during February for QLD, NSW and TAS, while VIC and SA continued to be much higher and remained consistent with January levels.

Extreme spot prices occurred, or threatened to occur, in NSW on Monday 21 February, but generator behaviour appeared to squash extreme spot price outcomes despite competition to allow prices to run. Meanwhile, Snowy Hydro main water storage levels reached the second highest level in history, for this time of year.

Blue Grass solar farm came online as did Murra Warra Stage 2 wind farm. Due to higher outages, black and brown coal generated less for the same time in previous years. Hydro was about the same, while renewables (wind, solar, solar PV) increased.  

Ancillary service costs continue to be low, while spot environmental certificate prices were more stable during the month, although forward LGC prices continued to rise.

The weather outlook is for a higher rainfall than average, adding to the deluge and flooding that has already been experienced in northern NSW, Brisbane and north of Brisbane. For those affected, we wish you well in such difficult conditions.

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