Mar-21 Energy Market Wrap

Mar-21 Energy Market Wrap

Prices tumble causing records to tumble. Big battery plans are prevalent, while there are 'movers and shakers' trying to stimulate prices to rise. Low spot prices are causing even lower price outcomes for solar and wind farms in the southern States. Forward prices for the next 3-years, are the lowest seen for many years.


We have released our full Market report that is available via subscription, and due to many requests we have introduced a new pricing model.  Check this out over here.

Below are the key highlights from this month's Market Report:

Market Events

  • there is an avalanche of battery energy storage system (BESS) projects on the drawing boards and so we have provided an insightful and interactive map with a description of all projects
  • given the early retirement of Yallourn, we have updated the retirement plan
  • the biggest Market News item for the month relates to AGL which includes splitting the company, acquisitions, a software joint venture and a knock-back on the Crib Point import terminal

Spot Prices

  • March average spot electricity prices were low for Vic and Tas; NSW and QLD stronger; while SA had an extreme price event causing the average monthly price to increase from about $35/MWh to $68.90/MWh
  • the average quarterly price was the lowest for Tasmania for 10-years, lowest QLD and VIC average price for 9-years, lowest NSW and SA average price for 6-years
  • the proportion of negative half-hour prices continues to be material for SA
  • There are 'movers and shakers' trying to stimulate higher spot price outcomes evident from their offers

Forward Prices

  • with the extreme price event in SA, the $300/MWh cap product would have paid out more than the premium, unlike all other States where the cost would have far weighed the benefit
  • the traded forward price before the commencement of Q1-21 was at a significant premium to the actual spot prices, proving again that the forward price does not have a good track record to predict future spot prices
  • SA holds the crown for the lowest FY-21/22 forward price, and NSW maintains the crown for the highest
  • the forward price outlook for the next 3-years is setting new records

Generation

  • Winton solar farm (85MW) began operations in VIC
  • Brown coal generation has stepped up since January this year, while Black coal has been consistent since November last year but much lower than same time last year. Gas powered generation is operating at about half of 2019 levels, while solar and wind have markedly increased
  • average wind farm price earned by NSW wind farms is similar to the time weighted average, but VIC and SA is discounted
  • average solar farm price earned in VIC was extremely low for the quarter and SA was even lower. For now, NSW and QLD are more resistant

Everything else...

  • compared to previous years, Snowy's water storages are higher, and HydroTas is about the same
  • FCAS costs were the highest since November, but far less than the same time last year
  • Natural gas spot prices have hovered around $5.50/GJ to $6.25/GJ for the month, despite rising Asian prices
  • VEET certificate costs are rising strongly due to Melbourne lock-downs and changes to rules, while LGC forward prices softened during the month before beginning to rise
  • the BoM weather outlook for the next 3-months is warmer than average and drier in Queensland
Key Feature

Battery Energy Storage Systems

The Avalanche of Proposals

Our Key Feature this month looks at the avalanche of Battery Energy Storage Systems proposed, and an update of the planned retirement of plant given the bringing forward of Yallourn's closure.

Back in November last year we wrote an article called Gas-powered generation continuing to be bumped! where we made the point that gas-powered generation was meant to be the transitional fuel from coal to renewables. However, renewables jumped the queue, relegating gas-powered generation. We also predicted that Battery Energy Storage Systems would likely follow suit, and this prediction seems to be playing out...




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