December saw significant reductions in Futures prices for all states, largely due to news about the government intervention in the market with the move to cap coal and gas prices. Mild summer conditions and high renewable output have positively affected the supply and demand balance which is helping to reduce spot prices. The spot price has dropped to pre-energy-crisis levels, with average daily prices consistently below $100/MWh for the first time since March 2022 and comparable to prices in December 2021.
Gas and coal price caps implemented by the Federal Government took effect on December 23rd, however this was too late for companies looking to contract for 2023, and those that took the risk of remaining on the spot price for gas are unable to receive offers from retailers who say they are still working to understand the new legislation. AFR Electricity Futures prices have been rising again in recent days, so it remains to be seen to what extent the price caps will aid the electricity market.
- Government intervention to cap contract gas prices at $12/GJ was passed on Friday 16th December. The measures also included a temporary coal price cap of $125/tonne and $1.5 billion in bill support for consumers (primarily those on Commonwealth support payments). ABC
- In return for supporting the coal price caps, the federal government struck a deal with the NSW government to invest $8bn in critical infrastructure to connect Renewable Energy Zones to the grid, including Snowy 2.0 connections. Sydney Morning Herald
- Federal and State energy ministers have agreed on a capacity investment scheme, which will support investment in dispatchable renewable energy technologies such as pumped hydro and battery storage. ABC
- Unlike the original capacity mechanism design by the energy security board, coal and gas generation will not be eligible for the scheme to ensure it does not delay the phase out of fossil fuels. AFR
Renewable Energy News
- Australia’s first offshore wind renewable energy zone has been officially declared, with the most advanced offshore wind farm project Star of the South awarded Major Project Status which will prevent unnecessary delays. RenewEconomy
- ARENA has announced funding for 8 large scale battery projects with grid forming inverters, which have the capability to provide system services which are currently provided by synchronous fossil fuel generation. RenewEconomy
- This is one of the engineering advancements required to allow the grid to operate on 100% renewable energy at any point in time.
- South Australia experienced a run of 10 days with greater than 100% net generation from renewable sources. RenewEconomy
- Some solar and wind energy was exported to Victoria, however other capacity had to be curtailed (largely due to negative prices).