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July Energy Update

River next to pine forest.

July 2022

Energy prices have fallen dramatically in the last few days, although it remains too early to identify whether this is a lasting shift in the price trend or just temporary respite. There are issues that still need to be resolved, most significantly recent warnings from the ACCC that Australia could face a gas shortfall next year, creating pressure for the Federal Government to trigger the Domestic Gas Supply Mechanism which would restrict LNG exports. To avoid the triggering of this mechanism, LNG producers are considering other proposals to ensure domestic supply. This response, along with warmer temperatures and scheduled maintenance at a Queensland LNG train which is reducing exports and increasing domestic supply, has resulted in a gas price drop which has flowed on to decrease electricity spot and Futures prices. The electricity market has also been helped by an increase in renewable output and coal generators coming back online after maintenance and outages. This is still an evolving situation; with the northern hemisphere winter approaching, a possible return to previous gas export levels once LNG train maintenance is completed, and future gas shortfall concerns, we may see a return to high prices despite the temporary positive news.

Recent Highlights

  • The ACCC has warned that the Domestic Gas Supply Mechanism may need to be triggered if there is a shortfall next year. They predicted a shortfall of up to 56 PJ (almost 10% of annual demand) if all uncontracted gas is exported. AFR
    • The ACCC report also raised concerns over the dominance of LNG exporters and their power to control supply of gas into the east coast market.
  • The Reliability and Emergency Reserve Trader (RERT) was triggered in Queensland on the 5th of July in response to Lack of Reserve conditions. WattClarity
  • AEMO has released the 2022 Integrated System Plan, a roadmap for the energy transition for coming decades. It has identified 5 priority transmission upgrades essential for a reliable system. AEMO ISP, Energy Magazine
    • Stakeholders identified the most likely pace of the energy transition to be the step change scenario, under which energy consumption in the grid will double by 2030, large-scale variable renewable energy (VRE) capacity will increase 9 times and all coal fired power stations will be retired by 2043.
  • Labor is confident they will be able to legislate their emissions reductions target of 43% reduction by 2030, after gaining the support of the Greens after negotiations over amendments to the bill. AFR

Renewable Energy News

  • AEMO’s Quarterly Energy Dynamics (QED) report revealed that renewable energy generation continued growing in Q2 2022, up 3.7% from this time last year to a total share of 31.7% (including rooftop solar and hydro). AEMO QED
    • The QED report also identified a corresponding record reduction in coal fired generation.
  • ARENA has received $3.7 billion of battery project applications vying for $100 million of grant funding. AFR

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