Both wholesale and Futures prices have continued skyrocketing in May, from already elevated levels. This is still largely the result of soaring international commodity prices, the conflict in Ukraine, unplanned coal outages and the impact of NSW/QLD flooding. Origin has also announced that they are having difficulties sourcing coal for the Eraring power station, and will be forced to either run at reduced capacity or source coal from more expensive supplies. Adding to supply challenges, eastern Australia is in the middle of a cold snap which will continue over the next week, placing further pressure on gas and electricity markets.
Cal 2023 prices are sitting around $200/MWh in NSW and QLD and well above $100/MWh in SA and VIC. Wholesale spot prices are at unprecedented highs, averaging above $300/MWh in May for NSW, QLD and SA, with no sign of easing in the short term. One major impact has been record high domestic gas prices, which have averaged above $30/GJ for the first time in the week leading up to May 15th, and remain above $40/GJ in Adelaide and Brisbane and close to $30/GJ in Sydney. On Monday 30th of May, Melbourne hit the Cumulative Price Threshold and prices had to be constrained to $40/GJ.
The combination of all these dynamics will provide a test for the incoming Labor government, but we are unlikely to see any short-term impact from policy changes. There have been calls from industry for the government to invoke the Australian Domestic Gas Security Mechanism, where certain amounts of gas have to be reserved to be sold domestically, however even this is uncertain to have an immediate impact on prices due to domestic pressures.
- Futures prices jumped a massive $30-$40 dollars in a single day on Wednesday 25th of May in NSW, Vic and Qld. WattClarity
- The AER has raised default prices by 8% above inflation for residential customers and up to 13.5% above inflation for small businesses, due to soaring wholesale prices. WattClarity
- Gas retailer Weston Energy have been forced to cease operations due to the record gas prices, which have tripled since the start of the year. AFR
- They were unable to source cashflow requirements for their trading portfolio.
- Weston’s managing director expressed frustration over perceived policy failures which have allowed domestic gas prices to reach unprecedented levels.
- AGL has abandoned it’s proposed demerger plans after failing to secure enough shareholder support.
- This comes following an intense campaign by Mike Cannon-Brookes against the demerger. His private firm Grok Ventures, which owns over 11% of the company, has called for a more thorough refresh of the board and management ahead of a strategic review, and will seek 2 board seats. AFR
Renewable Energy News
- The international energy agency has announced that a record 295 GW of renewable energy capacity was added in 2021, with an anticipated 320 GW to be added in 2022. AFR
- Instantaneous wind production in the NEM reached a new maximum of 6637 MW on Tuesday 31st of May, as strong wind warnings were issues around the country. WattClarity
- This accounted for around 32% of grid demand when the record was reached at 2:30am.