Market Update – December 2022

Market update – December 2022

Market conditions to 19 December 2022

Spot market

In the spot market, prices are on the decrease heading into the festive season after hitting historic highs throughout the year.

The perfect storm in the energy market that led to a sharp elevation in prices – including a meteoric rise in international coal and gas prices; a number of unplanned generator outages, as well as some units being out of action for planned maintenance; heavy rains slowing coal mine output; and sustained periods of low wind and solar output – has begun to dissipate.

With baseload availability returning to normal levels, coal stockpiles recovering, strong wind and solar generation, and cooler-than-expected weather, spot market prices have fallen in Queensland, New South Wales and Victoria throughout the months of October and November.

Contract market

The contract market remains volatile. This has largely been the result of increases in international commodity prices and a lack of market liquidity, but in November, we also started to see the impact of reports that the Federal Government is preparing to introduce a cap on coal and gas prices. Prices were down across the board, due to concerns about how government intervention on market-determined prices would impact the forward market.

Environmental market

Prices for renewable products remain stable, and the market for Large-Scale Generation Certificates (LGCs) remains buoyant, as corporations are highly motivated by sustainability goals and renewable energy commitments to reduce or offset their emissions. According to the Clean Energy Regulator, the third quarter of 2022 was the single largest quarter ever for voluntary LGC surrenders. A total of 4.7 million LGCs were voluntarily surrendered throughout the quarter, beating the old record (set in the third quarter of 2020) by 36 per cent.

Buying demand for Australian Carbon Credit Units (ACCUs) has also been strong, especially for Human Induced Regeneration (HIR) projects, which regenerate native vegetation by adjusting land management practices.

Finally, the clearing house for Small-Scale Technology Certificates (STCs) has been in deficit for much of the year, so STCs continue to hover at or near the clearing house fixed price of $40.