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February 2023 – Market Update

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Prices were down across most of the energy market in February, despite scorching temperatures throughout the month.

Spot market

Many regions experienced their hottest maximum temperatures in years throughout February.

But despite this heat, which often leads to rising energy prices, we actually saw the spot price go down in Queensland and New South Wales.

This was largely due to a decrease in fuel costs, and increased availability from generators in these states, with assets generating more megawatts at cheaper price bands than the previous month.

In Victoria, where Melbourne recorded its first 40-degree day in three years, we didn’t see a similar increase in generation, and prices rose by almost $10.

Contract market

The decrease in the spot price in Queensland and New South Wales has contributed to lower prices in the forward market.

We’re also expecting to see an increase in solar generation this winter, because of the El Niño weather forecast for the season. This is also putting downward pressure on prices in the forward market.

In Victoria, however, less wind generation is forecast for winter, so we didn’t see the same drop in price there that we saw in Queensland and New South Wales.

Environmental market

In the environmental market, there’s been a slump in prices for Large-Scale Generation Certificates (LGCs).

This is typical of this time of year, because liable entities must surrender their LGCs midway through February. In the weeks after the surrender date, urgency to buy LGCs is at its lowest.

The price of Australian Carbon Credit Units (ACCUs) also went down slightly. This could simply be the market correcting itself, after prices rose by roughly the same amount last month in the wake of the Chubb Review, which affirmed the integrity of the ACCU scheme.

Finally, the clearing house for Small-Scale Technology Certificates (STCs) once again remained in deficit throughout February. This kept STCs at or close to the fixed price of $40 throughout the month.

And that’s it for February… wishing you all the best for March from the team at Stanwell Energy!

Market Update – January 2023

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Market Update – January 2023

The weather is heating up and so are prices in the spot and forward markets, while the environmental market reacts to the release of the Chubb Review.

Spot market

In the spot market, cooler-than-expected weather kept demand – and prices – low for much of January.

But that classic Australian summer heat finally started to creep in towards the end of the month, turning quickly to heatwave conditions.

As we gave our air conditioners a work-out, demand crept back up – and so did prices. And, as can be expected for a Queensland summer, these heatwave temperatures will now carry into February and possibly into March.

Contract Market

In the forward market, the National Cabinet’s decision to impose caps on the wholesale price of coal and gas led to price decreases across the board in December. However, the curve reversed trend in January.

The Australian Energy Market Operator is forecasting record demand for the start of February, which has lifted the forward curve across all contracts.

Retail customers also returned from holidays in January and began requesting new contracts, which provided support to the curve.

Prices in New South Wales have risen more sharply than in Queensland and Victoria, potentially due to Liddell Power Station fully closing down by April 23.

Environmental Market

In the environmental market, there was a slow-down in buying interest for Large-Scale Generation Certificates over the holiday period that extended into the new year. This has led to the LGC curve getting traded down.

But Australian Carbon Credit Units, or A-C-C-Us, were up. This was on the back of the Chubb review, which was released in December. The independent panel convened to review the integrity of the ACCU scheme found that the scheme was fundamentally well-designed, and rejected suggestions it had led to carbon dioxide abatement being overstated.

This assurance about the scheme’s integrity led to renewed interest in ACCU trading.

Finally, the clearing house for Small-Scale Technology Certificates, or STCs, once again remained in deficit throughout the month, which kept STCs at or close to the fixed price of $40.

And that’s it for January… wishing you all the best for February from the team at Stanwell Energy!

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.

Market Update – November 2022

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Market Update – November 2022

Plenty of available generation and cooler-than-expected weather drove prices down in the spot market in November, while the volatility in the contract market continued.

Spot market

In the spot market, an abundance of available generation put downward pressure on prices in all regions. The weather was also cooler than expected, which helped to give our air-conditioning units a break and drive down demand. At the end of the month, prices finished lower in Queensland (down $32.55 to $121.50), New South Wales (down $38.75 to $112.90) and Victoria (down $40.27 to $58.63).

International commodity prices have been a major contributor to elevated spot market prices throughout the year. In November, the price of coal dropped below US$300 a ton, but it was back up to almost 400 dollars by the start of December.

Contract market

The contract market was highly volatile in October, and that volatility continued in November, fuelled by reports that the Federal Government is preparing to introduce a cap on coal and gas prices.

Prices were down across the board, due to widespread concerns about how government intervention on market-determined coal and gas prices would impact the forward market.

Cal 23 prices finished the month lower in Queensland (down $7.85 to $210.30), New South Wales (down $10 to $205.25) and Victoria (down $9.75 to $128.60).

Looking ahead to Cal 25, prices also finished lower in Queensland (down $8 to $116), New South Wales (down $23 to $145) and Victoria (down $19.75 to $95).

Environmental market

There was little volatility in the environmental market, with prices for renewable products remaining stable.

While there was some downward pressure on the curve for Large-Scale Generation Certificates (LGCs), which finished the month down 25 cents at $65, the market outlook remains buoyant.

Driven by sustainability goals and renewable energy commitments, corporations are highly motivated to reduce or offset their emissions by voluntarily surrendering LGCs. In November, the Clean Energy Regulator released data showing the third quarter of 2022 was the single largest quarter ever for voluntary LGC surrenders.

4.7 million LGCs were voluntarily surrendered throughout the quarter, which is a 36 per cent increase on the previous record, set in the third quarter of 2020.

We also saw strong buying demand for Australian Carbon Credit Units (ACCUs), throughout the month. Demand was particularly high for Human Induced Regeneration, or H-I-R, projects, which regenerate native vegetation by adjusting land management practices.

HIR ACCUs, specifically, closed at $34.50, $2.50 higher than the overall spot market price for ACCUs, which finished $2 above last month at $32.

Finally, the clearing house for Small-Scale Technology Certificates, or STCs, remained in deficit throughout November, which kept STCs at or close to the STC clearing house fixed price of $40 all month.

And that’s it for November… wishing you all the best for December from the team at Stanwell Energy!

Market Update – October 2022

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Strong solar generation kept the spot market in check throughout October, but the contract market remains volatile.

Spot market

In the spot market, strong wind and solar generation continued to keep prices in check throughout October, with prices finishing the month lower in Queensland (down $2.89 to $154); New South Wales (down $1.86 to $152) and Victoria (down $12.76 to $99).

At 12:30pm on Friday October 28, the National Electricity Market reached the highest renewable penetration rate ever recorded, with renewables providing 68.7 per cent of all the energy in the grid. Rooftop solar accounted for 34 per cent of the fuel mix at that time, with wind accounting for 17 per cent and utility-scale solar accounting for 13 per cent.

There was also more generation available than there was last month, when a series of unexpected unit outages led to a slight price rise in Queensland. With availability returning to normal levels this month, the spot price fell accordingly.

In the contract market, volatility is hitting all-time highs, with significant swings of up to $40 in prices over the final week of the month. Ultimately, the Cal 23 price finished lower in Queensland (down $5.55 to $218.15), New South Wales (down $16.85 to $215.25) and Victoria (down $18.80 to $138.35).

The ongoing volatility we’ve seen throughout the year has largely been the result of increases in international commodity prices, and a lack of market liquidity.

Looking ahead to Cal 25, there’s been a perception that the curve has been too backwardated, meaning that the back end of the curve was too low in comparison to the front end of the curve.

Overall, there’s an expectation that commodity prices will still be high in Cal 25, while dispatchable generation will be retiring earlier than expected. Ultimately, we saw rises in the Queensland (up $14.75 to $124) and Victorian (up $24.35 to $114.75) prices, bringing them more in line with the New South Wales price (down $15.50 to $168).

Environmental market

The environmental market remained steady, with minimal movement in the prices of Large-Scale Generation Certificates (up $1 to $65.25) and Australian Carbon Credit Units (down 75 cents to $30).

The Small-Scale Technology Certificate (STC) clearing house remained in deficit for the entire month, keeping STC prices at the clearing house cap of $40.

And that’s it for October… wishing you all the best for November from the team at Stanwell Energy!

Market Update – September 2022

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Strong solar generation kept downward pressure on prices in the spot market this month, while global commodity prices continue to keep contract prices high. Here’s your September energy market wrap. 

Spot Market

After prices dropped sharply by hundreds of dollars in August, the spot market was steady throughout September.

Strong solar generation and warmer weather continued to limit demand during the daytime. In fact, the National Electricity Market set a new minimum demand record this month.

From noon to 12:30 on Sunday 25 September, demand averaged 12,255 megawatts – the lowest 30 minute average for demand since January 2000. Demand was particularly low in New South Wales, with the state reaching a minimum demand record of 4,253 megawatts.

However, there was also a series of unexpected unit outages in Queensland. This meant there was less availability than last month, which pushed prices slightly higher in Queensland (up $23.39 to $156.89), and to a lesser extent, New South Wales (up $5.86 to $153.86). In Victoria, the spot price fell $9.24 to $111.76.

Contract Market

In the contract market, increases in international commodity prices, as well as fears that extreme European electricity prices would take hold elsewhere, led to increases in price across the board (up $23.70 to $223.70 in Queensland; up $19.10 to $232.10 in New South Wales; and up $19.80 to $157.15 in Victoria).

Low Australian coal plant stockpiles, which are still struggling to rise after multiple rain events, have also contributed to elevated prices in the contract market.

Looking ahead to Cal 25, we see the curve is still trending upwards, in line with rising global commodity prices.

The forward curve for Newcastle coal is still trading well above $300 US dollars up to March 2024. This signals that current supply and demand conditions will persist – particularly the increasing demand for coal in Asia and Europe. However, this trend may be starting to revert on the back of recession fears in Europe and the US.

A third consecutive La Niña this summer is also expected to add to the stockpile struggles for Australian coal plants.

Build delays and cost increases for large-scale renewable generators and storage systems, which are slowing the supply of new renewable energy to the market, are also contributing to elevated contract prices.

Prices are highest in New South Wales (up $12.40 to $149.10), which is partly due to concerns about the early closure of coal-fired power stations in that state. Cal 25 prices also rose in Queensland (up $13.95 to $109.25) and Victoria (up $9.40 to $90.40).

Environmental Market

In the environmental market, prices for Large-Scale Generation Certificates (LGCs) continued to rise (up $5.50 to $64.25). Strong demand from buyers, as well as the anticipated increase in the voluntary surrender of certificates by liable entities that we discussed in last month’s market update, has placed upward pressure on LGC prices.

The price of Australian Carbon Credit Units (ACCUs) also rose (up $2.25 to $30.75), driven by interest from international trading entities

The clearing house for Small-Scale Technology Certificates (STCs), remains in deficit by 3.06 million certificates, which is keeping the STC price close to the clearing house cap of $40.

And that’s it for September… wishing you all the best for October from the team at Stanwell Energy!

Market update – August 2022

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Daylight made the difference in the energy market this month, as increased solar generation led to a sharp drop in spot prices.

Spot Market

After months of elevated prices, we saw significant drops in the spot market in August.

Spot prices in Queensland (down $258.09 to $133.50), New South Wales (down $223.17 to $148) and Victoria (down $219.34 to $121) all fell by more than $200 over the last month.

The reason? Sun, sun and more sun. The overcast and rainy conditions that limited solar generation in July were nowhere to be seen in August

That meant there was plenty of solar energy in the system, which helped to reduce the price spikes that we’d been seeing in the middle of the day.

That led to spot prices falling, even though coal and gas prices remain high.

The drop in price was sharpest in Queensland, which was partly because of a constraint on the Tamworth-Armidale line that limited the amount of energy flowing south.

Contract Market

In the contract market, Cal 23 prices increased across the board (up $14.85 to $200 in Queensland, up $20.75 to $213 in New South Wales, and up $9.26 to $137.35 in Victoria).

There’s a scarcity of sellers in the contract market at the moment. This is largely due to the high cost of securing additional fuel, as the Russia-Ukraine conflict continues to disrupt coal and gas trade.

As the forward price trades higher, the ASX requires higher margins to cover the risk of financial loss due to adverse market movement, which is also limiting additional selling.

When we look ahead to Cal 25, the prices tell a similar story (up $11.30 to $95.30 in Queensland and up $10.20 to $136.70 in New South Wales).

There aren’t a lot of sellers in that contract market at the moment, but with the new financial year, there are more buyers looking to secure their energy supply for Cal 25, leading to a jump in prices.

The effect wasn’t as noticeable in Victoria (up $2 to $81), where concerns about the state’s low gas storage levels and tight pipeline capacity had already led to a price spike in July.

Environmental Market

In the environmental market, we saw little movement in the prices of Small-Scale Technology Certificates (STCs) (no change at $40) and Australian Carbon Credit Units (up 50 cents to $28.50).

But the price for Large-Scale Generation Certificates (LGCs) increased significantly (up $7.75 to $58.75). This came as the market priced in an anticipated increase in the voluntary surrender of certificates by liable entities.

Technically, liable entities only have to surrender enough Large-Scale Generation Certificates (LGCs) to meet their obligations under the Renewable Power Percentage. But we’re seeing more companies opting to surrender above that target – sometimes up to 100 per cent – in order to signal their transition to renewable energy sources to their stakeholders and customers.

And that’s it for August… wishing you all the best for September from the team at Stanwell Energy!

Market Update – July 2022

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It was another eventful month in the energy market, with elevated coal and gas prices and concerns about gas availability over the next 12 months continuing to drive high prices.

Spot Market

June was an unprecedented month in the spot market, with the implementation of the Administered Price Cap and the temporary suspension of the market in all regions of the NEM.

In July, the market operated under the normal rules, but prices remained elevated, although Queensland (down $9.65 to $185.15) and New South Wales (down $9.70 to $192.25) finished lower than last month. Unit outages continued throughout the month, and coal and gas prices remain much higher than the long-term average.

In Queensland, overcast and rainy conditions also limited solar generation and contributed to higher prices in the middle of the day, with occasional price spikes up to the market cap of $15,500 per megawatt hour.

In Victoria, rising prices (up $43.86 to $340.34) were driven by lower wind output, as well as gas constraints. Record low gas storage levels at IONA led AEMO to issue an official system security threat, which will remain in place until the end of September.

AEMO also triggered the gas supply guarantee mechanism to secure additional gas supplies from Queensland LNG producers.

The regulator also ordered two gas-fired power plants in Victoria to shut down until October 1, in order to keep the gas supply operating safely and securely at the correct pressure for customers.

Contract Market

In the contract market, we’ve seen Cal 23 prices for Queensland (down $9.65 to $185.15) and New South Wales (down $9.70 to $192.25) stabilise, after their rally in May and early June. That’s because much of the price risk for Cal 23 is now assumed to be priced in by the market.

Victorian prices are on an upward trend, however (up $5.49 to $128.09), as concerns increase about gas availability over the next 12 months. The state’s gas storage levels are low and pipeline capacity is tight, which means gas prices are expected to remain elevated.

There are also concerns about the reliability of Victoria’s traditional generation assets, which are the only stations in Australia to be fuelled by brown coal.

Looking ahead to Cal 25, there was little movement in Queensland (down 50 cents to $84) and New South Wales (up 20 cents to $126.50).

But in Victoria, those same concerns about gas prices and the reliability of brown coal plants led the Cal 25 price to rise (up $6.25 to $79).

It returned to levels observed earlier in June, before a lack of trading volume led the price to drop off at the end of that month.

Environmental Market

In the environmental market, there was little movement in the prices of Large-Scale Generation Certificates (LGCs) (up $1.80 to $51) and Small-Scale Technology Certificates (STCs) (up 5 cents to $40).

The price of Australian Carbon Credit Units (ACCUs) initially rose, due to market expectations that the change in Federal Government would lead to more support for the carbon market.

But there was less buying demand for these ACCUs as the month went on, leading prices to fall (down $7.10 to $28).

There are signs of recovery for the ACCU market, however. The Federal Government has locked in an emissions reduction target of 43 per cent by 2030, and it’s expected that the ACCU scheme will be used to help attain that target.

And that’s it for July… wishing you all the best for August from the team at Stanwell Energy!

Market Update – June 2022

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It was an unprecedented month in the energy market, as the Australian Energy Market Operator made the decision to suspend the spot market in all regions of the NEM for the first time.

Spot market

Instead of the price of wholesale electricity being set competitively, AEMO set fixed prices for the length of the suspension, and took a greater role in directing which power stations to generate energy and when.

AEMO said it took this step because it had become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers, in accordance with the National Electricity Rules.

The suspension came as the result of a perfect storm in the energy market that included 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; sustained periods of low wind and solar output that limited renewable generation; and a fierce June cold snap that increased demand.

These conditions resulted in very high wholesale electricity prices,  which triggered an automatic price cap that limited wholesale spot prices to $300 per megawatt hour (MWh).

That’s much less than the usual market price cap of $15,100/MWh – so much less that it didn’t cover the cost of producing power for some generators, particularly gas generators, causing them to withdraw their availability from the market, and leading to further shortfalls.

On June 14, to ensure there would be enough supply to meet demand, AEMO directed five gigawatts of generation through direct interventions – that’s about 20 per cent of demand. The next day, the market operator decided it had become impossible to continue operating the spot market this way, and ordered the suspension of the market to begin.

The suspension meant that generators would inform the market operator of their availability, and the market operator would tell them when to run.

A pre-determined suspension pricing schedule was applied to each region in the NEM, ranging from $150/MWh to $300/MWh across the day.

If the cost of generating electricity was higher than that pre-determined price, generators could apply for additional compensation to make up the shortfall.

The market suspension was lifted at 2pm on June 24, as the market operator was satisfied that conditions had stabilised, and it could resume operating the market under the normal rules.

Prices finished the month higher across Queensland, New South Wales and Victoria. It’s expected that the electricity market will remain volatile in the months ahead, with coal and gas prices remaining four to five times higher than the long-term average in Australia.

Contract market

The contract market was quiet during the suspension, as most participants were trying to make sense of the events in the spot market.

Before the suspension, fears that generators in New South Wales would have to source coal from the highly inflated spot market were driving an increase in Cal 23 prices for the state. New South Wales plants have since been successful in procuring additional coal, which has seen prices drift back down.

On the other hand, the Cal 23 price in Victoria initially decreased as generators returned from outages. But prices increased throughout the month due to unplanned maintenance for two units at Yallourn Power Station, leading to fears that Victorian generators would continue to be unreliable.

Looking ahead to Cal 25, we’ve seen a spike in the forward price in New South Wales, as the recent outages and instances of reduced generation throughout the state appear to have reignited market apprehension about the large gap that could be left by the closure of Eraring in 2025.

Environmental market

It’s been a quiet month by comparison in the Environmental Market, but we have seen prices for Large-Scale Generation Certificates (LGCs) increase. This is due to the market’s expectation that supply chain constraints will make new renewable projects more difficult and more expensive to build moving forward.

And that’s it for our June market wrap-up. Wishing you all the best for July from the team at Stanwell Energy!

Market Update – May 2022

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The unprecedented rise in prices that we’ve seen over recent months has continued, with another busy month for the market in May.

Spot Market

In the spot market, we saw extremely high prices in Queensland (up $100.72 to $320.48), New South Wales (up $160.42 to $347.28) and Victoria (up $92.13 to $233.64).

There’s a perfect storm of factors that are contributing to the run-up in prices. On top of an unusual number of unplanned unit outages across the National Electricity Market, the market continues to absorb the global impact of rising coal and gas prices in the wake of Russia’s invasion of Ukraine.

The La Niña weather pattern continues to make its presence felt, with extreme weather in Queensland and New South Wales limiting solar generation, affecting coal supplies and driving up demand for electricity.

The Australian Energy Regulator’s latest Wholesale Markets Quarterly report projects that higher prices will continue throughout the year. But there is some reason to expect prices to fall, with generators returning from maintenance, and the recently completed upgrades to the Queensland to New South Wales Interconnector expected to boost interstate transmission capacity.

Stanwell’s assets have continued to operate at a high level throughout this period, with approximately 97 per cent availability throughout 2022.

The reliability of these assets has helped us to apply downward pressure on prices at times when other units have been unavailable.

Contract Market

In the contract market, the same confluence of market forces that we’ve seen in the spot market is driving the forward curve to unprecedented highs, with prices rising in Queensland (up $80.70 to $201.70), New South Wales (up $67.40 to $196.35) and Victoria (up $50.95 to $127.55).

While prices have risen sharply across all regions, there continues to be a divide between north and south.

According to the Australian Energy Market Operator, inadequate connection capacity between Victoria and New South Wales is limiting the ability of generators in Victoria and South Australia to sell to northern markets, which is contributing to higher prices in Queensland and New South Wales.

Looking ahead to Cal25, Queensland (up $22.30 to $97.05) and Victoria (up $17.10 to $77.65) are now catching up to New South Wales (up $1 to $105.05), where prices had already risen after the early closure announcement for the Eraring Power Station in February and a massive rally in March.

The early closure of plants like Eraring in New South Wales is contributing to increased price expectations in the contract market, but Stanwell will continue to provide certainty by keeping our generation assets operating for as long as the market and our customers require us to do so.

While we will increase our portfolio of renewable energy, these new assets will be supported by our existing dispatchable generation.

Environmental Market

It was a quiet month in the markets for Large-Scale Generation Certificates, or LGCs (down 75 cents to $47.75), and Small-Scale Technology Certificates, or STCs (steady at $40), with little volatility

However the Australian Carbon Credit Units (ACCUs) jumped higher, up $5.50 to $35.50.

While there were no changes to the underlying fundamentals of the ACCU market, the perceived long-term support for the carbon market from Labor and the Greens led to renewed buying interest for these units in the wake of the Federal Election.

And that’s it for our May market wrap-up. Wishing you all the best for June from the team at Stanwell Energy!