Australian Renewable Energy Market Update – August 2023

Coming off the back of a record breaking FY23, which saw Solar, Wind and Hydro account for 37% of energy in NEM, a number of new records were set recently. This included a new record for wind generation at 8.1GW across the NEM, a significant increase on the previous record of 7.4GW, set only a few weeks prior in June. Subsequently, we’ve also seen a new minimum demand record of 3.5GW in QLD, illustrating the impact of Rooftop Solar on operational demand during daylight hours. We expect new records to continue to be set as we approach September and October, which is a seasonally strong period for renewables production. This, coupled with the significant number of renewable projects currently in construction and commissioning, means that we’re expecting FY24 to be another record-breaking year for renewables across the NEM. 

On the 4th of August, the federal government released its Public Consultation paper for the Capacity Investment Scheme (CIS). The CIS is a national framework intended to encourage new investment in clean dispatchable capacity to support grid reliability and reduce the risk of price shocks in the National Electricity Market (NEM) during the energy transition. The CIS is expected to promote $10 billion of new investment and the rollout of 6 GW of clean dispatchable capacity by 2030. The scheme features a novel contract mechanism, like that of the NSW LTESA structure, where a floor and ceiling price are used to share downside and upside risk with the Guarantor – being the government. The scheme is part of efforts to quicken the investment into dispatchable capacity to replace the retirement of both Coal and Gas assets. In NSW, the scheme has been incorporated into the Firming Infrastructure Tender Round currently underway, with further tenders to be announced for South Australia and Victoria in October.

AEMO released their Quarterly dynamics report in July.  The report provides a quarterly overview of trends and events. During the quarter average spot price across the NEM for Q2 was $108/MWh, the second highest Q2 quarter on record.

However, whilst spot prices in NSW ($137/MWh), QLD ($126/MWh) and SA ($124/MWh) remained high, Victoria averaged $89/MWh with cap returns falling to only $1. Key findings include:

• Thermal plant bidding trends: Thermal coal prices dropped from $514/tonne in Q2 2022 to $240/tonne in Q2 2023. This, together with policies capping domestic thermal coal prices, reduced the marginal costs of black coal-fired generators, increasing volumes bid at ~$50/MWh lowering average electricity prices in Q2 2023.

• Thermal plant availability: Despite the retirement of Liddell units in late April, total black coal availability increased by 373 MW, driven by relatively lower planned and unplanned outages in New South Wales.