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Australian Renewable Energy Market Update – August 2023

1 Sep 2023

Renewable energy records continue to tumble 

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. 

Capacity Investment Scheme – Public Consultation paper released

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 Quarterly Dynamics Report

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.
  • Demand: Average quarterly NEM operational demand was 214 MW lower than in Q2 2022, driven by increased rooftop PV output. Reduced daytime operational demand saw return of negative pricing particularly in South Australia (17%) and Victoria (13%). All states set Q2 records for negative price occurrence.
  • Renewables Generation: Variable renewable energy (VRE) output increased by 745 MW, contributing to the increased occurrence of negative prices. Queensland’s negative price occurrence between 0900 hrs and 1700 hrs rose to 25%, an increase of 19% due to a significant uptick in grid scale solar output. An increase in market prices of large-scale renewable certificates contributed to larger negative price impacts, as VRE generators bid deeper negative prices.

Octopus Renewable Energy Opportunities Fund (OREO)

Octopus Renewable Energy Opportunities Fund report

The latest Octopus Renewable Energy Opportunities Fund report is now available to view. 

Did you know?

Iceland generates over 99% of its electricity from renewable sources, namely hydroelectricity (approximately 80%) and geothermal (approximately 20%).