July 2024 Electricity Market Review

Market Commentary

Electricity spot prices dropped in all states across the National Electricity Market except South Australia as low renewable output recovered throughout July 2024. 

Winds, in particular, picked up in mid-July as cold polar blasts ramped up output to record levels, the flipside being a substantial increase in electricity demand for heating. 

Solar and hydro output also increased over the month but are still not back to the levels we are accustomed to, reflecting in spot prices that are still inflated, but cheaper than the previous month.  

SA relies heavily on gas generation, battery discharge, and interconnector imports when renewable energy is low, giving the state quite distinctive characteristics from the rest of the NEM. Electricity spot prices in South Australia jumped up 37% over July 2024 as renewables performed poorly during the first two weeks of the month. 

In one of the most volatile months it has ever experienced, SA recorded seven instances where pricing hit $17,500/MWh.  

There were a further 18 instances where pricing was above $10,000/MWh and 113 instances above $1,000/MWh. There was one market cap event where pricing hit $16,600/MWh. 

Icy blasts set new wind records but push up demand for heating  

New South Wales set a new record for wind energy generation, reaching nearly 3GW due to icy winds from an Antarctic blast on July 16.  

Wind power peaked at 2,293.5 MW at 12:15 am, surpassing the previous record of 2,270.8 MW set just half an hour earlier. This new record beats the April 2024 high of 2,179.0 MW.  

A new maximum one-day average for wind power was also set at 1,914.3 MW on the morning of July 16, exceeding the earlier record of 1,863.4 MW.  

The cold snap also drove a new winter operational demand record on the National Electricity Market, hitting 33,381 MW, surpassing the previous high from June 2022.  

Victoria also saw a new winter electricity demand record of 8,612 MW, breaking a 17-year record. 

Concerns build around escalation of war in the Middle East 

Escalations in the war in the Middle East threaten the oil and gas supply which could lead to increases in international gas prices. 

Global gas price increases have historically impacted Australia’s domestic gas market as gas producers favour foreign exports over domestic supply. 

Markets are already reacting to the risk of further escalation in this region. 

Increasing Battery Output and Revenue 

The Australian grid’s big battery projects have doubled their output during morning and evening peaks.  

According to the Australian Energy Market Operator (AEMO), average output in the morning peak increased from 67 MW to 138 MW in the June quarter, while evening peak output rose by 130% to 227 MW.  

Despite still lagging behind California’s 10 GW battery fleet, Australia is rapidly expanding its capacity, with numerous projects under construction.  

Net revenue from big batteries in Australia reached $41.2 million in the June quarter, with a significant portion coming from energy arbitrage, highlighting the shift to longer storage durations. 

Supernode Battery Project in Brisbane to Triple in Size 

The Supernode battery project in Brisbane, developed by Quinbrook Infrastructure Partners, is set to triple in size following an expanded off-take deal with Origin Energy.  

The first stage, a 250 MW/520 MWh facility, is under construction. Origin’s new commitment adds a 250 MW/1040 MWh extension, doubling the connection capacity to 500 MW and tripling storage to 1560 MWh.  

Origin has secured capacity for both stages as it shifts from coal to flexible energy solutions.

This expansion supports Origin’s strategy to replace baseload power with renewable energy storage, including its significant battery projects at Eraring, Mortlake, and Darling Downs. Quinbrook highlights the strategic location of the Supernode site at South Pine switchyard, essential for Queensland’s power network. 

This expansion marks a significant step in Queensland’s transition to 85% renewables by 2035, with the Supernode battery set to provide crucial grid support and market responsiveness. 

BayWa r.e. Battery Projects 

German renewable energy developer BayWa r.e. has filed for federal approval to develop a 200MW/800MWh battery energy storage system in Gladstone, Queensland, alongside seeking approval for the Wimmera Plains Energy Facility in Victoria. The Gladstone project will be located near a Powerlink substation, while the Wimmera Plains project will feature up to 312MW of wind energy and a 100MW/400MWh BESS, with construction expected to begin in late 2025.  

This project aims to enhance the reliability and stability of the power grid, particularly in regions with high renewable energy penetration.  

BayWa r.e.’s focus on combining wind and battery storage in the Wimmera Plains project underscores the growing trend of hybrid energy systems designed to optimize the use of renewable resources and provide consistent power supply. 

Doubling Eraring Battery Capacity 

Origin Energy will double the Eraring battery’s capacity, adding a 240MW/1030MWh second stage, bringing the total to 700MW/2103MWh.  

This expansion supports solar energy absorption and evening peak supply, with the second stage set for completion in 2027, while the first stage is expected by the end of 2025.  

The Eraring battery project is a critical component of Origin’s broader strategy to enhance grid stability and integrate more renewable energy sources. 

By expanding the battery’s capacity, Origin aims to mitigate the variability of solar power and ensure a more reliable electricity supply during peak demand periods.  

This move is part of a larger trend in the energy sector where utilities are investing heavily in storage solutions to support the transition to a more sustainable and resilient energy system. 

Humelink Transmission Project Budget Approval 

The Australian Energy Regulator (AER) has approved a reduced budget of $3.9648 billion for the second stage of Transgrid’s Humelink transmission project, trimming over $3 million from the original request. 

Humelink, one of New South Wales’s largest energy infrastructure projects, will deliver 365 kilometres of 500 kV double-circuit transmission lines, connecting Wagga Wagga, Bannaby, and Maragle, and linking the Snowy 2.0 pumped hydro project to the grid.  

Transgrid initially sought $4.2791 billion for the contentious project, but the AER’s revised estimate is $314.3 million less.  

AER Chair Clare Savage emphasized that the cost adjustments aim to protect consumers from unnecessary expenses amid rising electricity prices.  

The reduction was due to outdated information and overestimated risk costs by Transgrid.  

However, the AER approved all proposed costs for community engagement and social license activities, highlighting the importance of maintaining community support.  

The first stage of the project, already approved at $608.6 million, includes early design work, stakeholder engagement, and land-use planning.  

The AER’s decision reflects a commitment to rigorous cost assessment while acknowledging the project’s significance and its impact on local communities. Transgrid aims to complete the Humelink project by 2026–27.  

This transmission project is crucial for enhancing the capacity and reliability of the electricity grid, facilitating the integration of renewable energy sources, and ensuring the stability of the power supply in New South Wales. 

More Callide C Power Station Delays 

Callide C4’s return to service has been delayed for another month, with August 31 as the new target date.  

Faults have beset the power station for three years.  

Unit C3 has been back online since April 2024, following a rigorous testing and commissioning process.  

Initially, Unit C4 was scheduled to return to service by July 31, 2024, but the date has now been pushed back to August 31, 2024, to allow more time for testing and quality assurance.  

The coal-fired generator’s return follows two separate incidents: an explosion in May 2021 that damaged Unit C4 and a cooling tower structural failure in October 2022 that took Unit C3 offline. 

These incidents led to widespread blackouts and significant disruptions in the energy market.  

The delays in bringing Callide C4 back online highlight the challenges associated with maintaining and operating aging coal-fired power plants. 

These issues underscore the importance of transitioning to more reliable and sustainable energy sources, as ongoing problems with traditional power plants can have severe impacts on energy security and market stability. 

New South Wales

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

New South Wales electricity futures prices for 2025 started the month at $134/MWh, dipping to $121 in the third week of the month, closing at 122/MWh. 

Prices for 2026/27 followed the same trend. Prices have come down since the crisis in October 2022 and are $20/MWh costlier than the same period last year.  

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Commentary:

• New South Wales spot prices dropped significantly from $152/MWh to $127/MWh.  
• Spot prices are substantially higher than in June 2023, when the average price was $84/MWh. 
• July was a volatile month in NSW with 27 instances of pricing over $1,000/MWh and a high close to the market cap at $17,289/MWh. The bulk of trading took place at around the $130/MWh mark. Incidents of negative pricing increased to around 300, with a maximum low of -$48/MWh.  
• Renewables shares in July 2024 climbed up to more familiar levels of 28% of the energy mix, up by 5%. Reliance on gas dropped from 4.8% to 2.6%. Coal contribution dropped by 3% to 69% of the generation mix.   
• Batteries remained at a contribution of 0.2% of the state’s energy, dropping to $266/MWh. Gas generation dropped from $206/MWh to $284/MWh. Renewables cost an average of $105/MWh, and coal dropped from $161/MWh to $139/MWh. 

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Victoria

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Victoria futures prices opened the month at $86/MWh, closing at $76/MWh. Prices for 2026 and 2027 followed the same pattern but at a cheaper cost.  

Electricity prices have come down significantly since the crisis in October 2022 but are $7/MWh higher than the same period last year.  

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Commentary:

• Victorian average spot prices dropped from $164/MWh to $149/MWh 
• Electricity spot prices in July 2024 are $94/MWh costlier than in the same period for 2023 when they were just $55/MWh.  
• The trend was similar in Victoria. There were 24 instances where pricing was above $1,000/MWh with a high of $17,376. The bulk of trading occurred around the $130/MWh mark.  
• Incidents of negative pricing increased to around 400 with a low of -$61/MWh. 
• The share of renewables generation climbed by 5% to 33%. Coal generation dropped to 61%. Gas dropped from 7.2% to 5.6% of the generation mix.   
• Battery supply accounted for 0.5% of electricity, and generation cost an average of $263/MWh. Renewables cost an average of $120/MWh, while coal cost $147/MWh and gas cost $250/MWh.  

Queensland

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

Queensland futures electricity prices for 2025 opened at $114 at the start of July 2024, closing off the month higher at $104/MWh. Prices for 2026 and 2027 followed the same trend but at a cheaper cost  

Electricity prices have come down since the crisis in October 2022 but are $11/MWh costlier than the same period last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!

Commentary:

• Queensland electricity spot prices dropped from $114/MWh in June to $104/MWh at the end of July.  
• Queensland spot prices are costlier than they were in June 2023, when the average price was $93/MWh.  
•  Queensland experienced two extreme pricing events at $17,500 and $16,120. There were 21 instances of pricing above $1,000/MWh. There were around 1,000 instances of negative pricing with a low of -$50/MWh. The bulk of trading occurred at the $115/MWh mark.  
• Renewables in Queensland have performed poorly in 2024, but July finally bucked the downward trend as an increase 21.9% to a more respectable 27% was registered. Coal generation remained dropped 6% to 64% contribution. Gas increased from an already high 7.6% to 8.8% in the energy mix.   
• Batteries supplied 0.2% of the total generation. Battery energy cost $291/MWh in June. Gas averaged a cost of $199/MWh, coal $131/MWh and renewables $61/MWh.  

South Australia

Wholesale Electricity Base Load Futures:

*The ASX has ceased to report on electricity futures prices for the year 2024. As a result, reporting now covers the years 2025, 2026, 2027

Average Movement Summary:

As usual, South Australia’s wholesale electricity futures prices for July 2024 displayed a different trend to other states, due to its different energy mix, of which the majority are renewables and the rest gas.  

2025 futures started the month at $116/MWh, dropping through the month to close at $105/MWh. Prices for 2026 and 2027 were initially significantly cheaper. 

Prices have come down substantially since the crisis in October 2022 and are $5/MWh cheaper than last year.  

Start comparing current market offers and make your procurement process a breeze. Take the first step and get started here!

Commentary:

• SA’s average electricity spot prices increased significantly from $176/MWh in June to $241/MWh in July – a jump of 37%.  
• Electricity prices are much higher than the same period last year when they averaged $73/MWh. 
• Notorious for pricing volatility, SA experienced seven instances where pricing hit $17,500/MWh. There were a further 18 instances where pricing was above $10,000/MWh and 113 instances above $1,000/MWh. There was one market cap event where pricing hit $16,600/MWh. Like other states, pricing was consistently high throughout the month of June. 
• Around 1000 negative pricing incidents were recorded during July 2024 with four incidences of pricing falling to -$190.  
• Renewables climbed from 54% to 67% of generation still not back to the familiar high 70s mark, but a significant increase. Conversely, gas generation shrank from 44% to 31%, usually sitting at around 20% of the generation mix.  
• Battery contributed more than 1% for the third time on record at 1.1% and averaged a cost of $458/MWh. Gas costs an average of $474/MWh, and renewables at $109/MWh.  

Take Control of Your Energy Costs 

Spot prices dropped across the National Energy Market, except in South Australia, due largely to higher wind output.  

Depending on your business’s risk appetite, now could be a good time to secure a new energy contract. 

Act now! Reach out to one of our experienced energy consultants today and gain valuable insight into the potential costs that may lie ahead. Don’t wait—take control of your energy expenses now! 

We hope you have found our electricity market update for July 2024 informative and helpful. We understand that these are challenging times and we are here to support you. If you would like to delve deeper into the energy market’s previous months, you can find our monthly energy market reviews here. 

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Explainer:  Why we focus on Wholesale Futures Prices

Wholesale Futures Price: This reflects what the market expects wholesale electricity spot rates to be for future periods. The offers that commercial and industrial (C&I) customers receive via Leading Edge Energy are closely correlated to wholesale prices on the ASX Energy futures market; this is why we focus on these prices in our commentary.

Spot Price: This represents how much the spot market is charging for electricity currently based on demand and supply. Spot prices go up when demand is high and supply is tight. You can view live Spot Prices here. 

You can learn more about the difference between wholesale electricity futures and spot prices in our blog section.

Disclaimer: The information in this communication is for general information purposes only. It is not intended as financial or investment advice and should not be interpreted or relied upon as such.

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