May 2024 Electricity Market Review

Market Commentary

An increase in spot wholesale futures prices in all states across the National Energy Market was triggered by a combination of a third consecutive month of nationwide wind drought, unplanned outages at Eraring and Vales Point power stations and low wintertime solar output. 

Spot and futures prices driven up by poor wind output

Aggregate wind power production remained below 11.2% of the NEM grid demand for an extended period.  

The proportion of wind energy in the NEM between 22-27 May averaged only 4%. This contrasts with an average of 13.1% over the past year.  

The drop in output is reflected in increases in both spot and futures prices across all states.   

While average wind output was well below par in May, an extremely gusty end to the month set a record for wind generation with a new all-time maximum point 8,431MW on Thursday 30 May. 

New South Wales registered a substantial spike of 25% on wholesale futures over from 1 to 31 May. South Australia and Victoria followed with a 15% increase, and Queensland 14%. 

The total percentage increase across the NEM was 17.25%.

Eraring to continue operations until August 2027, possibly 2029

The New South Wales Government has struck a deal with AGL Energy to delay the closure of the Eraring Power Station until August 2027, with a potential extension to April 2029.   

Initially set to shut down in August 2025, Australia’s largest coal-fired power station will continue to play a role in the state’s energy landscape.  

The power plant will operate at less than half of its maximum coal generation capacity of 2,880 MW, producing a minimum of 6 terawatt hours (TWh), which is sufficient to meet current reliability needs compared to its potential of 16 TWh and the 14.8 TWh it produced in 2023.  

Origin can invoke the underwriting agreement based on market conditions, ensuring it can manage financial risks effectively.  

Origin can cover up to 80% of its losses, capped at $225 million annually.  

If profitable, Origin retains a sizeable portion of the profits, sharing only up to $40 million with the state. 

But reliability issues at the coal plant were on display once more as it experienced an unplanned outage.  

Unit 3 came offline on 2 May after a boiler tube which led to a burst of volatility on the spot market in New South Wales and returned to service on 9 May. 

Unit 1 also came offline as a result of a boiler tube failure and did not return to service until 21 May. 

The result was repeated triggers of the administrative market price cap of $16,600/MWh over the space of 3 days between 8 – 11 May.

Vales Point Unit 6 trips and stays off for 3 days 

Delta’s Electricity’s Vales Point 1,320 MW coal generator in New South Wales – also experienced an unplanned outage on 17 May as Unit 6 came offline. The unit returned to service earlier than expected on 21 May. 

As of 2021, the Vales Point Power Station emits more toxic nitrogen oxide pollutants than allowable under the NSW Protection of the Environment Operations (Clean Air) Regulation 2021 in order to continue to legally operate (or otherwise cease operating), the operator applied for an exemption which was granted on 15 December 2021 with a reduction variation and additional conditions imposed by the New South Wales Environment Protection Authority.  

Australian Energy Market Operator highlights critical need for urgent investment in the NEM  

The Australian Energy Market Operator (AEMO) released an essential update to the 2023 Electricity Statement of Opportunities (ESOO), highlighting the critical need for urgent investment in the National Electricity Market (NEM).   

AEMO’s update emphasises the necessity of immediate and substantial investments in transmission, generation, storage, and consumer energy resources (CER) to mitigate reliability risks.   

New South Wales faces Increased risk between 2024-25 and 2027-28 due to delayed battery projects and revised demand assumptions. The region must address these issues promptly to avoid potential blackouts.  

Victoria faces higher reliability concerns until 2027-28, affected by transmission constraints and mothballed South Australian generators. Proactive measures are needed to alleviate these bottlenecks.  

In South Australia, a new reliability gap in 2026-27 has emerged due to delays in Project EnergyConnect and the closure of key power stations like Torrens Island B and Osborne.

Federal Government launches Future Gas Strategy

The Federal Government’s Future Gas Strategy has sparked significant debate among stakeholders throughout Australia. 

The Future Gas Strategy, a key initiative of the Federal Government, is designed to ensure that gas remains a significant part of Australia’s energy and export sectors beyond 2050, positioning it as a crucial element in the nation’s transition to renewable energy and achieving net zero emissions. 

If you require assistance with obtaining and comparing electricity or gas plans, contact our team of energy specialists now. We can help you strategise for future contracting and secure the best plan for your business. Get in touch today!

New South Wales

*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 $108/MWh, climbing sharply in the second week of the month to $128/MWh climbing further to close the month at $136/MWh.

Prices for 2026/27 followed the same trend. Prices have come down since the crisis in October 2022 and are $10/MWh costlier than the same period last year.

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Commentary:

• New South Wales registered a huge increase in the volume-weighted average price on the spot market. The average price increased from $90/MWh in April to $273/MWh in May – a 204% increase.
• Spot prices are substantially higher than in May 2023, when the average price was $193/MWh.
• May was a tumultuous month for spot prices in NSW. The market cap of $16,600 on 8 May, but there were 21 instances with prices above $16,000/MWh. The bulk of trading took place at around the $250/MWh mark. Incidents of negative pricing plummeted to around 500, with a maximum low of -$46/MWh.
• Renewables shares in May 2024 dropped by almost 5% to a lacklustre 26.8% of the generation mix. Reliance on gas increased from 1.5% to 3.3%. Coal contribution made up for the drop in renewables, climbing by almost 3% to 70% of the generation mix.
• Batteries remained at a contribution of 0.2% of the state’s energy climbing exorbitantly in price from an average of $170/MWh to $767/MWh. Gas generation also increased drastically in price from an average of $171/MWh to $815/MWh. Renewables cost an average of $290/MWh, and coal $262/MWh – well above their usual average generation costs.

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Victoria

*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 $70/MWh (2025), climbing to $80/MWh in the second week of the month, closing at $81/MWh to close the month. 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 $2/MWh higher than the same period last year.

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Commentary:

• Victorian average spot prices also increased substantially from $84/MWh at the end of April to $133/MWh at the end of May 2024.
• Electricity spot prices are $5/MWh costlier than in the same period for 2023.
• Although prices were higher than the previous month, Victoria’s spot market was relatively stable compared to NSW with a high of 776/MWh. The bulk of trading occurred around the $75/MWh mark.  
• Incidents of negative pricing dropped to around 600 with three lows of -$100 to -$110/MWh.
• The share of renewables generation dropped significantly from 32.3% to 28%. Coal generation remained static at 66%. Gas increased substantially from 1.2% to 5.5% of the generation mix. 
• Battery supply accounted for 0.4% of electricity, and generation cost an average of $195/MWh. Renewables cost an average of $103/MWh, while coal cost $139/MWh and gas was at $204/MWh.

Queensland

*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’s futures electricity prices for 2025 opened at $95 at the start of May, climbing to $105/MWh before closing off the month significantly higher still at $111/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 $19/MWh costlier than the same period last year.

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Commentary:

• Queensland electricity spot prices increased by $8/MWh over the previous month at an average of $92/MWh for April 2024.  
• Queensland spot prices are significantly cheaper than they were in May 2023, when the average price was $163/MWh.  
• Queensland – usually one of the more volatile states – experienced a relatively stable month with the highest spot prices set at around $449/MWh. There were around 1,500 negative pricing events, with a low of -$90/MWh. The bulk of trading occurred at the $80/MWh mark.  
• Renewables in Queensland have performed poorly in 2024 and a fourth consecutive drop from 26.6% to 24.2% was registered. Coal generation shrank minimally to a 70% contribution. Gas contributed 5.8% to the energy mix.   
• Batteries supplied 0.2% of the total generation. Battery energy cost $180/MWh in May. Gas averaged a cost of $144/MWh, coal $102/MWh and renewables $46/MWh.  

South Australia

*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 May 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 $89/MWh, climbing in abrupt fits and starts, closing the month at $115/MWh. Prices for 2026 and 2027 showed a very similar pattern but at a cheaper cost.

Prices have come down substantially since the crisis in October 2022 and are $2/MWh costlier than last year.

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Commentary:

• SA’s average electricity spot prices increased substantially from $92/MWh in April to $135/MWh in May – a jump of 47%.
• Electricity prices are cheaper in 2024 than May 2023, when prices averaged $198/MWh.
• Notorious for pricing volatility, SA’s spot pricing was stable in May with a high of $995/MWh.
• Around 1,000 negative pricing incidents were recorded during April 2024. Negative electricity prices were relatively soft with a low of -$110/MWh.
• Renewables dropped drastically from 77% of total generation to 58%. Conversely, gas generation jumped from 19% to 40% of the generation mix.
• Battery contributed more than 1% for the first time on record, up from 0.8% to 1.3% and averaged a cost of $190/MWh. Gas costs an average of $184/MWh, and renewables at $95/MWh.

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 May 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.   

Contact our team for advice on reducing electricity costs and improving your business’ energy sustainability. We are here to assist you and explore your options together. 

Explainer:  Why we focus on Wholesale Futures Prices

Wholesale Futures Price: This reflects what the market expects wholesale electricity spot rates to be in 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.

We source, analyse, compare and rank commercial, industrial and multisite energy quotes. Obligation Free.

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