November 2023 Electricity Market Review

Market Commentary

November 2023 was eventful for the electricity market with a scrapped $10.6-B bid for Origin Energy, the Federal government subsidising a 32 GW generation and storage project, new renewable energy records, the construction of big battery projects, and new investment announcements occurring throughout the month.

Brookfield walks away from Origin after shareholders reject $10.6 million takeover  

Canadian multinational investment company Brookfield will walk away from Origin Energy after the energy company’s shareholders rejected a $10.6 billion takeover bid. 

According to Origin’s regulatory filings, final votes were 31.08% against the bid, with 68.92% in favour, which is lower than the 75% threshold required for a takeover to proceed. 

The agreement imploded after the superannuation fund, AustralianSuper, declared its intention to oppose the A$9.39 per share proposal.  

With a 17% ownership stake in Origin, AustralianSuper held sufficient influence to thwart the bid. 

Brookfield said it would consider a new government plan to accelerate the rollout of green energy before it decides what to do next.  

Brookfield’s proposal, made with EIG Partners, promised to build 14 gigawatts of renewable energy as part of a 10-year, A$20 billion to A$30 billion investment plan. 

The uncertainty around Origin’s state of affairs and the back and forth over whether it will extend the life of the ageing 2,880 MW Eraring coal-fired power station is expected to affect the wholesale market. 

Origin Energy will still need to schedule planned outages for maintenance and the uncertainty around the situation is expected to have a ripple effect. 

Federal Government to underwrite 32 GW of generation and storage under Capacity Investment Scheme 

The Federal Government is set to significantly broaden a taxpayer-backed program to bolster the development of new clean power generation and storage capabilities.  

This move shows that the government acknowledges the necessity of these measures to reach its target of powering Australia with 82% renewable energy by 2030. 

Climate Change and Energy Minister Chris Bowen said the government would underwrite 32 gigawatts of new electricity, consisting of 9GW of storage and 23GW of variable renewable generation. Fossil fuels, including gas-fired power, will not be eligible. 

The move effectively scraps the Renewable Energy Target.  

Advisors to Bowen contend that the Renewable Energy Target (RET) mechanism currently provides a weak price signal.  

This is because new wind and solar projects are causing prices to dip into negative territory.  

They argue that tenders incorporating minimum revenue guarantees and price caps offer the most effective protection for consumers. 

More renewable energy records smashed as coal plummets 

Renewable energy hit a record high of 80 per cent of NSW’s generation on Sunday 12 November, as a wave of wind and solar across Australia’s main grid sent coal output and operational demand to new lows. 

The new peak of 80 percent beat the previous peak of 72.5 percent set late last month (October 24). 

The bulk of the renewable came from rooftop solar from households and businesses, which accounted for around 44 per cent of total generation. Utility-scale solar and large-scale wind had shares of just over 14 and 12 per cent each, while hydro played a minor role with just over 1.1 per cent. 

A week later, solar set more records, with the share of rooftop and large-scale solar hitting a new peak of 65.7 per cent across the main grid and coal output hitting a record low of 4709 MW just before midday on Sunday. 

Work commences on various big battery projects around Australia 

Work has commenced on Australia’s biggest large-scale battery after an initial $245M investment into the project by Victoria’s State Electricity Commission. 

The 600MW/1600MWh big battery is being developed by Equis Renewables in Melton.  

Once fully developed, the battery will have a capacity of 1,200MW and 2,400MWh.  

The battery will comprise three components: A 200MW four-hour (800MWh) battery and two separate 200MW, two-hour (400MWh) batteries. 

It is the first investment from the reformed state utility’s $1 billion kitty, set aside to deliver 4.5GW of new renewables – 2.6GW of it between now and 2028. 

Other battery projects in Victoria include Akaysha Energy’s four-hour 311MW 1244MWh “Elaine” big battery and Flow Power’s 100MW/200MWh BESS in Gippsland 

UK energy storage developer Pacific Green has unveiled plans for a 500MW, three-hour battery energy storage system on South Australia’s Limestone Coast. 

Pacific Green’s 0.5GW/1.5GWh Limestone Coast Energy Park would be the biggest big battery in South Australia. 

Queensland also had some battery news as the 100MW/200MWh Chinchilla battery became the first to be built by state-owned generator CS Energy. 

The Chinchilla battery, which features 80 Tesla Megapack modules, is being built next to the Kogan Creek coal fired generator, which is also owned by CS Energy. 

In New South Wales, a 500 MW, two-hour battery will be built at the Liddell site by AGL Energy, and a 415MW, four-hour battery (1660 MWh) will be built by BlackRock’s Akaysha Energy at Orana in the state’s central west. 

AGL to spend $760 million on last two coal-fired generators this financial year 

AGL will spend $760 million this financial year on upgrade and maintenance programs on its two remaining coal-fired generators. 

AGL closed the ageing Liddell coal-fired generator in April 2023 but still expects the neighbouring Bayswater plant and the Loy Yang A brown coal generator in Victoria to operate for another decade. 

Bayswater could close as early as 2031, while Loy Yang A is expected to keep burning coal until 2035. 

Fortescue kicks off $1Bn in hydrogen projects 

Andrew Forrest’s Fortescue Metals Group has announced three of the first green hydrogen deals to reach a final investment decision in the United States and Australia. 

The board has approved the Phoenix hydrogen hub in the US, a green hydrogen project in Gladstone, Queensland, and a green iron trial plant in Western Australia. 

The estimated total investment in the three approved projects is approximately $US750 million ($1.1 billion) over the next three years. 

The Phoenix hub comprises an 80-megawatt electrolyser and liquefaction facility with a production capacity of up to 11,000 tonnes of liquid green hydrogen per year, with the first production planned for 2026. 

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New South Wales

Average Movement Summary:

New South Wales electricity futures prices started the month at $108/MWh. Prices rose sharply in the first week of the month to $116/MWh before consistently trending down to $99/MWh to close the month. Prices for 2025/26 followed the same trend but decreased at a shallower rate. Prices have decreased considerably since the crisis in October 2022 and are $88/MWh cheaper than last year.

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Commentary:

• The volume-weighted average price on the spot prices market climbed substantially from $42/MWh in October to $87/MWh. 
• Prices are significantly lower than the spot market in November 2022, when the average price was $113/MWh.  
• Electricity spot prices were somewhat volatile in NSW in November. There were nine instances where pricing was above $1,000/MWh. Prices hit a high of $15,433. The bulk of trading took place at around the $80/MWh mark. Incidents of negative pricing dropped by about half to 600 with a maximum low of -$55/MWh.  
• Renewables share dropped marginally from 41.3% of the state’s energy generation to 41.2%. Reliance on gas rose from  0.4% to 2.3%. Coal contribution dropped from 58.3% in October to 56.3%.  
• Batteries provided 0.1% of the state’s energy and are now undercutting gas generation at an average of $72/MWh compared to $83/MWh (gas). Renewables cost an average of $72/MWh, and coal $92/MWh. 

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Victoria

Average Movement Summary:

Victoria futures prices opened the month at $70/MWh, on a downward trend from September. Prices continued to rise to $75/MWh on 7 November but gradually decreased to close the month at $69/MWh. 2025 and 2026 prices dropped more steeply and closed the month lower than 2024. Prices have decreased considerably since the crisis in October 2022 and are $27/MWh cheaper than last year.

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Commentary:

• Victorian average spot prices rose substantially from $17.50/MWh in October to $35/MWh in November. 
• November spot prices are still lower than in 2022 when the average price was $58/MWh. 
• Electricity spot prices were relatively stable in November, with no incidents of note and a maximum price of $314. The bulk of trading occurred around the $35/MWh mark. 
• Incidents of negative pricing dropped to around 2,000. Around 200 instances of pricing went below the -$100/MWh with a maximum low of  -$959/MWh.  
• The share of renewables generation dropped to 39.7% compared to the previous month at  42.1%. Coal generation increased to 59.3%. Gas generation increased from 0.2% to 0.7%.  
• Battery supply accounted for 0.3% of electricity, and generation cost an average of $80/MWh. Renewables cost an average of $16/MWh, coal costs $44/MWh and gas $104/MWh. 

Queensland

Average Movement Summary:

Queensland futures prices opened at $97, rising to $103/MWh by the end of the first week of November before dropping substantially to close the month at $92/MWh. The prices for 2025 and 2026 were more stable and closed the month lower than those for 2024. 

Electricity prices have come down to a large extent since the crisis in October 2022 and are $48/MWh cheaper than last year. 

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Commentary:

• Queensland spot prices more than doubled from $36/MWh in October to $87/MWh in November.  
• Queensland spot prices were more expensive in November 2022, when the average price was $113/MWh. 
• Queensland reverted to its usual volatility In November. There were nine incidents with pricing above $10,000/MWh. The highest price was $13,390/MWh. 
• There were around 1,500 negative pricing events, with a low of $-48. The bulk of trading occurred at the $80/MWh mark. 
• Renewables dropped substantially from 33.5% to 29.5% of the state’s energy for the month. Coal generation rose to 63.4%. Gas generation increased from 4.9% to 6.9%. 
• Batteries supplied 0.09% of total generation. However, battery energy costs an average of $72/MWh. Gas averaged a cost of $120/MWh, coal $81/MWh and renewables at $39.2/MWh. 

South Australia

Average Movement Summary:

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

Prices started the month at 109/MWh, dropping steadily to $99/MWh by the end of the month.  Prices for 2025 were flat and in the same region as those for 2024.  

2026 prices started out high at $123/MWh but dropped significantly to $109 by the end of the month.

Prices have come down substantially since the crisis in October 2022 and are $86/MWh cheaper than last year.  

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Commentary:

• SA’s average November electricity spot prices increased substantially to $44/MWh from $15/MWh in October. 
• Prices are lower than in the same period last year when prices averaged  $62/MWh. 
• South Australia returned to volatility with four instances where pricing was close to the market cap at $16,000.  
• Nearly 3,000 negative pricing incidents were recorded, with a low of below -$993/MWh.  
• Renewables dropped from 86.7% of total generation to 81.6%. Gas generation climbed from 12.5% to 17.4%. 
• Battery power increased slightly to 0.9% and averaged a cost of $102/MWh. Gas costs an average of $108/MWh, and renewables at $25/MWh. 

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We hope our review of the electricity market and the relevant movements in electricity prices in August 2023 have been informative and helpful. We understand that these are challenging times, and we’re here to support you. If you’d 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 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.

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