October 2023 Electricity Market Review

Market Commentary

Very low demand and oversupply of renewables throughout the month of October led to very soft spot pricing, which in turn put negative pressure on the wholesale market resulting in a sharp end-of-month drop in prices.

On Sunday, 1 October, Queensland and SA registered their lowest demand on record, with operational demand hitting a low of just 5 MW and network demand going into negative territory at minus 37 MW.

Queensland registered a new low of 3,131MW for the half-hours ending 11 a.m. and 11:30 a.m. on the day

On that day, between 1 p.m. and 1.30 p.m., rooftop solar met 99.7% of the state’s total demand. 

This represents the highest level achieved during a thirty-minute interval, although it’s essential to note that rooftop solar previously reached an astonishing 101.2 per cent capacity not long ago. 

However, this remarkable achievement was fleeting, lasting only for five minutes. The surplus renewable energy generated is effectively managed through two main avenues: either it is stored in batteries or channelled to Victoria through transmission links.

The Australian Energy Market Commission’s figures showed that operational demand over the whole National Energy Market registered a new record low at (11,224MW for the half-hour ending 12:00 NEM time.

This was lower than the previous low point set exactly two weeks earlier on Sunday, 17 September 2023.

Lack of Reserve declared in SA

Totally flipping the script, a Lack of Reserve was briefly declared in SA on 27 October as imports were constrained when solar went to bed for the night and wind dropped. The market responded and AEMO took no action.

So far this spring, the NEM has been operating at an average renewable share of 42.3 per cent, compared to 38.5 per cent in Spring 2022.

New South Wales registered a further record low demand on 9 October with 3,869MW.

Increase in negative pricing across the NEM

Spot pricing registered a marked increase in negative pricing across the National Energy Market. 

Cumulative price in South Australia has turned negative. Whilst negative spot prices have been becoming increasingly common, cumulative prices have very rarely strayed negative, up until now.

Cumulative price is the rolling total of the previous 7 days of trading prices. There is no floor to the cumulative price and negative cumulative price for a region is a sure sign of prolonged low and negative pricing. 

Battery storage undercutting gas in NSW and Victoria

Another notable takeaway from this month’s energy review is that battery storage is helping keep a lid on peak spot prices by bidding into the market at prices lower than  gas generators in New South Wales and Victoria.

Industrial action called off at Kogan Creek

Mining and Energy Union members at the Kogan Creek Power Station have reached a new workplace agreement after taking industrial action.

With Callide C being out of commission, the news that industrial action has been called off allayed fears about the curtailment of electricity supply causing a shortage in Queensland.

The Bureau of Meteorology officially declared El Niñno last month and concerns persist around bushfires as they can cause state electricity interconnectors to fail.

Concerns grow around Mount Piper generation capacity due to coal supply mine flooding

Prices have remained low despite Energy Australia’s warning that electricity generation may be disrupted at its 1,400 MW coal-fired Mount Piper power plant in New South Wales.

The power plant in Wallerawang, commissioned in 1993, depends on coal from Centennial’s Springvale coal mine 12 kilometres away.

The mine’s output has been curtailed due to flooding.

Victorian Labor Launches State Electricity Commission

In a significant move that marks a turning point in Victoria’s energy landscape, the Victorian Labor government has officially launched the State Electricity Commission The utility’s mandate is to invest in government-owned renewable energy projects and the necessary grid infrastructure to achieve Victoria’s ambitious target of reaching 95% renewables by 2035.

Cheaper prices, more renewables and less coal – AEMO Q3 report

Reduced wholesale prices, reduced operational demand and declining coal versus ascendant renewables were the most salient points in The Australian Energy Market Operator’s Q3 Quarterly Energy Dynamics Report.

Wholesale spot electricity prices in the NEM averaged $63 per megawatt-hour in Q3 2023, a 71% decline from the previous year, despite the retirement of some coal units. This drop was due to higher output from renewable energy sources and lower operational demand.

Warmer weather and a 31% growth in distributed photovoltaic (PV) output in Q3 2023 led to a new low in the National Electricity Market’s (NEM) operational demand, with numerous minimum demand records set.

Black coal-fired and gas generation saw declines, while grid-scale solar output increased in Q3 2023.

Two new hydrogen projects get government funding

The federal government has announced it will invest $69.2 million to develop the 2.2GW Central Queensland Hydrogen Hub (CQ-H2), described by the state government as the biggest green hydrogen project in the country.

The project will be led by the Stanwell Corporation – a Queensland government-owned energy company, that will be matching the government’s investment – leading to a total of $138 million.

The government is also providing up to $70 million in funding to support the establishment of the Port Bonython Hydrogen Hub.

The Australian and South Australian Governments have finalised a grant agreement to develop the Port Bonython Hydrogen Hub, near Whyalla. 

Port Bonython is well-positioned to become South Australia’s first large-scale export terminal for hydrogen.

Australian Energy Market is the most volatile in the world

And to close off the month, the NEM won a dubious accolade – the most volatile energy market on the planet. 

Unplanned outages across Australia’s increasingly unreliable fleet of ageing coal power plants and extreme weather events are helping to make Australia’s electricity market the most volatile in the world, new research from Rystad Energy has found.

Rystad Energy says a comparison of 39 electricity markets globally reveals that Australia’s NEM has the widest spreads between high and low wholesale electricity prices over the course of each day, giving it “the unwanted title of ‘most volatile’.”

Rystad said it measured volatility using the average one-hour intraday spread for a year of data – that is, the difference between the highest and lowest wholesale price during a given hour.

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New South Wales

Average Movement Summary:

New South Wales electricity futures prices started the month at $124/MWh, already on a downward trend from the end of September. Prices continued to retreat to close the month at $105/MWh which is a substantial drop. Prices for 2025/26 followed the same trend but decreased at a shallower rate. Prices have come down considerably since the crisis in October 2022 and are $61/MWh cheaper than they were last year.

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Commentary:

• The volume-weighted average price on the spot prices market dropped substantially from $64/MWh in August to $42/MWh.
• Prices are significantly lower than the spot market fetched in October 2022 when the average price was $151/MWh. 
• Electricity spot prices were relatively stable in 2023, with only one pricing incident of note at $2,054. The bulk of trading took place at around the $60/MWh mark. Incidents of negative pricing were around the same mark as September with 1,500 with a maximum low of  -$70/MWh. 
• Renewables share increased from 38.9% of the state’s energy generation to 41.3%. Reliance on gas dropped even further from 0.8% to 0.4%. Coal contribution dropped by 2 percentage points from 60.2% to 58.3%. 
• Batteries provided 0.1% of the state’s energy and are now undercutting gas generation at an average of $94/MWh compared to $104/MWh  (gas). Renewables cost an average of $21/MWh, and coal $55/MWh.

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Victoria

Average Movement Summary:

Victoria futures prices opened the month at $79/MWh, already on a downward trend from September. Prices continued to drop, closing at $70/MWh. 2025 and 2026 prices dropped more steeply and closed the month lower than 2025. Prices have come down considerably since the crisis in October 2022 and are $40/MWh cheaper than they were last year.

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Commentary:

• Victorian average spot prices dropped drastically from an already low $26 in September to $17.50 in October. 
• Spot prices for October were significantly lower than in 2022 when the average price was $99/MWh.
• Electricity spot prices were relatively stable in October, with no incidents of note and a maximum price fetched of $299. The bulk of trading occurred around the $40/MWh mark.
• Incidents of negative pricing increased substantially to 2,500. There were around 120  instances of pricing going below the -$100/MWh with a maximum low of  -$428/MWh. 
• The share of renewables generation climbed back up to the more familiar territory of 42.3% from 39.7 % the previous month. Coal generation decreased slightly to 57.2% from 58.8 % the previous month. Gas generation dropped from 1% to a negligible 0.2%. 
• Battery supply accounted for 0.3% of electricity and generation cost an average of $64/MWh. Renewables cost an average of $7/MWh, coal costs $27/MWh and gas $106/MWh.

Queensland

Average Movement Summary:

Queensland futures prices opened at $110, dropping fairly steadily to $94/MWh by the end of the month. 2025 and 2026 prices were more stable and closed the month lower than 2024.

Electricity prices have come down to a large extent since the crisis in October 2022 and are $43/MWh cheaper than they were last year.

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Commentary:

• Queensland spot prices dropped from $50/MWh in September to $36.54/MWh in October. 
• Queensland spot prices were three times more expensive in 2022, when the average price was $154/MWh.
• Queensland had a very stable October compared to its usual volatility. There were only two incidents of note, with a price event at $14,928 and another at $2,925/MWh. 
• There were around 2,500 negative pricing events, with a low of $-70. The bulk of trading occurred at the $35/MWh mark.
• Renewables increased by 2 percentage points to 33.5% of the state’s energy for the month. Coal generation dropped slightly to 61.5%. Gas generation dropped from 5.7% to 4.9%.
• Batteries supplied 0.09% of total generation. However,  battery energy is costly at an average of $115/MWh. Gas averaged a cost of $67/MWh, coal $46/MWh and renewables at a shocking low of  $1.28/MWh.

South Australia

Average Movement Summary:

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

Prices started the month at 120/MWh, dropping to $109/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 $130/MWh but dropped significantly to $123 by mid-month, remaining stable to close at that price.
Prices have come down substantially since the crisis in October 2022 and are $41/MWh cheaper than this time last year.

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Commentary:

• SA’s average August 2023 electricity spot prices dropped substantially from $41/MWh in September to  $15/MWh in October.
• Prices are lower than in the same period last year when prices averaged  $68/MWh.
• South Australia has another rare, steady month. There were only three price incidents of note, one at $1,822/MWh and two around the $999 mark.
• While positive pricing was steady, negative pricing is showing increasing volatility. There were close to 3,000 negative pricing incidents recorded, with three instances where pricing dropped below -$900/MWh. 
• Renewables climbed nearly 10 percentage points to 86.7% of total generation. Gas generation dropped from 20.3% to 12.5% which is very low by South Australia standards.
• Battery power dropped slightly to 0.8% and averaged a cost of $63/MWh. Gas cost an average of $54/MWh and renewables were in negative territory at -$1.67/MWh.

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We hope our review of the electricity market and the relevant movements in electricity prices in October 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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