Wholesale markets quarterly – Q3 2020

Segment: 
Category: 
Quarterly report
Release date: 
12 November 2020

Overview

The AER's monitoring, regulation and enforcement roles will help deliver affordable and reliable energy for Australian consumers. Our quarterly report bridges the gap between our short term and long term performance reports, allowing us to identify significant trends in the electricity and gas markets, and independently evaluate market developments as they emerge.

Key findings

  • Gas and electricity wholesale prices increased slightly but remained low in Q3 2020.

Electricity

  • Q3 2020 average prices were below $55 per MWh in all regions. Low prices were the result of a number of factors.
  • Quarter three is typically a low demand quarter due to milder weather and good rooftop solar generating conditions. This quarter, some regions saw instances of extremely low daytime demand, supported by an unusually warm September. In particular, South Australia experienced record low demand and Victoria experienced its lowest ever minimum demand for quarter three.
  • These low demand conditions helped contributed to a record number of negative prices.
  • Spot prices for fuel inputs for gas and coal generators remained low. Coal generators in particular, continued to offer more capacity at low prices.
  • With low demand conditions and wind and solar generation continuing to rise, less black coal, gas and hydro generation was dispatched than a year ago.
  • Queensland black coal generation in particular was lower than in Q3 2019 as a number of generators experienced both planned and unplanned outages. And, with the exception of Queensland, gas generation was also lower in all mainland regions.
  • Looking forward, falls in base future and cap prices for Q1 2021 over this quarter suggest an expectation that the market is well placed to deal with summer conditions.

Gas

  • In most markets, gas prices increased slightly from last quarter, but remained at levels last seen in early 2016 of between $4.00 and $5.50 per GJ.
  • Prices in Victoria decreased for the seventh consecutive quarter to $4.56 per GJ.
  • International netback gas prices bottomed out this quarter at $2.29 per GJ in July, bouncing back in the following months.
  • LNG exporter maintenance over winter was higher than in 2019. The associated changes in Queensland production has led to reduced LNG export cargoes and some gas diverted to storage, however gas flows south did not notably decline from Q3 2019 levels.
  • Our focus story highlights competition outcomes across the upstream Gas Supply Hubs, Day Ahead Auction and downstream spot markets.
  • A record number of trades occurred through the Day Ahead Auction this quarter. Our report highlights some key pinch points on the network where demand exceeded available capacity. Participants vied for limited capacity to bring gas south during this quarter’s peak demand period. These outcomes support the intent of the Day Ahead Auction to facilitate gas transfers across the markets to balance supply and demand.