Wholesale markets quarterly - Q2 2021

Sector: 
Segment: 
Category: 
Quarterly report
Release date: 
13 August 2021

Overview

The AER's monitoring, regulation and enforcement roles help deliver affordable and reliable energy for Australian consumers. Our quarterly reports allow us to identify significant trends in the electricity and gas markets, and independently evaluate market developments as they emerge.

Key Findings

Electricity

  • Average financial year spot prices in the National Electricity Market (NEM) were below $75/MWh in all regions for the first time since 2014-15. Only in Queensland were prices higher in 2020-21 than 2019-20. 
  • There was, however, a significant increase in quarterly prices in Q2 2021 from levels the previous year, particularly in Queensland and NSW.
  • These high prices were largely driven by a higher number of planned and unplanned coal generator outages, as well as network (line) outages that limited Queensland and NSW's ability to import cheaper generation from other regions.
  • At the same time demand increased with the onset of winter and some very cold days.
  • Frequency control ancillary services (FCAS) costs were high in Q2 2021 totalling $142 million. These included local FCAS costs in Queensland, which reached a record $74 million as a result of energy price volatility and line outages.

Gas

  • Average financial year spot prices in all east coast gas markets were low in 2020-21. Prices ranges from $5.60/GJ in the Wallumbilla Gas Supply Hub to $6.54/GJ in Brisbane, the only market where prices increased from the previous financial year. For all other markets, prices were at their lowest levels since 2015-16.
  • In Q2 2021, however, prices increased by 39% from the previous quarter, ranging from $7.30/GJ to $9.17/GJ. 
  • There were 2 main contributing factors to higher prices. The first was unseasonably high international gas prices.
  • The second was outages and constraints across the NEM and gas markets in May and June. As a result of outages in the NEM, gas generators were called upon to boost electricity generation.
  • There was near record trade at Wallumbilla and record trade on the Day Ahead Auction as participants moved gas between northern and southern markets. Trade through downstream markets was also at record levels, led by large increased in producer sales.