Wholesale markets quarterly - Q3 2021

Segment: 
Category: 
Quarterly report
Event date: 
1 July 2021
Release date: 
17 November 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

  • Q3 2021 outcomes were driven by the ongoing transition from a market dominated by large coal-fired generators to one that incorporates more wind and solar generation.
  • For the first time in a Q3, average quarterly black coal generation supplied less than 50% of total output, while wind generation was at record high levels.
  • Volume weighted average (VWA) prices in all regions were lower than in Q2 2021 but were generally up from levels in the same quarter last year.
  • Prices on the mainland were high in July, particularly in Queensland and NSW, before falling in August and September.  High prices at the start of the quarter were driven by cold weather, high demand, generator outages and interconnector limits.
  • Low demand later in the quarter played a key role in reducing prices, with South Australia experiencing its lowest ever minimum demand and Victoria its lowest Q3 demand.
  • Record minimum demand, driven by record rooftop solar output in every region, contributed to an increase in negative prices. Wholesale electricity prices in South Australia were negative a quarter of the time.
  • Frequency control ancillary services (FCAS) costs were high in Q3 2021 totalling $130 million. These included local FCAS costs in Queensland of $71 million.
  • This report also includes a focus story on the introduction of 5 Minute Settlement.

Gas

  • Gas prices increased 28% from Q2, ranging between $10-$11.50/GJ across downstream markets.
  • Supply rose to meet winter demand and average gas production reached a record 5,650 TJ/day in Q3.
  • QLD LNG exports remain strong just above 300 PJ in Q3, as international prices escalated to reach over $20/GJ late in Q3.
  • The Day Ahead Auction for pipeline capacity continues to provide cheap access to transport to move gas across the east coast markets.
  • This report also includes a focus story analysing the competitiveness of wholesale gas spot markets.