The latest summary edition of our monthly Australian energy & environmental market update is now available. Keep reading for energy and carbon pricing movements, policy updates and other news.
This month we cover energy and environmental market movements, AEMO’s Engineering Roadmap for FY25, its 2024 Electricity Statement of Opportunities, and Transgrid's proposed new inland REZs that could deliver 14 GW of renewable generation over the next decade.
Keep reading for an overview of key market developments and a discussion of the impact of these announcements.
A comprehensive report with additional insights, charts and commentary from our industry analysts, is available to paid subscribers. Contact our team to find out more.
For a comprehensive update on the ACCU market, read our ACCU Monthly Market Report here
AEMO published its annual Engineering Roadmap, outlining its priorities as supporting DER uptake, improving visibility of system needs and increasing readiness for additional renewable and BESS capacity.
The Engineering Roadmap outlines the activities that AEMO will undertake to advance operational capabilities at times of high renewable penetration.
For FY25, AEMO’s key priorities include:
System security needs emerged as the overarching theme across both distributed and utility-scale renewables, with AEMO looking for ways to manage an increasingly IBR-dominated grid.
On the back of this Engineering Roadmap, the AEMC’s final determination on the Improving Security Frameworks rule change provides AEMO with tools to manage system security, which includes incentives for participants to invest in the provision of long-term security services.
AEMO released the 2024 ESOO in August, forecasting that if current state and federal schemes are met, reliability standards will mostly be met over the next 10 years. But, if delays occur, reliability standards may not be met in NSW, VIC and SA.
Every year, AEMO releases the Electricity Statement of Opportunities (ESOO), whereby AEMO’s modelling assesses the likelihood that reliability standards will be met.
The report concludes that current state and federal schemes, if delivered, would provide sufficient capacity to meet most reliability standards over the next 10 years. The report also flagged that delays to these investments may impact this.
However, the report forecasts some reliability gaps in:
In response to this upcoming summer’s gaps in reliability, the AER will require retailers to enter sufficient contracts to cover peak demand under the retailer reliability obligation (RRO).
Unserved Energy (USE) events typically occur in periods of maximum demand, and the report highlights the high correlation between wind unavailability in periods of maximum demand and USE events.
In the figures to the right, the above scenario forecasts reliability if all state and federal schemes are met, and the lower figure accounts for only projects that are existing, in commissioning, committed or anticipated, and accounts for observed commissioning delays.
In-light of looming energy security gaps and uncertainty in offshore wind developments, Transgrid has proposed new inland REZs that could deliver 14 GW of renewable generation over the next decade.
In their latest Transmission Annual Planning Report (TAPR), Transgrid suggested that NSW electricity demand would increase steadily year-on-year over the next decade.
In this time, the network operator expects substantially volatile power-flows, increases in peak demand, and sharp drops in minimum grid-supplied demand.
Among previously deployed technologies, offshore wind is also expected to play a role in addressing these challenges, but there is uncertainty regarding project delivery timelines.
In acknowledging this, Transgrid has planned for a scenario wherein offshore wind is not critical to NSW energy security – this scenario introduces the possibility of new renewable energy zones (REZs) that are remote and located inland:
While this alternative scenario requires substantially more transmission infrastructure, Transgrid maintains that the new REZs sit on under-utilised, low-density land with favourable conditions for both solar and wind generation.
If not for new inland REZs, there would need to be other solutions – potentially those that are non-network like synchronous condensers and grid-forming batteries, which may help provide system strength support.
Energy market
As demonstrated in August, wholesale energy prices are increasingly correlated with weather patterns. This is due to the increasingly unreliable coal generators and, at times, variable nature of renewable energy.
Energy buyers can manage this volatility risk through tools such as Power Purchase Agreements (PPA) and Battery Energy Storage System (BESS) offtake contracts. These tools help to ensure an annual volume of renewable energy and/or hedge the most volatile periods of the day. Our advisory team can help you work through the various options.
The August report includes an updated analysis of BESS performance in the NEM. It demonstrates that batteries can defend both the morning and evening peaks and serve as a good hedge against spot price volatility.
Although spot pricing in August was elevated in all NEM states, all futures markets are now in some level of backwardation. This indicates the market anticipates that the incoming renewables supply, coupled with no sizeable coal closures in the next 3 years, should begin to suppress wholesale electricity pricing and may provide a reduction in electricity costs for consumers in years to come.
Carbon market
The ACCU market saw a notable increase in reported trade volume, marking a return to levels seen earlier this year. The price for Generic spot ACCUs hit $35.60 toward the end of the month, its highest price since March, before closing at $35.25, up 2.2% for the month.
The increase in interest in the ACCU market is also seen through primary market engagement where buyers engage with project developers as part of their strategic carbon procurement. This may be through carbon offtake agreements, co-investment or partnership opportunities with values-aligned projects.
To explore your carbon procurement strategy and market engagement mix, get in touch with our advisory team. We can support you in structuring a plan that supports your overall decarbonisation roadmap and commercial goals.
The events outlined in this month's update highlight the evolving nature of carbon, environmental and energy markets and the complexity of the net zero transition.
To discuss your unique requirements, get in touch with our team today to see how we can help.
Australian Energy & Environmental Market Update - August 2024
