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, CIS Tender 1 NEM generation outcomes, the 2024 AER Wholesale Electricity Market Report, and the outcome of a class action lawsuit on a class action lawsuit 2 major Queensland government-owned corporations.
Keep reading for an overview of key market developments and a discussion of the impact of these announcements.
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For a comprehensive update on the ACCU market, read our ACCU Monthly Market Report here
The Australian Government has awarded CIS contracts to 19 projects, totalling 6.5 GW of generation capacity, with NSW projects winning the lion’s share of capacity.
In December of 2024, the Australian Government announced the winners of CIS Tender 1 - NEM Generation, which was Australia’s largest ever renewable energy tender.
The tender process yielded significant interest with over 40 GW of projects registering and more than 27 GW submitting a response for Stage A.
Notably, none of the ‘Big 3’ Gen-tailers – Origin, Energy Australia and AGL - won contracts despite entering the process.
The CIS contracts top up 90% of a generators revenues in a financial year below an agreed floor up to an annual payment cap, and generators are obliged to pay back 50% of revenues above an agreed ceiling
The next tender, Generation Tender 4, is currently open for registrations.
The AER’s 2024 report assessed the competitiveness and efficiency of the NEM over the long term, including a deep dive into SA’s market owing to its prominent role in the renewable energy transition.
The report, released in early December, aimed to assess the effectiveness of competition in the NEM and identify any market structure that may hinder competition or efficiency. The AER analysed the market over the past five years, with a focus on outcomes since the 2022 report, and included a deep dive into the SA market to understand its unique dynamics amid the renewable energy transition.
NEM prices have fallen since 2022, mainly due to lower fuel prices and increased renewable generation. However, prices remain higher than pre-2022 levels. In 2024, prices were low during the first two quarters, then rose in the second half due to extreme weather, network and generator outages, and lower wind and solar generation. The first half of the year saw record-low demand driven by mild weather and increased rooftop solar output.
Renewable energy generation grew to 32% of total NEM generation in 2023-24. However, VRE output increased at its slowest rate since 2017-18. Wind generation is the most significant source of large-scale renewable generation, while large-scale solar surpassed hydro generation for the first time. Notably, rooftop solar output in winter 2024 exceeded that of summer 2020.
The report also included a deep dive in the SA market, as it has the highest penetration of VRE of any NEM region and therefore may offer insights into the future of the renewable energy transition. The report found that coal was setting prices in SA less frequently in 2023-24 compared to 2021-22, but at higher levels.1 Solar generators continued to set prices at similar levels as previous years, with prices closer to $0. Gas generators set higher prices on average, while battery storage increased its impact in 2023-24, both in terms of percentage of time they set prices and the level at which they set those prices.
The SA market was found to consist of 27 participants. The 2 largest participants, AGL Energy and Origin Energy, own almost half of the region’s capacity, and have a mixture of gas, wind, large-scale solar and battery assets. AGL Energy has the greatest market share by capacity, with 26%, with the largest gas and BESS capacities in the state.
A class action lawsuit alleging the actions of CS Energy and Stanwell Corporation artificially increased electricity bills was dismissed. The Judge finding that the defendants did not have significant market power.
In 2021, the law firm Piper Alderman filed class action lawsuit on behalf of Stillwater Pastoral Company and 46,000 other electricity consumers, alleging the actions of two major Queensland government-owned corporations (GOCs), CS Energy and Stanwell Corporation, artificially inflated electricity bills. The class action was dismissed in December of 2024.
Section 46 of the Competition and Consumer Act (CCA) prohibits a corporation with substantial market power engaged in conduct with the purpose, effect, or likely effect of substantially lessening competition in the market.
Justice Sarah Derrington concluded that although rebidding practices used by CS Energy and Stanwell caused a small number of price increases, these behaviours are within NEM rules and allow generators to recover fixed costs.
The case has now been adjourned until March 2025 for the determination of costs.
Stillwater Pastoral Company has indicated that they may appeal this decision.
Energy market
The AER released its 2024 Wholesale Electricity Market report, assessing the competitiveness and efficiency of the NEM over the long term. Whilst the report noted numerous indicators of the increasing importance of wind, solar and storage to the market it also noted that VRE output increased at its slowest rate since 2017-18.
The slowing rollout of new wind and solar projects may go a long way to explaining why baseload futures prices increased in all mainland NEM regions, except South Australia, in December and across 2024 on-the-whole.
The speed of the rollout should improve in coming years, with the Australian Government awarding CIS contracts to 19 projects, totaling 6.5 GW of generation capacity.
As market outcomes continue to fluctuate, finding the right contract to buy or sell electricity and environmental certificates remains an important risk management exercise.
The CORE Markets team partners with renewable energy developers and corporate buyers to support strategic planning and effective risk management. Reach out to discuss how we can help optimise your strategy in this evolving market.
Carbon market
The price of spot Generic ACCUs retreated from the November highs, stabilising around $38 mid-month before sliding into the $36-$37 range by month end. The price of Soil Carbon ACCUs also declined, however Plantings ACCUs bucked the trend to reach an annual high of $50.
Despite the holiday period, December was the second largest ever month, behind November, for volume of ACCUs traded. Derivatives trading also remained buoyant, with December the second largest ever month, Behind October, for volume of traded ACCU derivatives.
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 - December 2024
