The latest lite 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 price movements, AEMO’s release of its Gas Statement of Opportunities (GSOO) 2023 Report, the release of the VCMI Claims Code of Practice and the launch of the Capacity Investment Scheme by the Federal & NSW State government.
Keep reading for an overview of key market developments and a discussion of the impact of these announcements.
The full version of the update, with additional commentary from our industry analysts, is available to paid subscribers.
Contact our team to find out more.
The Gas Statement of Opportunity (GSOO) studies the demand and supply of natural gas whilst understanding possible alternate fuels including hydrogen, biomethane and other natural gas equivalent. The GSOO identifies various scenarios, however, the current GSOO focuses primarily on the “Orchestrated Step Change (1.8 ° C)” Scenario which is the closest to AMEO’s ISP (Integrated Systems Planning) Report 2022 and actively incorporates opportunities towards emission reduction through electrification.
As the electricity grid is forecasted to see significant coal generation facilities retire according to AEMOs ISP (Integrated Systems Planning) Report 2022, gas generation is expected to support the gird by providing firming needs.
GSOO also highlights that gas firming will play an important role in responding to sudden changes in the electricity supply and demand balance by maintaining grid security and reliability. AEMOs GSOO forecasts that the gas consumption for electricity generation:
LNG exports make up a significant proportion of gas demand on the east coast. The GSOO Report 2023 forecasts, that there is sufficient product to meet exports until 2027, assuming the anticipated investments proceed. GSOO also highlighted the key role of LNG exporters in ensuring gas availability to meet domestic demand along the east coast interconnected gas network.
The report also highlights that new sources of gas supply will be needed despite the fact even though that domestic gas consumption is forecasted to decline, with annual supply gaps forecasted as early as 2027.
The reports also underlines that as gas use is increasingly peaking, opportunities for supply are likely to come from increasing flexible and agile solutions, where flexible utilisation of infrastructure and demand responses could play a growing role in managing peak gas demand.
Additional commentary is available in the full version of the update. Contact our team to find out more.
The Voluntary Carbon Markets Integrity Initiative (VCMI) has released its Claims Code of Practice, which provides clear requirements, recommendations, and guidance to companies on credible use of high-quality carbon credits and when they can credibly make voluntary use of carbon credits. The Code also provides guidance on the claims organisations can make about their use of carbon credits.
VCMI has outlined a 4-step approach towards making a VCMI based claim:
Additional commentary is available in the full version of the update. Contact our team to find out more.
On the 29th of June, the Commonwealth and New South Wales governments announced that they will partner to increase the firmed capacity in the current NSW Firming Infrastructure Tender (Round 2), from 380MW to 930MW.
The federal government wants to underwrite the additional investment through the Capacity Investment Scheme (CIS). As a result, the CIS in total is expected to deliver almost 1 gigawatt of additional grid-scale dispatchable generation and storage, such as batteries, pumped hydro, or other dispatchable capacity, in New South Wales.
The investment scheme aims to promote an ideal mix of renewable and storage technologies entering the grid to reduce volatility in the energy market and ensure an ongoing supply of cheap and reliable energy as the grid transitions away from traditional fossil fuels.
The scheme will involve competitive tenders seeking bids for clean renewable generation and storage projects which will fill expected reliability gaps. Projects selected will be offered long-term Commonwealth agreements for agreed revenue ‘floors’ and ‘ceilings’, effectively financially de-risking new renewable builds and encouraging more investments.
The current CIS scheme only supports battery storage, pumped hydro and potential new storage technologies. Under the scheme a minimum storage capacity of 2 hours along with the project location being in the Sydney-Newcastle-Wollongong (SNW) sub-region is required. If the project is outside the sub-region the scheme dictates to provide sufficient information towards the contribution in meeting the Energy Security targets in the region to be eligible for participating in the tender process.
Australian energy markets continue to experience significant volatility. Business leaders are working to minimise the negative impact on their bottom line while meeting their own renewable energy targets.
While there are government interventions underway to stabilise the price fluctuations, there is an inherent and ongoing volatility risk in the transition to renewables.
Forward looking organisations are investing in energy efficiency, renewable energy and other sustainable technologies. Those with internal renewable energy targets are encouraged to review their energy strategy at regular intervals, even if their existing electricity contracts are not due to end for some time.
The Australian carbon market saw a softening demand last month. This may be, at least in part, due to delayed compliance demand as some organisations captured by the updated Safeguard Mechanism yet to enter the market. Softening demand, coupled with EOFY requirements, saw the ACCU price also soften.
We know from our advisory work however, that there is growing interest in businesses exploring long-term carbon offtake agreements. Similar to power purchase agreements (PPAs), in a carbon offtake agreement the buyer agrees to purchase a set volume of credits, at set price points for multiple years into the future.
If your business is captured by the updated Safeguard Mechanism, a carbon offtake agreement is a mechanism that should at least be considered as part of your ongoing strategy.
The events outlined in this months update highlight the evolving nature of carbon and energy markets and the complexity of the net zero transition.
To discuss your unique requirements, get in touch with our team today for a no obligation discussion on how we can help.
Organisations with a significant carbon footprint must understand their short, medium and long-term commercial exposure. We discuss the evolving ACCU demand and supply dynamics and their likely impact on future ACCU prices.
Organisations with a significant carbon footprint must understand their short, medium and long-term commercial exposure. We discuss the evolving ACCU demand and supply dynamics and their likely impact on future ACCU prices.
CORE Markets acknowledges Aboriginal and Torres Strait Islander Peoples as the Traditional Custodians of the land on which we live and work, and acknowledges and pays respect to their Elders, past, present and emerging.
