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, the Renewable Energy Guarantee of Origin scheme, Quarterly Energy Dynamics (QED) Q2 2024 and QED Q2 2024 - BESS performance.
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
The Albanese Government will fast-track the design of Renewable Energy Guarantee of Origin (REGO) scheme and Guarantee of Origin (GO) scheme, so that enabling legislation can be enacted, and operation can be commenced in the second half of 2025.
The REGO scheme will build on the LGC framework, with potential key additions:
The Guarantee of Origin (GO) will be a voluntary scheme which would allow producers in certain industries to verify the carbon intensity of their products.
Digital certificates will be issued upon production and travel through the supply chain until the product was sold and certificate was consumed. Across each stage, details on the product’s origin, means of production, and transportation would be updated.
The GO Scheme will initially be open to the hydrogen industry and its derivatives, and later expand to include low carbon liquid fuels like sustainable aviation fuel (SAF), green metals, and biomethane and biogas production.
GO certificates will be used to establish eligibility for tax credits under the $6.7 billion Hydrogen Production Tax Credit announced as part of the 2024/25 federal budget.
Underlying demand across the NEM hit a new Q2 record high, however growth in distributed PV output meant operational demand was relatively stable. Wind and hydro generation decreased, while coal, gas and solar generation increased.
At the tail end of July, AEMO released its Q2 2024 Quarterly Energy Dynamics (QED).
Electricity Demand
Electricity Generation
Pricing
Since Q2 2023, BESS have been increasingly gaining prominence, capturing over half of the FCAS market share, increasing their price-setting frequency, and estimated net revenue.
Q2 2024 was particularly notable for its coincidence of peaking seasonal demand with low renewable generation, particularly from wind and hydro across the NEM.
This led to an increase in dispatch of thermal generation, putting upward pressure on wholesale electricity prices.
Compared to Q2 2023, only grid-scale and distributed solar output increased because of the additional installed capacity, whereas other renewable sources fell short in their outputs in Q2 2024. In this same time, BESS gained prominence, especially in offering capacity into morning and evening demand peaks.
From Q2 2023 to Q2 2024, NEM-wide average BESS generation availability increased from 496 MW to 985 MW. Whilst revenue increased 49% to $41.2 million, energy arbitrage revenue accounted for $25.4 million of this. All in all, there was a 25% decline in revenue per MW of BESS capacity from Q2 2023 to Q2 2024.
BESS saw the largest increases in price setting frequency out of all generation types, averaging 23% during some evening dispatch periods in Q2 2024, compared to just 7% in Q2 2023.
BESS remained the predominant technology for providing FCAS, capturing a 52% market share compared to other fuel sources.
This is lower than the 57% market share observed in Q1 2024 but exceeds the 40% observed in Q2 2023.
Energy market
July saw a stop to the downward trend in renewable energy penetration, with a month-on-month increase across all NEM states. This meant that despite increased energy demand there was a moderate softening of futures pricing across all regions, while spot prices softened across NSW, Queensland and Victoria.
Notably average spot prices remained above $100/MWh for all NEM regions for the second month in a row, and significantly exceeded July 2023 values. However, performance of solar, wind and batteries, varied significantly between regions given differences in variable renewable energy alongside multiple instances of constrained interconnectors.
Thus, it is crucial that entities structuring renewable power purchase agreements (PPAs) and battery offtakes ensure they have strategies that consider the relative performance of different assets across the NEM. Further, organisations exploring PPAs will need to understand and manage firming exposure for these extreme pricing intervals as seen in South Australia.
New in the report this month are charts exploring the interaction of battery energy storage systems with the energy market. These charts introduce differences in strategies and performance between states, providing valuable insight for both new and existing market participants.
Carbon market
Generic spot ACCUs traded sideways through July with closing prices equal to that of June 2024. This was paired with a decrease in traded volume in the reported market, with Generic units still holding significant majority share.
The lower traded volumes may be, at least in part, impacted by the ongoing discourse about the potential volume that could come to market via the 18-month long Carbon Abatement Contract exit window
Secondary market transactions, however, only paint part of the picture and there is an increase in the overall interest in the ACCU market.
Our advisory and transactions teams are seeing organisations with a significant carbon exposure actively exploring primary market opportunities. This may be through carbon offtake agreements, co-investment or partnership opportunities with values-aligned projects.
Most organisations use a mix of models to engage the market, and this strategy should always support the overall decarbonisation roadmap.
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 - July 2024
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