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 Climate Change Authorities Sector Pathways Review, AEMO’s CIS Stage A briefing note, and the closing of the last coal-fired power station in the UK.
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 Climate Change Authority has outlined a pathway for 6 sectors of Australia’s economy to decarbonise to allow Australia to meet its net zero by 2050 target.
The Climate Change Authority has published its Sector Pathways Review, where it outlines the most effective technology transition and emissions pathways for Australia to transition to net zero emissions by 2050.
Commissioned by the Australian Government, the review considers six sectors for decarbonisation: agriculture and land, built environment, electricity and energy, industry and waste, transport and resources.
The review highlights “mature technologies” such as wind, solar and lithium-ion batteries as key to facilitating this transition, and identifies opportunities for “early-stage technologies”, such as hydrogen and sustainable fuels to play a key role as well.
The pathway identified some key barriers that need to be considered in order to meet a net zero by 2050 target, which included:
AEMO services has released a briefing note on Stage A of Generation Tender Round 1 of the CIS, giving general feedback on the types of projects that were shortlisted to Stage B, and the projects that weren’t.
Announced in August of 2023, the Capacity Investment Scheme (CIS) aims to incentivise investment providing a revenue floor, ceiling and annual payment cap to 32 GW of new renewable energy generation and dispatchable capacity, all of which would be delivered by 2030.
In Stage A – Project Bid Assessment, proponents were required to address four merit criteria, aimed at ensuring the project has progressed to a mature enough stage, the organisation responsible has a proven track record to deliver the proposed project, First Nations and local communities have been engaged, and that the project contributes to system reliability and system benefits.
While 40 GW registered for the stage A, there were over 80 bids received which totalled more than 25 GW, however AEMO services has not published how many projects were shortlisted to Stage B.
AEMO services outlined that successful projects:
Shortlisted proponents have now submitted a response to Stage B – financial value bid, and projects that are awarded CIS agreements should be announced by December of this year.
Great Britain closed Ratcliffe-on-Soar power station on 30th of September, ending 143 years of coal-fired generation in the UK.
The last operating coal-fired generator in the UK, the 2 GW Ratcliffe-on-Soar power station, closed on the 30th of September, marking the end of a 143 years of coal-fired electricity generation in the UK. The world’s first coal-fired generator was opened in 1882 in East London.
In the week succeeding the coal closure, ~24.7% of demand was met by gas, ~4.4% by solar, ~34.7% by wind, ~15.3% by nuclear, ~7.1% by biomass and the remainder was hydro and imports.
The UK has been transitioning away from coal since 1990 when 80% of electricity generated came from black coal. This transition was accelerated in 2015 when the government announced plans to close all coal within the next decade, which it has now achieved. Britain is now the first of the “G7” countries to phase out coal.
Despite the closure of its last coal plant, the national energy system operator expects Britain's winter power supplies to outstrip demand by almost 9% in its base case scenario, with the risk of blackouts reducing to the lowest level seen in four years.
Gas fired generation has also followed a downward trend since 2016, albeit marginally, encouraging the continued decline of UK emissions intensity as seen in the figure to the right.
Energy market
The energy market saw significantly subdued pricing across all NEM regions through September, with most states experiencing oversupply during daylight hours. This was influenced by several factors, including an increase in rooftop solar generation, minimal coal outages and seasonality-led low demand.
This creates a challenging environment for, for renewable energy assets where below average market prices drive DWAPs close to and even below $0/MWh as well as BESS assets as price spikes have been relatively subdued.
On the sell-side of the market, these shifting conditions emphasise potential risks for spot-market exposed entities. Asset owners are likely to rely on alternate revenue streams such as PPAs, financial swaps, firm blocks, virtual and physical tolls amongst other offtake mechanisms. Lower merchant revenues for renewable energy projects may see a sell-off of LGCs as asset owners look to manage cashflow. These contract mechanisms and in-depth market insights are outlined in CORE Markets’ offtake market report.
Similarly, potential buyers should look to establish appropriate hedging and contracting strategies, to minimise some of the seasonal risk. Compared to the significant volatility observed in winter, spring can present opportunities for buyers, highlighting the need to lock in sound hedging strategies with appropriate timing.
This month also saw considerable variation in asset performance between states, highlighting regional differences and the importance of informed investment decisions.
The CORE Markets team works with renewable energy project developers and corporate energy buyers to help both sides of the market manage risk. Get in touch to discuss your strategy.
Carbon market
For the second month in a row the ACCU market saw a significant increase in traded volumes reaching a new high for 2024, at 2.5 million certificates. Alongside this traded volume increase spot prices for Generic ACCUs also rose to a new 2024 high of $37.40, Uni
Importantly, the market continued to show signs of increasing maturity with notable volumes of Put Options trading.
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 - September 2024
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