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 Australian electricity and gas price movements, present carbon and environmental market charts and discuss the latest scrutiny into carbon credit quality.
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.
• January saw electricity prices generally holding steady with no major generation disruptions. Mild summer temperatures lowered demand in SA and VIC leading to negative spot prices, while a late heat wave saw QLD prices briefly hit the cap price of $15,500 for 10 min.
• QLD, NSW and VIC all saw an increase to their energy Futures due to rising gas and thermal coal prices, with SA Futures decreasing due to its lower dependence.
• Wholesale domestic gas prices steadily rose to ~$14/GJ throughout the month due to higher demand from gas-peakers and an underestimation of gas demand by AEMO.
• ACCUs continued their rise and were up 14% in January to $38.50, STCs remained stable at $39.90, while the LGCs fell for most vintages, with the spot price sitting at $49.75 ending January.
• The quality of some prominent overseas carbon credits has come under scrutiny, this includes The Guardian’s investigation claiming a vast portion of Verra’s avoided deforestation credits have significantly less environmental impact than claimed. More on this in Feature 1 below.
• The ACCC’s Gas Inquiry reports a gas demand shortfall of 30 PJ in 2023 as uncertainty in gas supply and demand poses a potential increased risk to spot price volatility, despite the implementation of $12/GJ gas caps on new wholesale contracts.
• The CER has set the 2023 Renewable Power Percentage (RPP) and the Small-scale Technology Percentage (STP) at 18.96% and 16.29%, respectively.
Scrutiny into carbon markets and carbon offsets is at an all-time high, with two high-profile investigative reports being released in the last two weeks of January.
The Guardian’s investigation claimed that over 90% of all rainforest offsets created by Verra have no climate benefits. While a separate investigation from another publication questioned the integrity of South Pole’s Kariba project. Criticism such as this is usually well intentioned. It is fuelled by the urgency for meaningful climate action and to highlight the critical need for further regulation in a rapidly evolving carbon market.
As such, it is generally welcome by market participants, the vast majority recognising that increased transparency and trust are needed to support buyer confidence and ensure sufficient funds flow to protect our natural carbon sinks such as rainforests – an essential part of our 1.5°C goal.
There are some concerns however about the conclusions drawn in these investigations. Verra strongly disputes the studies referenced by The Guardian. South Pole launched an internal review of its REDD+ portfolio to help assure its customers and will publish the outcomes along with the details of the planned revalidation review already underway for the project in question.
There is little doubt however that carbon markets are in a phase of rapid evolution, and any additional rigour will help further support this increasingly powerful tool against climate change.
Additional commentary is available in the full version of the update. Contact our team to find out more.
The ACCC’s recent Gas Inquiry report, highlighted a gas supply shortfall of 30 PJ for the east coast of Australia in 2023 if LNG producers exported all their uncontracted gas overseas.
This shortfall is projected to be entirely within the southern states at 52 PJ (12% of gas demand) as gas production continues to decline there. Prices will also be more sensitive to gas infrastructure disruptions when importing gas southwards during peak periods.
Additional commentary is available in the full version of the update. Contact our team to find out more.
The carbon markets are moving from a niche market to a mainstream market and significant reform is underway. Vast demand has mobilised investment in carbon market infrastructure, monitoring and verification. While a booming climate tech industry drives solutions to support creation, monitoring, data management, and transaction of carbon credits.
The rigour and consolidation are welcome during this time of rapid evolution and will help ensure carbon markets are an increasingly powerful climate tool, for communities, businesses, government, and industry alike.
In Australia, ACCUs and quality carbon credits may find new buyers who would rather pay a premium for carbon credits certified under a more regulated framework, as opposed to participating in less expensive international carbon credit markets whilst there is such significant project consolidation and methodology review underway.
The ACCC’s recent Gas Inquiry report which outlined a potential gas supply shortfall for the east coast of Australia in 2023, could mean that QLD, NSW and VIC see gas prices increase over the coming year.
These higher gas prices can have a significant impact on businesses in a variety of ways, such as increased transportation and operating cost, which eat into profit margins and result in higher prices for consumers.
As there is an increasing reliance in Australia on gas-fired power generation, the increase in gas spot prices will flow through to the energy spot market, resulting in higher electricity prices, which would further affect consumer confidence and business bottom-line.
The events outlined in this months update highlight the evolving nature of carbon and energy markets and the complexity of the net zero transition.
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