In part one of this two-part series we discuss our medium-term expectations for the National Electricity Market (NEM), specifically the impact of COVID-19 on forecast wholesale prices in line with our latest Australian Electricity Outlook (AEO).
Part two of the series will discuss our longer-term expectations for price formation under our Alternative Case, reflecting AEMO’s “Step Change” shift to renewable energy in line with a “well below 2°C” Paris climate commitment (e.g. achieving net-zero emissions prior to 2050).
Background to our Australian Electricity Outlook (AEO)
RepuTex’s quarterly AEO provides an outlook for wholesale electricity prices for each region of the NEM over medium- (16 quarters) and long-term horizons (annually to 2040); an outlook for Large-scale Generation Certificates (LGC) prices to 2030; forecast market outcomes such as change in capacity and generation mix; and analysis of the major factors impacting the electricity market in the forecast period.
Modelling considers a Central Case for electricity price development in line with RepuTex’s view of the current transition of the energy industry, along with an Alternative Case reflecting AEMO’s “Step Change” shift to renewable energy (discussed in part two of this series), accounting for faster technological improvements and more aggressive action on climate change in line with a “well below 2°C” Paris climate commitment (net-zero emissions prior to 2050).
Sensitivities are also considered as a complement to each scenario, helping to identify the magnitude of impact of key assumptions and understand pricing paths.
COVID-19 impacts on demand, gas prices and renewable energy commissioning
The coronavirus pandemic could help to create a perfect storm for the wholesale electricity market, with the potential for lower demand, lower gas prices and the commissioning of large renewable energy projects to depress electricity prices, depending on the extent and duration of lockdown restrictions.