Carbon Markets

OUTLOOK: NEM wholesale electricity and LGC price forecast 2021-40

Dear Subscriber,

Our latest Australian Electricity Outlook (AEO) for the National Electricity Market (NEM) has now been published.

The AEO is a quarterly outlook for price development in each region of the NEM over both medium-term (four years) and long-term horizons (20 years). The report contains:

  • an outlook for wholesale electricity prices for each region of the NEM (NSW, QLD, SA, TAS, VIC), over medium- (quarterly average prices for the next 16 quarters) and long-term horizons (annual average prices to 2040);
  • an outlook for annual average LGC prices to 2030 including the potential interaction with forward Australian Carbon Credit Unit (ACCU) prices;
  • forecasts for market outcomes, such as change in capacity and generation mix;
  • detailed discussion of important input assumptions; and
  • analysis of the major factors impacting the electricity market in the forecast period.

Given the rapid transformation of the NEM since the most recent Integrated System Plan (ISP) in 2020, the Australian Energy Market Operator’s (AEMO) 2022 draft ISP adopts an updated set of scenarios to account for the continued acceleration of variable renewable energy (VRE). The updated set of scenarios span a range of plausible futures with varying rates of decarbonisation, electricity demand, and decentralisation.

In line with AEMO’s 2022 draft ISP, analysis depicted in our latest AEO adopts the two “most likely” scenarios as defined by stakeholder engagement undertaken by AEMO. In doing so, we replace our earlier Central Case with AEMO’s Step Change scenario (previously our Alternative case), now considered by energy industry stakeholders to be the ‘most likely’ scenario. AEMO’s Progressive Change scenario (previously Net Zero 2050) is subsequently applied as our updated Alternative case.

Scenarios are modelled to assess potential market development and pricing pathways. Additional sensitivities are also considered, with an emphasis on fuel prices, demand and generator reliability, helping to identify the magnitude of impact of key assumptions and test specific decisions that may soon be taken.

Parts one to three of this report introduce our AEO including our modelled scenarios, approach and common assumptions including inputs and policy settings. Part four summarises the key drivers of our modelled pool prices. Parts five and six detail the outcomes of our AEO, including medium- and long-term price forecasts for both our Central and Alternative cases. Part seven outlines our modelled change in capacity and generation mix for each scenario. Part eight presents our outlook for LGC prices. Appendices provide additional assumptions along with a summary of our National Electricity Market Renewable Energy Simulator (NEMRES).

This report is published under our Australian Electricity Market Intelligence and EnergyIQ services. Please login below to access the report or sign in to our EnergyIQ platform to view underlying outcomes.

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