OUTLOOK: NEM wholesale electricity and LGC price forecast 2020-40 (Q3 FY20)

Dear Subscriber,

Our Q3 FY19-20 Australian Electricity Outlook (AEO) for medium- and long-term price development in the National Electricity Market (NEM) has now been published.

The AEO provides an outlook for wholesale electricity prices for each region of the NEM over medium- (16 quarters) and long-term horizons (annual to 2040); an outlook for LGC prices to 2040; forecast market outcomes such as change in capacity and generation mix; and analysis of the major factors impacting the market in the forecast period.

‘Step change’ shift to 90% renewables by 2040 not forecast to increase electricity prices

Key findings:

  • We continue to forecast Australia will reach 50% renewables by 2030 under our Central case, despite the absence of a federal policy framework beyond the UNGI.
  • Even without further policy, renewable energy generation is forecast to grow to 75 per cent of NEM generation by 2040, with more than 18 GW (53 per cent of Australia’s thermal capacity) modelled to exit the market by 2040.
  • Under our Central case, the commissioning of renewable energy capacity is forecast to maintain downward pressure on wholesale prices though the 2020s.
  • However, as renewable energy investment remains low due to lower prices, the closure of major coal-fired facilities in the 2030s is forecast to increase prices.
  • Should more aggressive action be taken to shift to clean energy capacity under AEMO’s “Step Change” scenario, Australia is forecast to reach 70% renewables by 2030, growing to 90% by 2040.
  • Notably, modelling suggests that renewable energy penetration of around 70-90 per cent is not forecast to trigger large increases in wholesale prices, owing to continuing advances in demand side resources and energy storage.

Modelling considers a Central Case for electricity price development in line with RepuTex’s view of the current transition of the energy industry and market drivers, along with an Alternative Case reflecting AEMO’s “Step Change” shift to renewable energy, accounting for faster technological improvements and more aggressive action on climate change in line with a “well below 2°C” Paris climate commitment (achieving net-zero emissions prior to 2050).

This report is published under our Australian Electricity Outlook service. Login below to access the report and technical modelling, or click here to more about our services for the Australian electricity market. 

Click here to read our summary expectations for wholesale prices to 2040 >> 

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