In this update, we discuss our expectations for wholesale prices in the National Electricity Market (NEM) in line with our latest Australian Electricity Outlook (AEO).
Our quarterly AEO provides an outlook for wholesale electricity prices in the NEM over medium- (16 quarters) and long-term horizons (annually to 2040). Modelling considers two key pathways for the future development of the NEM, including our Central case for the “current transition” of the market, and an Alternative case, reflecting AEMO’s “step change” shift to renewable energy in line with a “well below 2°C” carbon budget under the Paris Agreement.
‘Perfect storm’ comes to fruition, driving down wholesale prices
As we flagged in our earlier update, the coronavirus pandemic has helped to create a perfect storm for the wholesale electricity market, with lower gas and coal prices, reduced operational demand, the commissioning of large renewable energy projects, and increased hydro and coal-fired availability seeing NEM regional average prices fall to to $33-59, 17 to 45% below the same period last year, the lowest level since 2014-15.
Figure 1: Weighted average NEM wholesale price (average all regions)
We discuss the current price environment and the key drivers of our Central Case forecast below.
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