Electricity

REPORT: It’s the economics, stupid. Scenarios for the NEM wholesale price to 2030

In this update, we present our updated outlook for black and green wholesale electricity price in the NEM to 2030, accounting for current policy settings, along with scenarios for a “minimum CET” , assuming electricity emissions are reduced by 28% below 2005 levels by 2030; and a “2°C aligned CET” assuming a scaled up target aligned with the Paris Agreement.

Key findings include:

    • In the absence of new energy policy, black wholesale electricity prices will continue to be heavily influenced by gas-fired generators due to a tighter supply-demand balance across the NEM. This is projected to lead to wholesale price rises, partially mitigated by large wind and solar investments subsidised by the LRET through 2020, with a significant price premium for green electricity driving a significant amount of wind and solar investment over the period to 2020-21.
    • A Clean Energy Target (CET) is likely to reduce wholesale electricity prices from around $100 per megawatt hour (MWh) to between $40-60/MWh over the next decade. Lower wholesale electricity prices are driven by higher volumes of renewable energy supply, which is forecast to increase competition and decrease the influence of high gas prices in the NEM.
    • The economics of the NEM are fundamentally working against baseload generation. Even should a CET (or other climate policy) not be introduced, coal-fired facilities are projected to continue to be retired, despite rising electricity prices. This is due to falling daytime power demand and changing economics of the grid, which now favours flexible supply.
    • Investments in ‘baseload’ sources of power, irrespective of the CET, are therefore too inflexible to compete in Australia’s future electricity system. We do not envisage any appetite for HELE coal or other ‘baseload only’ facilities, such as Nuclear, unless there is a major government distortion in the market.
    • Since baseload capacity is forecast to retire, ‘firm power’ rules could be established – whereby new generators must supply energy that can be dispatched – to maintain system reliability.
    • Analysis indicates that renewable energy with storage continues to be the most economically favoured solution to generator availability. Modelling indicates that renewable energy – with storage – continues to be the cheapest source of reliable energy supply for peaking and load-following generation. Traditionally, gas-fired generation ($96/MWh) was the least cost source of supply for load-following and peaking services. High gas prices, however, are changing the calculation to make Wind ($80/MWh) and Solar ($85/MWh) with energy storage projects competitive in providing flexible generation.
    • In this context, renewable energy remains attractive to the market given it is able to deliver energy reliability, with no emissions, at low cost prices.

To access this report, please login below. To register interest please click here >>

Restricted Access

This is a subscriber report. Please login to access this content.

Become a Carbon Insider today

Unlock our latest analysis, briefings and price information with our new Carbon Insider service.

Click below to see our plans.

Sign up for regular insights

LATEST UPDATES

  • Carbon Markets

    MARKET WRAP: The State of the Australian Carbon Market – May Review 2023

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Pricing across key methodologies fell through the second half of May as ACCU holders began […]

    Research Insights | June 6th, 2023
  • Carbon Markets

    UPDATE: Domestic prices fall sharply as increased supply weighs down the market, further ERF reform looms

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Australian Carbon Credit Unit (ACCU) prices fell across key categories as an increase in supply […]

    Research Insights | June 5th, 2023
  • Carbon Markets

    UPDATE: Large options transact, Generic and HIR ACCU prices fall to 3-month low

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    A range of ACCU projects and contracts transacted last week, with the majority of volumes […]

    Research Insights | May 29th, 2023
  • Carbon Markets

    UPDATE: Chubb Review begins to bite as HIR issuances flatline over 2023

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    Traded volumes again remained comparatively low last week as market focus turned towards Generic ACCUs […]

    Research Insights | May 22nd, 2023
  • Carbon Markets

    UPDATE: Forward trading active following the release of final Safeguard Mechanism rules

    Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone

    The release of the new Safeguard Mechanism Amendment Rules triggered an uptick in forward trading […]

    Research Insights | May 15th, 2023
  • Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedInEmail this to someone
  • Quick Navigation

  • Carbon Market

    Learn more about our Australian carbon price and market analysis
  • Electricity

    Learn more about our modelling and price outlooks for the NEM
  • EnergyIQ platform

    Access the latest market data with our EnergyIQ platform
  • Latest Insights

    View our latest articles, white papers, reports and publications