Electricity Market Update

Electricity Market Update 20230430

Historically, since 1996 when the market deregulated, current pricing is extreme, and pricing runs in cycles of peaks and troughs, we remain in a peak which is not the time to lock in long term.  Current market conditions are dictating short term contracts, and we anticipate pricing to remain volatile but continue a downward trajectory for the next 2-3 years, with the controversial Snowy 2 project forecast for 2027 and the Eraring Battery array in 2025 this will have a major impact on pricing, there is some conjecture the Government will throw money at Snowy 2 to bring it back on track and commission earlier.

In the current volatile market, Futures pricing in is tracking well lower for next year, which supports our view that we expect material reductions for retail pricing by next year, potentially late this year.  There is some impact in NSW at the moment as the Liddell Power Station has just shutdown earlier this month, but this has already started to recover and the impact is expected to be short-lived.  NSW Government is also considering buying the Eraring Generator to stop it closing in 2025 and the QLD Government is reviewing the remaining equity in Callide with a view to restoring it to 100% capacity, it is largely offline currently due to equipment failures, this will stabilise pricing further once confirmed.

It is fair to believe that the Federal Government will be doing their utmost to introduce more renewable supply and/or intervening in the market to keep down the cost of the living, both of which should depress the future market price.

As the market continues to fall, NES is considering strategies to take advantage of pricing dips for future year long term contracts.