June 2023
June 2023

Energetics provided input to the ABC about the near term and mid-term outlook for the east coast gas and electricity markets. This included being interviewed for and The Business. The story discussed the expected release in July of the gas market mandatory code of conduct, which is one of the two instruments legislated at the end of 2022 in reaction to high gas commodity prices during most of last year. Energetics’ interview for the ABC was about the outlook for gas and electricity markets.

To follow are some additional insights.

  • Whilst in early 2022 we were able to secure gas supply contracts at commodity prices around $11 to $14 per GJ, retail prices offered during the second half of last year climbed to more than $30 per GJ. As a result, some of our clients chose to take exposure to the short-term trading markets rather than contract at high historical fixed prices. Following the passing of the Federal Energy Price Relief Act in December 2022 prices went down.
    We are currently securing gas retail contracts at prices below the $20 per GJ mark but this is still too high a price to pay for gas-intensive end-users.
  • The outlook in both markets is challenging for end-users.
    • In the gas markets, over the next 12 months we expect extremely limited competition as most retailers don't have any volume to contract to C&I customers. In the long term, especially from 2027 onwards we will face a gas supply gap as production from existing fields is reducing faster than forecast demand declines. Large gas consumers are seeking to manage long term market risk by entering into gas supply agreements directly with gas producers.
      The projected gas supply shortage with expected price pressures will also incentivise other end-users to consider fuel switching through electrification within their facilities.
    • The outlook in the electricity markets is not better. Coal-fired power generators are challenged by low marginal cost variable renewable energy generators. They are facing low, if not negative, spot price events when the market benefits from large contributions from solar power generation. Those generators are seeking to maximise turndown ratios and cycling boilers to manage the intra-day price volatility and to benefit from high end-of-the-afternoon spot prices. This is putting intense thermal stress on ageing boilers that were not designed for such flexible operations which in turn impacts the reliability and performance of those units. On the other hand, the build-out of additional renewable energy generation, especially wind farms and additional transmission capacity has been significantly delayed - bogged down by lengthy and sometimes unsuccessful environmental planning approval and connection approval processes.
      This means that reserve capacity margins will remain thin during peak demand days over the next five years, if not longer. We increasingly see scarcity pricing with extremely high price volatility in both the spot physical and the financial markets.

Energetics can help large energy users to manage their risks

  • Energetics’ work on risk-managed energy procurement and renewable Power Purchase Agreements aims to support our clients in not only sourcing renewable electricity but also managing market risks into the long term.
  • Led by Anita Stadler, Head of Renewable Energy Investments, the Energy Markets team have made a significant impact through our renewable energy transaction support services. Energetics has advised more than 40% of the corporate renewable PPA transactions in the NEM during 2020 to 2022 as measured by estimated volume of annual offtake.
  • Our disciplined risk management framework for progressive purchasing of electricity is also highly valued. We are currently actively managing a portfolio of more than 3TWh of annual volume in the National Electricity Market on behalf of our clients.
  • We are especially working with end-user clients in structuring products that comprise a mix of long-term and short-term hedges, including over-the-counter financial instruments and leveraging self-hedging capabilities with flexible demand.
  • Our advice to large C&I clients is valued because we provide forward looking views on the physical and financial markets and can support long term risk management decisions using our advanced risk analytics.

Watch the coverage on ABC’s The Business below or read the ABC's full article

'Gas users say price controls have failed and the result is higher energy bills and pressure on interest rates'.

Related insights


Get our thought leadership directly to your inbox

Keep up to date with the latest insights on net zero, climate resilience and clean energy transition.