Quarterly market newsletter

Quarter 1

April 2020

We'll share insights and highlight key market events

to help you make better energy decisions.

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Market snapshot

For the period 1 January to 31 March 2020

  • The ACCC January 2020 interim gas report was published online in January; "Since our July 2019 report, the supply outlook for 2020 has improved slightly, with gas producers increasing their expected production by 6 PJ. Projected supply for 2020 is now at 2025 PJ while demand is forecast to be 1831 PJ, not including LNG producers’ excess gas."
  • January bushfires resulted in frequent spikes in wholesale electricity prices, but the popularity of rooftop solar contributed to record low demand for grid-based power.1
  • The Australian Financial Review reports on 6 January that Australia is now the largest exporter of LNG with a record 77.5 million tonnes shipped in 2019.
  • In the first week of January, over 35,000 NSW homes and businesses were without electricity after bushfires destroyed transmission lines.
  • On 22 January, AEMO calls on the NSW residential and business market to turn off pool pumps, washing machines and dishwashers in an attempt to curtail blackouts. Damage from the bushfires, along with extreme winds and power plant unavailability strained electricity supplies for the third time over the summer.
  • Bloomberg reported on 7 February that China National Offshore Oil Corp, China’s largest LNG buyer, attempted to cancel delivery of LNG cargoes due to the impact of the Coronavirus which includes the lockdown of more than 50 million people in more than a dozen cities. According to the report; "it was one of the first known cases of the legal clause being invoked in commodity contracts due to the epidemic, which has plunged raw materials markets into chaos."
  • On 18 February, the Victorian government moved to amend the National Electricity (Victoria) Act 2005 to give the state legal power to fast-track improvement projects without waiting for permission from the commission.
  • At the end of February, Origin announced its Half Year 2020 results.
  • Watch Origin’s CEO Frank Calabria provide key highlights.
  • 28 February; AEMO confirmed that the damage to transmission towers on the Moorabool to Mortlake, and the Moorabool to Tarrone transmission lines had been energized.A sudden storm on 31 January brought down six transmission lines3 separating South Australia from the rest of the NEM, and interrupting supply to the Portland aluminum smelter. Origin’s Mortlake Power Station was called upon to directly supply the Portland smelter.4
  • Early in March, the Tasmanian government announced it’s $50 million investment in the development of hydrogen energy. The State Government aims to have an operational renewable hydrogen generation facility by 2022-2024.
  • 5 March, Bloomberg reports that China National Petroleum Corp. issued a force majeure on natural gas imports with plans to cancel contracted deliveries both as liquefied natural gas and via pipelines in the short-term.
  • The World Health Organisation declares coronavirus as a pandemic on 11 March.5
  • Read Origin’s actions to assist customers impacted by COVID-19.
  • Origin advised the NT Minister for Primary Resources and the CEO of the Northern Land Council on 26 March that due to COVID-19, work on the Beetaloo project will be temporarily paused.
  • Read the full Beetaloo Exploration Program update.

Elec%20prices%20Q1 20

Electricity market

Baseload performance was reasonably strong this summer, dropping off over February and into March but still higher than the levels seen in 2019. This reasonably high baseload output with growing renewable output in the NEM, both large-scale and behind-the-meter, means we’ve had much stronger conditions on the supply side. In addition, this summer saw generally lower demands as there were only a few spells of hot weather.

Prices in April have continued to be low in line with falling demands arising from cooler temperatures across the NEM and coronavirus demand impacts, with demands around 11 per cent down on the same time last year. Furthermore, a lot of plant outages were moved or cancelled in April due to the limited mobility of staff required to perform these jobs. In addition, with falling gas prices, we’ve seen strong gas generation given the conditions. Overall, these demand and supply factors have led to very low prices in the NEM.

Finlay Macdonald-Stack, Portfolio Trader, Trading Operations 

Gas%20prices%20Q1 20

Gas market

Q1 saw the rise of the Corona virus which significantly reduced the Asian demand for LNG off the back of industry shutdowns in China. This increased the glut of international LNG and generated large amounts of gas available locally with Force Majeure being called on LNG cargoes and local exporters being stranded with gas.

Pool prices across the East Coast reduced reflecting the drop in international LNG pricing as a result. The only anomaly being high Adelaide Short Term Trading Market (STTM) prices in early Feb due to Heywood interconnector outage and AEMO Generator directions increasing gas requirements in SA.

Louise Colbran, Portfolio Trader, Trading and Operations

Are there any early impacts of COVID-19 on the large business energy market?

Whilst the impacts of the pandemic on the Australian energy market are not yet fully realised, we know many of our large business customers are reassessing their operations and priorities.

If your situation has changed significantly as a result of COVID-19, please email us on BusinessCustomers@originenergy.com.au. We’ll contact you to discuss the ways we can help your large business.

Operational demand declines but still in line with seasonal changes

Operational demand (demand for "grid" or large-scale generation) in the NEM, fell in March with notable reductions in South Australia and Victoria:

  • SA experienced a reduction of 6.7% overall commercial and industrial demand, a record low for the state.
  • Smart meter data from Jemena revealed Victorian commercial demand fell 7%.

It’s important to note that whilst demand in the NEM typically declines around this time of year as most states transition into cooler months, the above analysis of Victorian demand derives from Jemena smart meter data recorded the week before lockdown (1–7 March) and the week after lockdown (22–28 March) to provide insight into COVID-19 specific impacts.6

National response mechanisms and tax assistance

On 12 March, the Commissioner of Taxation announced support services for large businesses impacted by COVID-19. Tailored support arrangements can include payment deferral, GST adjustments and PAYG variations.

The COAG Energy Council met on 20 March to discuss the need for a national approach to the impacts of the pandemic. Australian Energy Regulator (AER), AEMC (Australian Energy Market Commission) and Australian Energy Market Operator (AEMO) are currently working with industry to ensure the ongoing delivery and security of energy supply. The newly formed "Energy Coordination Mechanism" will also ensure the maximum possible protection for all critical operations.

Major retailers, including Origin, and network operators have activated pandemic-response plans to ensure the protection of staff, assets and energy supply.7

Read about Origin’s support for customers impacted by COVID-19

Renewable investment delays

According to the PWC report; "Covid-19 and the solar industry", 63% of all solar modules required by solar projects worldwide are supplied by China. The impact of the reduction of manufacture with the additional uncertainty of the length of the shutdown period, has meant delays for Australian solar projects as well as short-term price increases.

The energy research agency; Rystad Energy reports that approximately 1.5 GW of approved renewable projects scheduled for 2022 are at risk of delay. The report adds that the fall of the value of the Australian dollar to a 17-year low has had an impact on further renewable development. Bloomberg figures reflect the overall decline of investment on large-scale solar and wind projects worldwide with clean energy project numbers the lowest in six years.8

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