Wholesale electricity and gas prices eased from record highs earlier in 2022 but remain elevated compared to historical Q4 levels. This quarterly report examines what happened to wholesale gas and electricity prices from October to December 2022.
Mild spring weather extending into December contributed to record low demand. Coupled with high rooftop solar output and record high large-scale wind and solar generation, this saw prices substantially eased from the previous two quarters. However, wholesale prices remain historically high.
Additional domestic gas supply and low demand eased pressure on wholesale gas spot prices. Southern gas storage refilled significantly in December and will assist with anticipated tight supply conditions in Winter 2023.
The Government’s price cap interventions announced in December 2022 may have applied some downward pressure on market prices. We will continue to monitor and report on the effect of these interventions in future Wholesale Markets Quarterly reports.
Insights
- Wholesale gas and electricity prices are down from Q2 and Q3 2022 levels but remained historically high compared to previous Q4s.
- The key drivers of lower wholesale electricity and gas prices in Q4 were mild weather conditions contributing to low demand, and record wind and solar output in the NEM.
- Increased wind and solar output, fewer black coal outages and reduced fuel supply problems reduced the need for expensive gas-powered generation in the NEM.
- Low demand for gas generation combined with low LNG exports contributed to easing pressure on domestic gas prices.
- Q4 2022 east coast wholesale gas prices averaged around $17.90/GJ. Average quarterly wholesale electricity prices were higher than previous Q4 prices, ranging from $70/MWh in Victoria to $129/MWh in Queensland.
- Reduced market demand after winter combined with gas supply from LNG producers on planned maintenance eased pressure on wholesale gas spot prices.
- The Iona gas storage facility in Victoria was refilled to its highest end-of-year levels since reporting commenced.
- NEM price expectations for 2023 improved in December with forward base future prices falling between 41% to 55% compared to their highest point in October 2022.