January saw a notable decline in electricity futures prices across the National Electricity Market (NEM), with reductions in all states and an ongoing trend of negative pricing events in regions with high renewable penetration.

Electricity Prices

• New South Wales: Futures prices fell 9.19%, peaking at $138.84/MWh and ending at $126.08/MWh. This decline was driven by improved coal plant availability, increased imports from Victoria, and lower peak demand periods reducing pressure on supply. However, concerns remain about long-term price stability due to aging infrastructure and potential regulatory interventions.
  
• Queensland: Prices followed a similar pattern, dropping 8.39% over the month. The decline was influenced by a higher share of solar generation, particularly during daylight hours, which reduced reliance on gas-fired power plants. This trend suggests that Queensland’s future pricing will continue to be shaped by solar penetration and battery storage developments.
  
• South Australia: Exhibited the least variability (7% spread), with a 6.6% price drop, closing at $99.44/MWh. Robust wind energy production and diminished peak demand contributed to this stability, though the state remains prone to volatility due to its high renewable energy share and limited baseload generation.
  
• Victoria: Decreased 2.4%, ending at $83.26/MWh. The state continues to benefit from its high proportion of renewable generation, which help maintain lower electricity costs. However, market observers warn that Victoria’s reliance on renewables without sufficient storage could lead to future supply challenges.

Negative Pricing Events

Victoria and South Australia continued to experience frequent negative pricing events, a trend that reflects the growing impact of renewables on wholesale electricity markets.

• South Australia: Recorded zero or negative spot prices in 78% of intervals between 10 AM and 12 PM during January. This phenomenon is primarily due to high solar and wind energy output during daylight hours, leading to supply surpassing demand.
  
• Victoria: Experienced a similar trend, with 74% of intervals in the same timeframe registering negative prices. The prevalence of negative pricing underscores the influence of renewable energy sources on market dynamics.

As more renewable energy projects come online, negative pricing events are expected to increase. This presents opportunities for businesses to adopt flexible energy procurement strategies, take advantage of demand-response incentives, and consider battery storage solutions to optimise cost savings.

Source: ASX Energy Futures

Gas Prices

Wholesale gas prices steadily declined in January, averaging 9% lower than December 2024. The decline was driven by several factors:

• Lower seasonal demand as summer progresses.
  
• Increased competition from renewables, reducing reliance on gas-fired generation.
  
• Improved supply conditions with higher LNG storage levels and stable production in major gas fields.

While the downward trend benefits gas-reliant businesses, ongoing regulatory discussions about gas price caps and supply security may lead to fluctuations later in the year.

Source: AEMO STTM and DGWM Spot Market Data

What Does This Mean for You?

With electricity prices declining across the NEM, businesses have an opportunity to lock in more competitive energy contracts. However, the ongoing trend of negative pricing events in Victoria and South Australia underscores the opportunity for strategic energy use, such as shifting consumption to periods of lower pricing or investing in battery storage solutions. Meanwhile, lower gas prices provide some relief for energy-intensive industries, but regulatory uncertainty around long-term gas supply means businesses should consider hedging strategies or diversifying their energy mix to mitigate future risks.

Alinta Aquisition

February saw renewed speculation around a potential $3 billion acquisition of Alinta Energy by an international investment firm. Industry analysts suggest that Alinta’s strong market position and growing customer base have made it an attractive target for mergers and acquisitions. If a deal does proceed, it could mark a transformation in the energy retail market, with potential changes to pricing strategies, customer offerings, and operational efficiencies.

Key Takeaways:

• A successful acquisition could reshape pricing structures, potentially affecting contract terms and competitive positioning in the retail market.
  
• Alinta’s new ownership, if finalised, may focus on expanding digital services and energy solutions, offering businesses more innovative options for managing energy consumption.
  
• The speculation highlights an increasing trend of international investment in Australia’s energy sector, which may drive further market consolidation.
  
• Regulatory scrutiny is likely, with the Australian Competition and Consumer Commission (ACCC) expected to assess its potential impact on competition, pricing, and consumer choice if the acquisition proceeds.
  
• If regulatory conditions are imposed, businesses may see changes in contract flexibility, new tariffs, or revised market participation rules.

What does this mean for you?

While the acquisition remains speculative, businesses should stay informed about potential ownership changes and how they might impact energy pricing and retail competition. At Utilizer, we continuously monitor these market developments to help businesses assess risks and opportunities in energy procurement. If the acquisition moves forward, it could influence contract structures, pricing strategies, and the competitive landscape, making it crucial for businesses to remain agile in their energy management approaches.

Energy Security Corporation

The NSW Government has launched the Energy Security Corporation's first Investment Mandate. Seeded with $1 billion, this initiative aims to co-invest with the private sector in critical renewable energy projects that will enhance reliability, affordability, and sustainability across NSW. By addressing investment gaps and ensuring the smooth operation of the energy grid, the Energy Security Corporation will play a pivotal role in the state’s transition towards a more resilient and decarbonised electricity network.

Key Takeaways

• Investment in short- and long-duration energy storage will help capture excess renewable energy, ensuring more efficient use of electricity from solar and wind.
  
• Infrastructure upgrades will support better grid coordination and improve energy distribution across households, businesses, and communities.
  
• Funding for large-scale battery projects will enhance the state’s ability to store surplus renewable power and deploy it during peak demand periods.
  
• Support for community batteries and Virtual Power Plants (VPPs) will enable better energy-sharing solutions for businesses and consumers.
  
• Pumped hydro investments will provide on-demand electricity, reinforcing the grid’s ability to handle fluctuations in renewable output.

What does this mean for you?

The Energy Security Corporation’s mandate creates significant opportunities for businesses to participate in and benefit from NSW’s renewable energy expansion. Companies based in NSW that invest in battery storage, demand-response programs, or Virtual Power Plant (VPP) participation may be able to access government-backed funding and incentives. At Utilizer, we help businesses understand how these evolving policies impact their energy strategy, from securing cost-effective procurement deals to integrating sustainability initiatives.

Woodside’s LNG Operations Extension

Woodside Energy has secured environmental approval from the Western Australian Government to extend the operational life of its North West Shelf (NWS) liquefied natural gas (LNG) project until 2070. This decision, concluding a six-year assessment and appeals process, is pivotal for the continued processing of gas resources through the Karratha Gas Plant, ensuring a stable energy supply for both domestic and international markets.

Key Takeaways:

• Extended Project Lifespan: The NWS LNG project is now authorized to operate for an additional 50 years, solidifying its role in global energy markets until 2070.
  
• Environmental Commitments: As part of the approval, Woodside is mandated to implement measures to reduce greenhouse gas emissions, including submitting detailed reports on emission reduction efforts every five years.
  
• Economic & Energy Security Implications: The extension is anticipated to bolster local employment, stimulate economic growth, and enhance energy security by maintaining a consistent supply of LNG.

What does this mean for you?

Woodside’s LNG extension secures long-term gas supply in WA, but businesses should monitor regulatory changes that could impact pricing and contracts. Staying informed will help mitigate risks and optimise procurement strategies.

Former ACCC Head’s Warning on Energy Market Risks

Former ACCC Chair Rod Sims has renewed his warnings about gas shortages and energy security risks in Victoria, highlighting a decade of missed opportunities to prevent supply constraints. Sims revealed that since 2015, the ACCC had repeatedly cautioned both federal and state governments about looming gas shortages due to Victoria’s restrictive policies on exploration and development. Despite clear evidence from industry reports and policy recommendations, little action was taken, leading to today’s supply challenges, rising prices, and increased risks to energy reliability.

Key Takeaways:

• Gas shortages in Victoria were predicted as early as 2015, with the ACCC warning that restrictive exploration bans would create long-term supply issues.
  
• Energy security concerns are escalating, as major domestic gas suppliers, such as Woodside’s Gippsland Basin assets, experience production declines.
  
• Victoria has taken late action by approving new projects like Beach Energy’s offshore pipeline and considering floating LNG terminals, but these may not be sufficient to stabilise supply.
  
• High gas prices are impacting industries, with manufacturers struggling to stay competitive. The collapse of Qenos, Australia’s largest plastics manufacturer, underscores the broader economic risks.
  
• Energy reliability is under strain, with experts warning that declining coal capacity and unreliable renewables leave the system vulnerable to sudden outages and cascading failures.

What does this mean for you?

Businesses reliant on gas and electricity should prepare for continued price volatility and potential supply disruptions. The ongoing transition away from coal, combined with limited new gas developments, underscores the need for strategic energy planning. Utilizer helps businesses navigate these risks by identifying cost-effective procurement strategies, evaluating alternative energy sources, and ensuring resilience in a rapidly shifting energy landscape.

Adapting to an Evolving Energy Landscape

Falling electricity prices present opportunities for businesses to secure competitive contracts, while negative pricing events in high-renewable regions emphasise the need for flexible energy strategies. Meanwhile, regulatory approvals for LNG projects and warnings from former ACCC Chair Rod Sims underscore the long-term risks of gas supply shortages and market volatility. As Australia navigates the challenges of energy transition, businesses must stay informed and proactive in managing their energy procurement and risk strategies.

At Utilizer, we provide expert insights and tailored solutions to help businesses optimise costs and secure energy resilience. Contact our team today to explore how you can future-proof your energy strategy in a changing market.