The impact of a global pandemic
The main impact of COVID-19 on pricing may be tied to the wider economic impacts and the global contraction likely to follow. An economic downturn would reduce demand, which may reduce prices. However, economic uncertainty may also make investors of new power plants cautious, which could act has a handbrake on the shift to renewables.
The outlook for Australia’s future energy pricing
Several factors have shaped the recent reduction in energy prices including lower demand, more generation from renewables and reducing gas prices. Some are sceptical whether this trend can continue. JP Morgan analyst Mark Busutill stated in January that the
current low spot prices were “too low to incentivise new capacity growth and therefore unsustainable over the medium term”. AGL also expects wholesale prices to trade $60 to $90/MWh over the next few years.
Electricity prices may shift over the next few years as the generation portfolio changes. The scheduled closure of the 50-year old Liddell power station has been pushed back to the end of 2022; however as this closure has been well signposted, it’s
already built into future price expectations. Similarly Victoria’s Yallourn power station is scheduled to close over the 2029-2032 period, with planning required should the closure date be brought forward to 2023.
The Snowy Hydro 2.0 pumped hydro is touted to have a capacity of 2,000 MW and is scheduled to be commissioned by 2027. Once up and running, it should provide dispatchable load to balance renewable generation troughs, and as a result may have a tremendous ability to set the price in the market.
To learn more about how to take advantage of these lower prices, get in touch with one of our energy finance experts at info.enelxanz@enel.com.