Over the past few months, the COVID-19 pandemic has had a significant impact on the Australian energy market, here we look at shifts in the Australian energy market worth considering for your business.

1. Shifts in
Australian energy
market you may
want to use to
your advantage

2. • Over the past few months, the COVID-19 pandemic has had a significant
impact on the energy market. While one of the key market fundamentals
such as underlying demand has not changed significantly since the start of
the crisis in March 2020, shift in market sentiment appeared to have a
significant effect on the pricing of Australian energy futures.
• Australia has had a different experience than most of continental Europe in
relation to COVID-19’s impact on electricity consumption where demand
was brought down by 15-30% in some cases*.
• After the easing of restrictions in mid-May, the energy market responded
positively and rebounded. However, the recent surge in Victoria’s COVID-
19 cases from mid-June put downward pressure on prices and pushed
Victoria’s Cal2021 price to the low $54.50 on 29 June 2020.
• While the COVID-19 pandemic has had a devastating effect on the global
economy, it has created an opportunity for commercial and industrial users
of energy to take advantage of the depressed pricings observable in future
deliveries.
*IEA (2020), Covid-19 impact on electricity, IEA, Paris
https://www.iea.org/reports/covid-19-impact-on-electricity
MARKET CHANGE – PRICE MOVEMENT
The impact of COVID-19 on the Australian
energy market

3. The impact of COVID-19 on
the Australian energy market
• Figure 1 demonstrates the correlation between recent COVID-19
number of daily cases and futures prices movements across
Australian state borders. Futures pricing for calendar year 2021
started dropping as Australia implemented lockdown, since the
expectation of indefinite and prolonged restrictions caused
market participants to expect a drop in future consumption.
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new confirmed cases in VIC NSW CAL2021 VIC CAL2021 QLD CAL2021 SA CAL2021
Figure 1: CAL2021 ASX daily baseload settlement prices vs recent rise in COVID-19 cases in VIC

4. • Monthly total consumption of the most populous state and largest
consumer of electricity in Australia (New South Wales) has not been
significantly affected by COVID-19 pandemic. This is demonstrated in
Figure 2 below where adding the solar generation to net
consumption, electricity demand in March to June 2020 has only
been down by 2-3% compared with previous years.
0
1,000
2,000
3,000
4,000
5,000
6,000
Mar Apr May Jun
2020 solar rooftop PV output 2018 2019
Figure 2: total monthly consumption in NSW plus rooftop PV output in 2020 (GWh)
Rise in rooftop solar PV
installations

5. • The pandemic has, however, had an impact on the roll-out of
new rooftop PV installations. Since the enforcement of
lockdown measures in March, Q2 CAL2020 had seen a
reduction in small-scale installations before recovering strongly
in June in a near record-breaking effort with strong commercial
investment.
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150
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300
Jan Feb March April May Jun Jul Aug Sep Oct Nov Dec
InstalledRooftopPV(MW)
2018 2019 2020
Figure 3: Monthly Small-Scale Solar Installation Rates
Rise in rooftop solar PV
installations

6. • Australian energy demand has not experienced the same downturn in
consumption as observed in most of European countries. This is
attributed to the growth in rooftop solar PV installations in Australia over
the past few years.
• Even with 24-month energy market lows, the Australian Government’s
stimulus package has contributed to the commercial uptake of solar
installation by almost halving payback times for commercial systems to
2-4 years.
• Announced in March 2020, the increases to the Instant Asset Write Off
(IAWO) Scheme from $30,000 to $150,000, and the Backing Business
Investment Program (BBI) allowing 50%+ tax deductions on assets worth
more than $1,000 for eligible businesses have driven further interest in
these commercial systems, and have recently been extended until
December 2020 (for the IAWO) and 30 June 2021 (for the BBI).
IMPROVED SOLAR SUBSIDIES
Take advantage of federal incentives for
solar projects

7. Take advantage of future low prices and
federal incentives for solar projects
• For more information on the impacts of COVID-19 on the Australian energy
market, or to better understand how customers have taken advantage of
Federal incentives to implement solar projects, please contact:
info.au@world-kinect.com.