Australian Chart of the week | Slow is smooth and smooth is fast for the NEM transition

Reporting season is all but over for the energy majors in Australia and that has left us with a bevy of takeaways on the sentiment for the not-so-distant future. A key thread among reports has been the current low-price environment in the NEM. This is a topic that we have explored in previous weeks, however, the significant write-downs and revised guidance from the energy majors should start raising red flags – or at least serve as a cautionary tale of the speed of the transition underway.

There has been significant commentary that the current market prices are ‘unsustainable’ and may lead coal generators to close much earlier than anticipated as their financials are squeezed. It is no surprise why this is happening through. The significant growth in variable renewable energy (VRE), with marginal costs close to zero, are displacing higher priced offers from coal, gas and hydro in the market.

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