Uncertainty rules in Australian electricity derivatives market

Australia's electricity derivatives market had been picking up since the global financial crisis, but volumes have declined in recent years. Firms blame the slowdown on a combination of slim trading opportunities and uncertainty over plans to curb emissions and regulate over-the-counter derivatives. By Gillian Carr

Australia is known as a country of extremes, with some of the highest temperatures and driest places in the world. Spot power prices in the Australian National Electricity Market (NEM) reflect this and are often highly volatile and weather driven. According to minimum and maximum levels set by the Australian Energy Market Operator, which runs the NEM, spot prices can range from as low as –A$1,000 ($907) per megawatt hour (/MWh) to as high as A$12,900/MWh.

Such spot market fluctuations have