Eastern Australia’s wholesale electricity prices fell sharply in the September quarter, a trend that if maintained could deliver power bill relief for households and businesses alike.
Spot market prices in the national electricity market (Nem) that serves about 80% of Australia’s population averaged $63 a megawatt hour in the July-September period, according to data provided by the Australian Energy Market Operator.
That result was 70% lower than for a year earlier and almost 42% lower than in the June quarter of this year, Aemo said.
Milder than normal weather during winter and early spring contributed to lower demand and increased renewable energy – aided by windy and sunny conditions – were among the factors sending prices lower.
Alison Reeve, the deputy director of the Grattan Institute’s climate change and energy program, said recent wholesale prices were a far cry from the record $264/MWh in the Nem during last June’s energy crisis.
The Albanese government’s intervention last December to introduce price caps particularly for domestic gas played a key role in helping to lower prices, Reeve said.
“The cap has had the effect that was intended,” she said.
Wholesale prices typically account for about a third of final retail bills for consumers, with distribution and network costs – along with margins – making up most of the rest. The spell of relatively low spot prices would also need to be repeated for three more quarters to prompt a significant reduction in power prices.
Still, the September quarter drop “points in the right direction”, Reeve said.
The federal energy minister, Chris Bowen, said the government had capped coal and gas prices “to shield Australians from the worst of global energy price spikes”.
“We understand that rising energy prices are one of the big challenges facing Australian families and Australian businesses this year,” Bowen said, noting the Coalition had vowed to repeal the price cap if in office.
Dylan McConnell, an energy analyst at the University of New South Wales, said the $63/MWh average price in the September quarter masked a wide spread between states.
Spot wholesale power prices have been trending lower in the National Electricity Market since last year's peaks. Still, there remains a big spread between the different states. (Via @dylanjmcconnell ) pic.twitter.com/l4o66s7QqW
— @phannam@mastodon.green (@p_hannam) October 9, 2023
Taking volume-weighted figures, South Australia’s electricity cost of almost $115/MWh contrasted with $30.80 in Tasmania. For NSW, the price was $89.48, Queensland $74.47 and Victoria $58.77.
Daniel Westerman, Aemo’s chief executive, said in a speech at an AFR energy summit in Sydney that wholesale power prices had typically ranged from $40 to $60/MWh for Aemo’s first decade of operations. This year marks 25 years of the Nem.
Meanwhile, renewable energy has set records lately, including meeting 69.9% of Nem demand during part of 20 September. Rooftop solar supplied 38% of the market at that time, Aemo said.
On Sunday, the National Electricity Market hit a new minimum operational demand record (11,224 MW, down 169 MW), with #rooftopsolar supplying 51% of total demand. Records were also broken in QLD & SA, with rooftop solar meeting 99.7% of total demand in SA from 1pm to 1:30pm. pic.twitter.com/rXRwR6HrpF
— AEMO (@AEMO_Energy) October 2, 2023
But Vik Bansal, chief executive at the building supply giant Boral, told the AFR summit his company often halted production at some factories because of high electricity prices.
It was “an issue we face every single day”, Bansal said, adding that production delays resulted in staff working overtime or doing more night shifts. “At the end of the day … somebody is paying for it. It’s either Boral’s shareholders, Boral’s customers or Boral’s workers.”
A Boral spokesperson later qualified that the shutdowns were happening mostly at two big plants at Maldon and Berrima. These halted output “three to four times a month for short periods due to energy price peaks”.
