Households already battling rocketing living costs are facing more pain via their power bills, with the body that runs the electricity market saying prices in that sector have also surged in the past year.
In its latest snapshot of the National Electricity Market (NEM), the Australian Energy Market Operator (AEMO) said wholesale costs soared 141 per cent in the three months to March 31 compared with the same period last year.
And prices averaged $87 a megawatt hour, which was also 67 per cent higher than the three months to the end of December.
The findings by AEMO came as Dale Koenders, the head of energy research at investment bank Barrenjoey, foreshadowed retail price rises of up to 20 per cent a year across coming years as power companies sought to pass on higher costs.
Mr Koenders said there were predictions wholesale prices could reach at least $150/MWh in Queensland and New South Wales as more coal-fired power stations closed and there was a shortage of supply.
NSW, Queensland hit hardest
AEMO said outages at some coal plants had contributed to the most recent price hikes, as had increased demand on the back of heatwaves and historically high gas prices.
Violette Mouchaileh, AEMO's executive general manager of reform delivery, said the rising prices were felt most acutely in the north-eastern states where coal-fired outages and grid constraints had squeezed supply.
As a result, she noted NSW was hampered in its ability to import power from Victoria "despite an average energy price difference of $48/MWh".
"Wholesale prices in Queensland and NSW were again significantly higher than in southern states," Ms Mouchaileh said.
Mr Koenders said the sharp rise in prices reflected a shortage of supply that was likely to last for years as more coal-fired power plants exited the market.
Keeping lights on 'just costs more'
On top of this, Mr Koenders said Australian energy users were becoming more exposed to soaring international prices for coal and gas.
This was because the fuels were often used to meet demand when supply was tight, meaning generators were sometimes forced to buy gas or coal in red hot spot markets.
"The outlook is the average household electricity bill could be increasing in the order of 20 per cent this year and 20 per cent again next year unless we can see a change in the cost of electricity," Mr Koenders said.
"But that just costs more."
He said the adoption of renewable energy backed by firming services such as batteries and pumped hydro facilities could ultimately help ease costs pressures.
However, he said the market faced a potentially rocky road to get there.
"As we go through this energy transition, and prioritise green electricity, what we are facing is greater volatility, greater uncertainty, and higher prices," he said.
"And until we get to that end point where there is sufficient hydro build-out and battery storage as per government targets, we are going to continue to face increased volatility in the electricity market."
Even as wholesale prices jumped for the quarter, AEMO noted they plunged to zero or negative levels – where generators pay to stay on – a record number of times.
According to the agency, negative or zero spot prices were "reached" 6.6 per cent of the time.
It said the rates were far higher in South Australia and Victoria at 16.4 per cent and 12.5 per cent respectively, given the greater share of renewable energy in the southern states' systems during the quarter.
AEMO also noted that for the first time it triggered its so-called wholesale demand response policy, under which big power users are paid to pare back their consumption during periods of stress on the grid.
Renewable energy a 'natural hedge'
Marija Petcovich, managing director of consultancy firm, Energy Synapse, argued the price hikes resulted directly from the NEM's reliance on fossil fuels.
AEMO's report showed that despite a drop compared with last year, coal-fired generation still made up more than 60 per cent of output in the quarter, while gas accounted for about 6 per cent.
Ms Petcovich noted the biggest price increases occurred in states with the biggest dependence on coal and gas, and the market volatility for those fuels was having an outsized effect.
"As long as our electricity system remains reliant on fossil fuels, we will continue to be vulnerable to price shocks in coal and gas markets," she said.
"The price of coal and gas has risen dramatically and we are seeing this flow through to the bidding behaviour of coal and gas power stations.
"This has been the main driver of increases in the wholesale price of electricity."
Hamish Fitzsimmons from the Australian Energy Council, which represented power and gas retailers, said household bills would not feel the effects of higher wholesale prices immediately.
He said the higher costs would be likely to start filtering through from the middle of the year.
