Report: electricity prices down thanks to lower volatility

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A year on from the suspension of the National Electricity Market (NEM), less volatility has resulted in wholesale electricity prices exceeding $300/MWh in 3% of intervals in the June quarter, compared to 26% in Q2 2022, according to AEMO’s latest Quarterly Energy Dynamics report.

From April to June, wholesale electricity prices in the NEM averaged $108/MWh—59% lower than record high quarterly price set in Q2 2022 ($264/MWh) but 31% higher than the March quarter.

By region, quarterly average prices ranged from $64/MWh in Tasmania to $137/MWh in New South Wales, with Victoria, South Australia and Queensland averaging $89/MWh, $124/MWh and $126/MWh, respectively.

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AEMO executive general manager reform delivery Violette Mouchaileh said less volatile market conditions, improved generation availability and higher renewable output put downward pressure on wholesale electricity prices.

“Increased market share of lower marginal-cost renewables helped push down the wholesale electricity cost from Q2 2022, despite this quarter having the highest Q2 underlying demand recorded since 2016,” Mouchaileh said.

“In addition to increased wind and grid-scale solar output, lower thermal-coal costs and a net increase in black-coal generation availability in NSW—despite the retirement of the Liddell Power Station—helped reduce year-on-year wholesale prices.

“Rooftop solar generation increased 30% from Q2 2022, which reduced electricity demand from the grid. Coupled with higher renewable output, wholesale prices were zero or negative 9% of the quarter throughout the NEM, a new Q2 record,” she said.

By market share, rooftop solar (1.8%), wind (1.6%) and grid-scale solar (1.4%) generation increased compared to Q2 2022, while gas (-3.2%), hydro (-1.2%) and black coal (-0.6%) decreased.

By state, wholesale prices at or below $0/MWh occurred the most in South Australia (17%), Victoria (13%) and Queensland (9%), rising to 29%, 20% and 25% respectively between 9am and 5pm.

NEM total emissions declined this quarter to the lowest Q2 levels on record at 28.7 million tonnes of carbon dioxide, 6.6% lower than Q2 2022, while emissions intensity dropped 4.3% to 0.61 tCO2 e/MWh.

In Western Australia’s Wholesale Electricity Market (WEM), an all-time record high weighted average Balancing Price ($113/MWh) was set in Q2 2023, along with a new Q2 maximum operational demand record (3,652 MW).
“The WEM experienced price increases due to a reduction in energy availability, mostly coal-fired and wind generation, and high demand due to cold temperatures during the quarter,” Mouchaileh said.

Energy expert and Climate Council councillor Greg Bourne commented, “Governments need to take urgent action on AEMO’s warning of the need to urgently roll out new renewable energy generation systems to ease the transition away from ageing, unreliable and emissions intensive coal and gas.

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“Renewables are continuing to nudge fossil fuels out of our energy grid. However now is the time to focus on dramatically accelerating and helping facilitate the clean energy and transmission projects that are ready to go.

“The quickest and cheapest way to increase Australia’s supply of clean, secure, affordable energy into our electricity systems is to replace coal and gas with renewables, backed by storage.

“We must seize this opportunity for clean, affordable energy and minimise costly disruptions to homes and businesses. We must urgently transition our energy system to clean energy.”

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