Soaring wholesale power prices could push up household electricity bills

Power prices are tipped to hit households

Wholesale electricity prices for industry and large businesses have breached the federal government’s promised level, adding another cost pressure to the economy.

The Australian Energy Market Operator said on Friday that prices in the national electricity market averaged $87 per megawatt-hour in the first three months of this year, up more than two-thirds on the December quarter and up 141 per cent on the March quarter of 2021.

Wholesale electricity prices have increased in every region, the Quarterly Energy Dynamics Report found.

Outages meant the availability of thermal generators was significantly lower, with black coal electricity generation at its lowest quarterly level since 2002.

AEMO executive Violette Mouchaileh said prices in Queensland and NSW, the most dependent on coal-fired generation, were again significantly higher than southern states.

“This was due to the larger price-setting role of black coal generation and system security constraints limiting daytime electricity transfers from Victoria into NSW,” she said.

Wind and solar farm output hit a new quarterly record, along with increases in small-scale solar, gas and hydro.

Declines were seen in brown coal and black coal generation, which hit its lowest March quarter average in two decades.

Despite increased demand for electricity as heatwaves struck, NEM emissions hit a record March quarter low at 30.4 million tonnes carbon dioxide equivalent – 4 per cent lower than a year earlier.

Lower coal generation combined with continuing growth in wind and solar farm output, the report said.

Energy market expert Tristan Edis said wholesale power prices had risen because Australia was too exposed to volatile international commodity markets, not because it had too much renewable energy in the grid.

“The federal government hasn’t managed to achieve its promise from the last election to bring wholesale power prices below $70MWh,” he said.

Oil, coal and LNG prices surged globally amid winter energy shortages and conflict in Europe.

Marija Petcovich, head of analytics firm Energy Synapse, said Australia would be vulnerable to price shocks as long as the grid remained reliant on fossil fuels.

Coal prices had surged and this had affected power stations, which must put a bid into the market to provide electricity at a certain price and are reluctant to go too low.

“This has been the main driver of increases in the wholesale price of electricity,” Ms Petcovich said.

Gas-fired plants supply less total electricity, but have a big influence in setting wholesale electricity prices.

East coast prices hit near-record levels and averaged $9.93 per gigajoule for the quarter, sharply higher than $6.05/GJ a year earlier.


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