Households already battling the soaring cost of living are facing more difficulties with their electricity bills, with the body that manages the electricity market saying that prices in this sector have also risen in the past. course of the past year.
Key points:
- AEMO says wholesale electricity prices in the NEM rose 141% in the first quarter compared to a year ago
- Coal-fired plant outages, increased demand amid heatwaves and soaring gas prices drive wholesale prices higher
- Energy analyst predicts price hikes of more than 40% over the next two years if predicted pressures materialize
In its latest National Electricity Market (NEM) overview, Australia’s Energy Market Operator (AEMO) said wholesale costs soared 141% in the three months to March 31 from compared to the same period last year.
And prices averaged $87 per megawatt-hour, also 67% higher than in the three months to the end of December.
The AEMO findings came as Dale Koenders, head of energy research at investment bank Barrenjoey, foreshadowed retail price hikes of up to 20% per year over the next few years, utilities electricity seeking to pass on rising costs.
Mr Koenders said there were forecasts that wholesale prices could reach at least $150/MWh in Queensland and New South Wales as more coal-fired power stations close and there are had a supply shortage.
NSW, Queensland hardest hit
The AEMO said outages at some coal-fired plants had contributed to the most recent price increases, as had increased demand due to heatwaves and historically high gas prices.
Violette Mouchaileh, AEMO’s executive director general responsible for implementing the reforms, said the price hike was felt most in the northeastern states, where coal blackouts and grid constraints had reduce supply.
As a result, she noted that NSW was hampered in its ability to import electricity from Victoria “despite an average energy price difference of $48/MWh”.
“Wholesale prices in Queensland and New South Wales were again significantly higher than in the southern states,” Ms Mouchaileh said.
Mr Koenders said the sharp rise in prices reflected a supply shortage that was likely to last for years as more coal-fired power stations exit the market.
Keeping the lights on ‘just costs more’
On top of that, Mr Koenders said Australian energy users were increasingly exposed to soaring international coal and gas prices.
This is because fuels were often used to meet demand when supply was tight, which meant that generators were sometimes forced to buy gas or coal from hot spot markets.
“The outlook is that the average household electricity bill could rise by around 20% this year and another 20% next year unless we see a change in the cost of electricity,” Mr. Koenders said.
“But it just costs more. »
He said adopting renewables backed by firming services such as batteries and pumped hydro could ultimately help ease cost pressures.
However, he said the market faces a potentially difficult road to get there.
“As we go through this energy transition and prioritize green electricity, we face greater volatility, greater uncertainty and higher prices,” he said.
“And until we get to that end point where there is enough hydroelectric construction and battery storage in line with government targets, we are going to continue to face increased volatility in the electricity market. »
Even though wholesale prices jumped during the quarter, the AEMO noted that they dipped 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 “hit” 6.6% of the time.
He said rates were much 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 southern states’ systems over the past of the quarter.
AEMO also noted that for the first time it has triggered its so-called wholesale demand response policy, under which large electricity users are paid to reduce their consumption during periods of grid stress. .
Renewable energies a “natural hedge”
Marija Petcovich, chief executive of consultancy firm Energy Synapse, argued that the price hikes were a direct result of the NEM’s reliance on fossil fuels.
The AEMO report showed that despite a decline from a year ago, coal-fired generation still accounted for more than 60% of production in the quarter, while gas accounted for around 6%.
Ms. Petcovich noted that the largest price increases have occurred in the states most dependent on coal and gas, and that market volatility for these fuels is having an outsized effect.
“As long as our electricity system remains dependent on fossil fuels, we will continue to be vulnerable to price shocks in the coal and gas markets,” she said.
“The price of coal and gas has risen dramatically and we see this impacting the bidding behavior of coal and gas power plants.
“This has been the main driver for the increase in the wholesale price of electricity. »
Hamish Fitzsimmons of the Energy Council of Australia, which represented electricity and gas retailers, said household bills would not immediately feel the effects of rising wholesale prices.
He said rising costs would likely start to kick in from the middle of the year.




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