Wholesale electricity prices soared 141% year-on-year, and households should brace for more

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.

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. »

Australian energy consumers are indirectly exposed to international gas prices, which have exploded.(Reuters: Gleb Garanich)

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. »

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