A mild winter and a boom in rooftop solar caused wholesale electricity prices to fall sharply and power demand to fall to record lows.
Key points:
- Over the past three months, wholesale electricity prices on the national grid were less than half of those of the previous year.
- Demand fell to lowest level on record for July-September period
- Australia’s energy regulator warns the transition to renewable solar and wind power is not yet happening fast enough.
But households may not be affected for some time, with retail energy prices set well in advance.
Over the past three months, wholesale electricity prices on the national grid were less than half what they were a year earlier, when the grid was reeling from high coal and gas prices and coal-fired power outages.
Instead, wholesale prices returned to average in almost every state, with only South Australia experiencing unusually high wholesale prices, according to Australia’s energy regulator.
South Australia saw a number of price increases over the three-month period, linked to low wind power generation and grid constraints limiting the energy that could be imported from Victoria.
The decline in wholesale prices does not indicate an immediate decline in retail prices paid by households, with a decline in wholesale prices often taking about a year to manifest.
Cheap coal, hydropower and large-scale solar power have been the main drivers of falling prices, as well as a sharp drop in demand.
Demand fell to its lowest level on record for a period from July to September and, for the first time, was lower than in April to June.
The lower-than-normal demand is due to a warmer-than-average winter, during which the need to heat homes typically increases demand on the energy grid.
The last 12 months have also seen a remarkable increase in rooftop solar capacity, with rooftop solar production jumping by almost a third year-on-year.
The amount of on-grid rooftop solar in September 2023 was 41% higher than in September 2022.
This is due to a mix of sunny conditions and the rapid pace of new solar installations.
The amount of black coal in the system has fallen to its lowest level on record, at 45 percent.
Warnings of what lies ahead
But the Australian energy regulator also used its quarterly update to issue two warnings: the impending summer and the need to accelerate the pace of the transition to renewable energy.
Given the relatively mild weather conditions over the past three months, this suggests that significant price increases in South Australia (and New South Wales and Queensland) are somewhat worrying, given the probably hot and dry summer ahead.
“As the market approaches an El Niño summer, this vulnerability presents a risk of more frequent high price events over the coming months,” he warns.
The regulator said that while the growing influence of cheap, renewable solar and wind power on the grid is welcome, the transition is still not happening quickly enough.
“Overall, the rate of new market entries is not in line with market transition needs,” he said.
“In Victoria, for example, no new capacity has entered the market since April.”
Energy Minister Chris Bowen said the fall in wholesale prices was welcome, attributing part of the fall to significant government market interventions, such as capping coal and gas prices at the end of last year.
“Today’s report confirms that the Albanian government’s urgent action to cap coal and gas prices has helped limit the worst impacts of last year’s planned rise in electricity prices, preventing them from being reflected in the bills of households and businesses,” he said.
“And this shows the decline in wholesale electricity prices due to the increased penetration of cleaner, cheaper and firmer renewables.”
