Extract from ABC News
A warm winter and a boom in rooftop solar has seen wholesale electricity prices fall sharply, and demand for electricity fall to record lows.
Key points:
- Over the past three months, wholesale power prices in the national grid were less than half what they were a year prior
- Demand fell to its lowest level on record for a July-September period
- The Australian Energy Regulator warns the transition to renewable solar and wind power still is not occurring quickly enough
But it may not flow through to households for some time, with retail energy prices locked in well in advance.
Over the past three months, wholesale power prices in the national grid were less than half of what they were a year prior, when the grid was rocked by high coal and gas prices, and coal-fired power outages.
Instead, wholesale prices returned to average in almost all states, with only South Australia seeing unusually high wholesale prices, according to the Australian Energy Regulator.
South Australia saw a number of price spikes across the three-month period, linked to low wind-power output and network constraints limiting energy that could be brought in from Victoria.
Lower wholesale prices do not indicate an immediate drop in retail prices paid by households, with a drop in wholesale prices often taking a year or so to flow through.
Cheap coal, hydro and large-scale solar power was the main driver of lower prices, along with a sharp fall in demand.
Demand fell to its lowest level on record for a July-to-September period, and for the first time was lower than an April-to-June period.
The lower-than-usual demand came about due to a warmer than average winter, when the need to heat homes usually drives up demand on the energy grid.
The past 12 months also saw a remarkable surge in rooftop solar capacity, with rooftop solar output leaping nearly a third year-on-year.
The amount of rooftop solar power in the grid in September 2023 was 41 per cent higher than in September 2022.
It's due to a mix of sunny conditions, and the rapid pace of new solar installations.
The amount of black coal in the system fell to its lowest level on record, at 45 per cent.
Warnings for what lies ahead
But the Australian Energy Regulator also used its quarterly update to issue two warnings: The looming summer, and the need to increase the pace of the transition to renewables.
Given the relatively benign weather conditions over the past three months, it suggests significant price spikes in South Australia (and NSW and Queensland) are somewhat concerning, given a likely 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," it warned.
The regulator said while the growing influence of cheap renewable solar and wind power on the grid is welcome, the transition still isn't occurring quickly enough.
"Overall, the rate of new entry into the market is not in line with what the market needs to transition," it 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, putting some of it down to the government's significant interventions in the market, such as capping the price of coal and gas late last year.
"Today's report confirms the Albanese Government's urgent action to cap coal and gas prices limited the worst impacts of last year's forecast electricity price spikes from flowing onto household and business bills," he said.
"And it shows the lower wholesale electricity prices from increased penetration of cleaner cheaper, firmed renewable energy."
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