Wholesale power prices rise sharply across Australia after cold snap but Queensland bucks trend
Wholesale power prices rose sharply across much of Australia in the June quarter after a cold snap lifted demand, according to the Australian Energy Regulator.
The regulator’s quarterly report, released on Wednesday, also warned the southern areas of Australia “remain susceptible to demand and supply shocks” for the rest of winter.
Related: Is Andrew Forrest’s energy dream in peril? The future of green hydrogen in Australia explained
The regulator said the falls in the default retail price offers for part of the national electricity market (NEM) were unlikely to be repeated for the 2025-26 year unless more favourable conditions returned in coming quarters.
A frosty start to winter and extended periods of reduced wind power combined to push up demand for expensive gas, the AER said in its quarterly report.
Victoria’s volume-weighted average price rose 99%, or $69 per megawatt-hour, in the June quarter compared with the previous three months. Tasmania’s rose 97%, or $67/MWh, and South Australia’s by 78% or $65/MWh.
New South Wales posted an 86% increase, or $87/MWh, with a “high price event” – caused partly by “profit maximising” from some big generators – contributing $55/MWh to that increase, the AER said. Queensland bucked the trend with wholesale prices dropping about one-fifth, or $29/MWh, thanks in part to milder weather.
Wholesale power prices make up about a third of power bills, with retail and network costs making up the rest.
Disruptions at Victoria’s Longford gas processing plant reduced supplies and contributed to a sharp reduction of storage levels at the state’s Iona site. At the end of June, Iona had 14.8 petajoules of gas. The AER said it would suffer “pressure constraints” were levels to fall below about 6 petajoules. Prices would also rise on peak demand days.
“Southern states … will need to rely on continued gas flows from Queensland and withdrawals from the Iona storage facility to supplement southern production sources and meet demand,” Jarrod Ball, an AER board member, said.
East coast downstream gas market spot prices averaged $13.76 per gigajoule over the quarter, an increase of 18.8% on the first three months of 2024.
Since the June quarter, the return of milder temperatures and windier weather has helped reduce the need to burn gas for electricity and also lowered wholesale power prices.
However, the extra gas burnt and a revival of coal-fired power plants contributed to an increase in greenhouse gas emissions for the sector, the Australian Energy Market Operator said in a separate quarterly report released on Wednesday.
Emissions rose by 2m tonnes of carbon dioxide equivalent in the June quarter, compared with a year earlier, to 30.7MtCO2-e, Aemo said. Relatively dry conditions, particularly in western Tasmania, also resulted in less hydro power as operators conserved supplies.
Wind generation contributed 12% of total national electricty market generation, its lowest share for any quarter since 2021, the AER said. Aemo said the capacity factors of wind farms, which track how much power turbines generated, was at its lowest level since the June quarter of 2017.
Black coal-fired generation averaged 10,857MW, or 7.3% more than the June quarter last year, Aemo said. The return of capacity at Queensland’s Callide C3 power station increased fleet availability.
Batteries, meanwhile, played a bigger role. Such storage had the largest increase in price-setting frequency out of all generation types, averaging 23% in some evening dispatch periods for the quarter up from a peak of just 7% a year earlier, Aemo said.
The expensive quarter for power generation nudged futures prices higher across the national electricity market, ranging from an increase of $24/MWh in Queensland to $41/MWh in South Australia, as the market anticipated higher spot prices to come.
A lack of new generation capacity entering the market did not help price pressure, with just one new wind farm with 201MW scale when fully commissioned being added to the market. “An increase in new generation is expected during the rest of 2024 and first half of 2025,” the AER said.
More than 70% of the gas produced in eastern Australia is exported. In its first disclosure of gas spot trading data, the AER said LNG exporters reported cargo sales totalling 95 petajoules of gas for delivery between October 2023 and June 2024, and 15 petajoules for delivery in July to September 2024.
