Wholesale electricity prices tumble in boost to hopes of power bill relief

Record quarterly renewable energy generation has sent wholesale electricity prices tumbling, boosting hopes of some moderation to household power bills.

Record renewable energy generation pushed the cost of wholesale electricity during the fourth quarter of 2023-24 down 24 per cent, the country’s energy market operator has said, in a major boost to hopes of a moderation in electricity bills for households.

The Australian Energy Market Operator said wholesale electricity prices in the National Electricity Market averaged $48 per megawatt hour in the last three months of 2023, a fall of 24 per cent from the third quarter and down 48 per cent from the same period a year earlier.

AEMO chief executive Daniel Westerman said wholesale electricity prices on the east coast had halved from 2022 levels, reflecting the increasing role that low-cost renewables were playing in daily generation.

“More low-cost renewable energy was generated and wholesale energy prices have fallen a record number of times to zero, and beyond, into negative territory,” Mr Westerman said.

AMEO said during the quarter wholesale electricity prices were zero or in negative territory some 20 per cent of the time, awash with renewable energy. The figure was a 3.3 percentage point increase on the same period last year and a new high for any quarter.

“We are regularly seeing records set for the higher contribution of renewables, and lower levels of energy drawn from the grid because of rooftop solar,” said Mr Westerman.

The fall in wholesale prices is a relief to authorities desperate for some moderation in power bills. Australians pay some of the world’s highest electricity bills and have endured two years of annual increases of more than 20 per cent – sapping support for the federal Labor government and stoking inflation.

Wholesale electricity prices are the biggest component in determining how much electricity bills will rise by. The Australian Energy Regulator is weeks away from revealing new annual tariffs.

The rise in renewable energy generation is also a boost to Energy Minister Chris Bowen and his hopes to reshape Australia’s electricity market. Labor has set a target of having renewable energy generate 82 per cent of Australia’s electricity by the end of the decade, requiring vast quantities of solar and renewables generation to be installed each year.

Mr Bowen said the policy was having an impact on power bills.

“Thanks in part to the Albanese government’s policies to deliver reliable affordable clean energy, average wholesale prices were 83 per cent lower in Q4 2023 than they were at the time the former Liberal government left office,” said Mr Bowen.

“AEMO’s report out today shows the shift to renewable energy is working exactly as it should with wholesale prices being cut in half over the past year as renewables hit an all-time record output and the Albanese government’s coal and gas caps took effect.”

While the increase in renewables will be welcomed, the rise of negative pricing could accelerate the push away from coal and accelerate the renewable energy build-out. Negative wholesale prices occur when too much electricity is being produced, typically during sunny days as Australia has the highest penetration of rooftop solar in the world.

Negative pricing exacerbates the pressure on coal generators particularly as they typically produce electricity throughout the day and are not easily able to lower output. Heightened costs on coal generators could prompt them to exit the system earlier than envisaged. AEMO expects most coal generators to have been retired in the next 15 years.

Originally published as Wholesale electricity prices tumble in boost to hopes of power bill relief