Reason for power price hike revealed

The price of electricity in Australia is much higher than last year – in some states reaching double that promised by government.

A major surge in the price of electricity in Australia has been blamed largely on a global spike in the cost of coal.

Wholesale electricity prices on the National Electricity Market (NEM) averaged $87 per megawatt-hour (MWh) for the first quarter of 2022, up 141 per cent on the year before and 67 per cent on the previous quarter.

Critics say the result is the opposite of what the government promised when it staked the country’s bet on fossil fuels.

In Queensland, record demand saw the average price of wholesale electricity for the quarter surge to $150/MWh, the state’s second highest rate for any quarter since 1998.

Since at least 2019 the government has aimed to keep the cost of wholesale energy below $70/MWh.

Energy Minister Angus Taylor has continued to spruik a target of $70/MWh for wholesale electricity. Picture: NCA NewsWire / Gary Ramage

The Australian Energy Market Operator (AEMO) said the increase was a mix of record demand, coal generator outages and higher electricity-generating fuel costs.

AEMO Executive General Manager Reform Delivery, Violette Mouchaileh said the rising cost of electricity coincided with the surge of global coal prices to record levels.

“Compared to the first quarter of 2021, over 3000MW of black coal offers shifted from lower-price band to above $60/MWh – the largest year-on-year quarterly change since 1998,” she said.

She noted that wholesale prices in Queensland and NSW were significantly higher than in southern states, partly due to transmission difficulties.

Green energy advocates were scathing of the figures which they say demonstrate fossil fuels are costing Australians more.

Green energy advocates blame the price hikes on the unreliability of fossil fuels. Picture: NCA NewsWire / Daniel Pockett

The highest electricity prices in Q1 2022 were in QLD and NSW, which are also the states that are most dependent on fossil fuels,” Managing Director of Energy Synapse, Marija Petcovich said.

“As long as our electricity system remains reliant on fossil fuels, we will continue to be vulnerable to price shocks in coal and gas markets,”

A heatwave in Queensland combined with reduced generation availability on 1 February led AEMO to dispatch Reliability and Emergency Reserve Trader (RERT) reserves for four and a half hours to maintain system security – costing an estimated $51 million.

Surging prices were unable to be stopped by record amounts of wind and solar in the grid, which in the first quarter of this year grew by 743MW over the period of a year to 4,190MW.

“The reason power prices have risen is not because of too much renewable energy but in fact not enough leaving us exposed to volatile international markets for coal and gas,” Director of Analysis and Advisory at Green Energy Markets, Tristan Edis said.

“This is the complete opposite of what Angus Taylor and Scott Morrison told us at last election.”

Originally published as Reason for power price hike revealed