By Mike Foley
Unreliable coal plants and the slow rollout of renewables are combining to drive energy prices up, new data shows, setting up a cost-of-living clash at the upcoming federal election as Labor pushes clean energy to cut bills and the Coalition calls for greater reliance on coal before a switch to nuclear.
The Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics report, released on Thursday, said average wholesale energy prices in the last three months of 2024 were up 83 per cent on the same time in the previous year.
Wholesale power prices surged in the last three months of 2024. Credit: AP
NSW was hit hardest, notching record high prices averaging $143 per megawatt hour, up 118 per cent on the same time in the previous year. But a quirk of the rapidly evolving grid meant Victoria’s prices dropped to a record low average price of $45.
Wholesale prices are what energy generators – owners of renewable infrastructure or fossil fuel plants – charge retailers for electricity. Retailers pass on these costs when they sell electricity to households and businesses.
AEMO said the big gap in wholesale energy prices could be blamed, in part, on “transmission constraints limiting northern flow of lower-cost energy”. That means a lack of new transmission lines to send cheap renewable energy from the solar and wind farms in South Australia and Victoria to NSW and Queensland – particularly when air-conditioners are used en masse during heatwaves, creating spikes in electricity demand.
High power prices are a political headache for the Albanese government, which promised in the 2022 election to cut power bills by $275 this year.
A key measure to cut power bills is the government’s pledge to raise the share of renewables to 82 per cent of the grid by 2030, but project building delays have slowed the rollout. Experts now forecast renewables will hit about 60 per cent by the end of the decade, as energy consultancy Nexa Advisory found an average three-year delay to new energy infrastructure projects.
However, AEMO said coal power, or lack of it, was also to blame for high prices.
This challenges the energy policy of Peter Dutton’s opposition, which has unveiled a “coal-to-nuclear” plan that would see the energy grid heavily dependent on coal power until seven nuclear plants are completed, claiming it can be done by the mid-2040s.
“Both black and brown coal availability decreased significantly compared to Q4 2023,” AEMO said, noting that one of the four units at Victoria’s Loy Yang A plant was out for nearly the entire quarter, and NSW’s coal fleet availability was down by more than 8 per cent.
AEMO’s findings were released the day after Nationals leader David Littleproud sparked confusion over the Coalition’s nuclear policy when he told Sky News on Wednesday morning: “We’ll start building the first nuclear power plant the very first day after a Coalition government’s elected”. However, he conceded later in the day that “there is a process where technical assessments would take place” before any plants are built.
It’s unclear how the Coalition would proceed with building, given state and federal governments have banned nuclear generation. Littleproud’s claim also contradicts the Coalition’s policy, which states it will conduct feasibility studies and community consultation for 2½ years before it commences building.
Energy Minister Chris Bowen said AEMO’s data showed the need to press ahead with the renewable rollout to reduce reliance on “unreliable coal”.
“Peter Dutton’s plan is to scrap transmission investment and extend unreliable coal generation for decades so he can build the most expensive form of power available, nuclear. That’s the worst thing possible for energy bills, reliability and the environment,” Bowen said.
Opposition energy spokesman Ted O’Brien said the government’s energy policy was failing by contributing to higher prices.
“Labor’s ideological war on coal and gas has weakened the grid, and as a result, Australians are paying more for less reliable energy,” O’Brien said.
Grattan Institute energy and climate change deputy program director Alison Reeve said the government should never have promised to cut power bills, which are a product of market forces that are out of its control.
“The best time to renege on that promise was probably in June of 2022,” Reeve said.
“Any politician who promises that they can give you cheaper electricity, particularly when they put a number on it – that is a foolish thing to do because they don’t run the market.”
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