Energy prices to remain high through to 2024 as electricity prices hit second-highest level on record: Australian Energy Regulator
The nation’s electricity prices have soared to the second-highest level on record, with the high prices tipped to remain for at least another two years.
Energy prices are forecast to remain high for the next two years, the Australian Energy Regulator said, with wholesale gas prices on the East Coast doubling in the September quarter from a year earlier and electricity at the second-highest level on record.
The AER said futures markets showed high gas and electricity prices will remain through both 2023 and 2024. ASX futures pricing indicates gas trading at $30/GJ in the second and third quarter of 2023, triple prices from a year ago.
“These increases reflect increased spot prices and expectations that higher prices are likely to be sustained in the short to medium term,” the AER said in its quarterly wholesale markets report.
The average wholesale gas price for the third quarter was $26 a gigajoule compared with $10.85GJ for the same three-month period a year earlier. Still, prices fell back from record $40GJ levels in the previous three months due to warmer weather and improved storage levels.
Electricity wholesale prices also jumped to an average of $233 per megawatt hour in the third quarter across NSW, Victoria, Queensland, South Australia and Tasmania, more than triple the $66MWh average from 12 months ago.
“Future price expectations remain elevated into 2023 and 2024,” the AER said.
“Current price expectations for winter 2023 range from $190/MWh in Victoria to $280/MWh in NSW. The key drivers for continued high price expectations are varied but include expected high international gas and coal prices, uncertainty around reliability of base load coal generation, local coal supply issues, forecast La Niña weather conditions and the closure of Liddell, tightening supply.”
The amount of new energy supply being delivered into the market also slowed to its lowest quarterly volume in five years, likely to worry energy ministers given the looming withdrawal of major coal capacity starting with the exit of AGL Energy’s Liddell coal plant in April 2023.
“While at least six new batteries totalling 700 megawatts are anticipated next year, bringing system strength, solar-soaking and firming capacity, the last three units or 1500MW of the Liddell black coal power station will close in April and the Osborne gas power station at 180MW is expected to close in December 2023,” the AER cautioned.
“It is important to bear in mind that the capacity factor of Liddell is many times that of new wind and solar and as such, its closure has impacted forward prices in NSW.”
The new data backs up figures from the competition regulator showing a huge jump in gas contract rates for next year, putting manufacturers on edge as they work to strike new contract deals for energy supplies.
New figures from the competition regulator shows one energy producer offered gas at an extreme price of $65 a gigajoule next year to industrial users while Australia’s big retailers have offered a dozen contracts between $30GJ and $40GJ, still more than triple the price from 12 months earlier.
Gas-reliant manufacturers say these price levels would send them out of business.
The findings may also add to pressure for the Albanese government to strike an urgent intervention in the market to calm elevated prices, despite a push-back by energy producers worried about sovereign risk concerns.
Australian Energy Regulator chair Clare Savage told a meeting of energy ministers on October 28 that any gas and coal cap would need to be implemented within weeks.
Ms Savage told the ministers that coal generators and gas users were starting to purchase their contracts for the next 12 months on the expectation prices would surge next year.
Federal Industry Minister Ed Husic said action needed to be taken, with Labor still considering a range of options that may include a new tax on gas producers, a price cap and direct assistance to industry.
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