South Australia has recorded the biggest price drops for wholesale electricity and gas in the nation, a new report by the Australian Energy Market Operator shows.
The falls indicate that the global gas price shocks are easing, and that renewable energy is driving down costs in South Australia.
The latest AEMO quarterly report published today shows the average wholesale electricity price for the first quarter of this year was $55 per megawatt hour in South Australia. That was $17 - or 24 per cent – lower than the average for Q1 in 2023.
Prices in Queensland ($118/MWh, up 13 per cent) were more than double the SA average, and SA was cheaper than NSW ($87/MWh, down 13 per cent) and Tasmania ($67/MWh, down 17 per cent).
Wholesale price changes flow through to the retail prices paid by households and small businesses. The AEMO report follows the announcement last month by the Australian Energy Regulator that it intends to cut benchmark retail prices – the Default Market Offer (DMO) – from July. Its draft DMO signals cuts of up to 2.5 per cent cut for households and 8.2 per cent for small business. These cuts are being driven by falling wholesale prices.
The AEMO report corresponds with a recent AER report on the first quarter of this year, which uses different methodology but draws the same conclusion – SA’s prices fell the most of any state, and the black coal dependent states of Queensland and NSW had the highest prices.
Both of these first-quarter reports extend the trend identified by these national agencies in January of significant price falls in the 2023 calendar year compared to 2022, when the Russian invasion of Ukraine coupled with worsening reliability of coal-fired generators in eastern Australia saw electricity prices spike.
The AEMO report says that in the gas market, Adelaide recorded the biggest year-on-year price fall – 7 per cent – to $11.65/gigajoule. The report says international gas prices have eased because of a mild winter in the Northern Hemisphere and increased use of storage in Europe in response to the war in Ukraine.
The Tailem Bend Stage 2 solar farm joined the state’s generation fleet in the first quarter of 2024.
The impact of the new Torrens Island Battery was shown with SA recording the largest year-on-year increase in revenue for batteries. The $20.4 million revenue was up from $9.3 million in Q1 of 2023.
Across the National Electricity Market, batteries offered more volume at lower prices, resulting in battery output more than doubling.
Quotes
Attributable to Tom Koutsantonis
These proven falls in wholesale prices are encouraging signs that we are on the right track.
South Australia’s high proportion of renewables – which exceeded 75 per cent of generation in 2023 – is key to South Australian prices being far lower than the black-coal states of NSW and Queensland.
In announcing the draft Default Market Offer for 2024-25, the Australian Energy Regulator said the fall in wholesale prices was the reason it intended to cut the retail benchmark.
This confirms that retail prices must fall because wholesale costs to retailers are going down.
I also welcome the growth in the use of batteries. They are charging up from renewables in the middle of the day and then providing supply at peak times, improving reliability while reining back the peak price points.
