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Australian Energy Market Operator’s (AEMO) latest market intelligence report  shows that renewable energy is driving down electricity costs and setting new records for minimum demand for electricity from the grid. 

AEMO’s Q1 Quarterly Energy Dynamics report shows the National Electricity Market (NEM) wholesale spot prices averaged $83/MWh for the March quarter, down from $93/MWh and $216/MWh in the previous December and September quarters.

Record average output of rooftop solar photovoltaic (PV) at 2,962MW for the March quarter, up 23 per cent from Q1 2022, contributed to the lowest Q1 operational demand at 14,375MW in the NEM since 2005, and new Q1 records being set in Victoria, New South Wales and South Australia.

As electricity generation from coal and gas declined, with gas-fired generation reaching its lowest Q1 level since 2005.

The report also shows new and recently commissioned grid-scale solar and wind units increased generation in the NEM this quarter by an average of 330MW and 134MW respectively, yielding a record quarterly average of 4,654MW, which was eleven per cent higher than Q1 2022.

AEMO’s CEO, Daniel Westerman, said the insights in the report underlined the need for more investment in new transmission and firming technology to connect the new locations of wind and solar farms, and to even out the variable nature of renewable generation.

“These insights reinforce that critical transmission investments, such as VNI West and Energy Connect, are needed to share low-cost, low emission renewable energy with consumers. Constraints are affecting output from regions like Victoria’s Murray River Renewable Energy Zone – that is why we need investment in new transmission,” Mr Westerman said.

“Growing renewable output across the NEM meant that 12 per cent of the time wholesale prices were negative or zero. Further, between 9.00am and 5.00pm, wholesale electricity prices were negative in South Australia and Victoria 60 per cent and 55 per cent of the time, respectively.”

Instantaneous renewable penetration also hit a new Q1 record at 65.8 per cent this quarter, up 4.4 per cent than the previous record, with rooftop solar PV accounting for 36 per cent of supply during this interval. 

On 11 February 2023, rooftop solar PV output reached a record high output of 11,504MW, 818MW higher than the previous record in Q4 2022.

NEM total emissions declined in Q1 2023 to the lowest Q1 levels on record at 28.83 million tonnes of carbon dioxide equivalent (MtCO2-e), a decline of 5.1 per cent from Q1 2022 at 30.39 MtCO2-e, while emissions intensity dropped four per cent from Q1 2022 to 0.64 tCO2-e/MWh.

Meanwhile, brown coal-fired generation in Victoria declined by 293MW compared to Q1 2022 and black coal fired generation output in New South Wales and Queensland declined 137MW.

Easing La Niña conditions and relatively mild temperatures helped wholesale electricity prices return to historic levels, but price separation between NEM regions remains.

By state, price differences reflect recent quarterly trends, with the northern regions of Queensland, at $104/MWh, and New South Wales having higher average prices, at $101/MWh, than the southern regions of Tasmania with $80/MWh, South Australia at $72/MWh and Victoria at $56/MWh.

“Despite the continuing north-south price divide, black coal generators in New South Wales and Queensland have increased offer volumes in lower price bands following the announced caps on thermal coal prices, which has decreased the average price set by black coal generators,” Mr Westerman said.

Operationally, constraints affecting the Victoria to New South Wales Interconnector (VNI) continued to bind frequently during the middle of the day, limiting flows northward and further increasing the gap from higher prices in the northern NEM regions to lower levels in Victoria and South Australia.

During the quarter, east coast wholesale gas prices eased to an average quarterly price of $11.86/GJ, still above $9.93/GJ for the same time in 2022. 

At the same time, gas demand decreased by ten per cent compared to Q1 2022, driven by a large decrease in demand from Queensland liquefied natural gas exporters (-33.5/PJ), yielding the lowest Q1 flows to Curtis Island since 2018.

In Western Australia’s Wholesale Electricity Market (WEM), the weighted average Balancing Price reached $81/MWh for Q1 2023, a Q1-record high, due to a reduction in generation and transmission availability and changes to the fuel mix.

“Mild temperatures in Western Australia and 16 per cent increase in average rooftop solar PV generation contributed to an eight per cent decrease in average operational demand from Q1 2022 to 2,060MW,” Mr Westerman said.

The Q1 2023 maximum operational demand at 3,676MW was recorded on 2 March 2023 across the 1600 hour interval, due to high temperatures and sudden cloud coverage reducing rooftop solar PV output.

A total of 92PJ was consumed in the Western Australian domestic gas market in Q1 2023, a four per cent increase from Q1 2022. Consumption from electricity generation increased by ten per cent, in line with the changes in fuel mix. Q1 2023 saw total Western Australian domestic gas production of 89PJ, a marginal reduction of 2.9 per cent from Q1 2022.

Industry insight 

Climate Council Senior Researcher Dr Carl Tidemann said in the span of just three months, Australia has seen more records broken from renewable energy output, and the lowest ever level of emissions recorded by the NEM for the first quarter of 2023.

“What we’re seeing is less reliance on expensive, polluting fossil fuels, and another big jump in the share of clean, affordable renewables powering Australia,” Dr Tideman said.

“Every step we take towards a grid powered by 100 per cent renewable electricity is a step towards lower power bills for Australians, less harmful carbon pollution and more control over our own energy.”

Climate Councillor and energy expert Greg Bourne said it is good news that energy generated from gas has seen its lowest level for the first quarter of the year since 2005, and brown and black coal-fired generation have also seen a drop in New South Wales and Victoria. 

“This is what a managed transition of our energy system looks like. As old coal power stations like Liddell close, renewable energy backed by storage is powering up to meet our needs,” Mr Bourne said.

“Australia is rapidly moving away from ageing, unreliable and emissions-intensive coal and gas, so governments and industry must accelerate progress on clean energy and transmission projects which are ready to go.”

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