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Lower energy prices and high renewable generation were the hallmarks of the final quarter for 2022 for the energy industry, according to new data released in AEMO’s Quarterly Energy Dynamics (QED) report.

Last quarter, the average renewable output in the National Electricity Market (NEM) was the highest on record, with peak renewable contribution records broken. In addition, the overall contribution of both coal and gas to the NEM is falling.

During the December quarter, wholesale electricity prices in the NEM averaged $93 per megawatt hour (MWh), dropping 57 per cent from the September quarter ($216/MWh), but remaining well above the final quarter of 2021, averaging $52/MWh.

The report shows reduced wholesale prices were influenced by wind and grid-scale solar setting prices 17 per cent for end of 2022, up 4 per cent from the final quarter of 2021, hydro at 34 per cent (up 1 per cent), while black and brown coal generation reduced from 45 per cent to 39 per cent.

AEMO Executive General Manager, Reform Delivery, Violette Mouchaileh, said sustained high commodity prices, upcoming coal unit outages and tight gas supply led to futures prices remaining elevated early in the quarter, before declining through November, and sharply in December.

“Following the Federal Government’s temporary capping of wholesale domestic gas and thermal coal markets on 9 December, ASX Cal23 electricity futures prices saw steep falls in the mainland states through to the end of the quarter,” said Ms Mouchaileh.

“Instances of high price volatility in the December quarter followed a transmission failure in South Australia, which saw the state lose normal connection with the rest of the NEM for a week.”

Without normal connection to the NEM, local frequency control ancillary services (FCAS) markets spiked due to increased demand, and an administered pricing period was triggered – capping South Australia’s FCAS prices at $300/MWh.

“While SA lost interconnection, instantaneous renewable penetration in SA peaked at an extraordinary 91.5per cent on 19 November,” Ms Mouchaileh said.

“This was possible with the support of four new synchronous condensers that are strategically placed within the SA network, providing system strength services that are traditionally offered by coal, gas, and hydro.

“The ability to manage frequency using the Hornsdale big battery and gas generation was critical to maintain system reliability with high renewable penetration.

“This event was a glimpse of the future, when both batteries and gas generation will be key to Australia realising its renewable potential.”

Ongoing investment in consumer-owned generation continued to displace grid generation and drive down daytime operational demand, with both markets observing minimum demand records – in the NEM at 11,892MW on 6 November and the Wholesale Electricity Market (WEM) at 626MW on 16 October.

New instantaneous renewable penetration records were also set in the NEM at 68.7 per cent on 28 October (up 4.6 per cent) and the WEM at 84.3 per cent on 12 December (up 3.7 per cent), largely driven by high levels of Distributed PV.

Ms Mouchaileh said output from wind and grid-scale solar grew strongly in the final quarter of 2022, producing 20 per cent of total generation in the NEM as new facilities were connected and commissioned.

“This growth, along with the lowest output from coal-fired generation since the NEM started (down 926 MW from quarter four of 2021), saw NEM emissions drop to the lowest quarter on record at 26.4 million tonnes carbon dioxide equivalent – 5.6 per cent lower than quarter four of 2021 levels. Similarly, WEM emissions dropped 11 per cent from quarter four of 2021.”

East coast gas prices have also dropped from recent record-highs to a quarterly average of $17.79/GJ, compared to $26/GJ in quarter three of 2022 and $10.60/GJ in quarter four of 2021.

Demand for east-coast gas decreased by 7 per cent during the quarter, but an increase in gas storage saw the Iona Underground Gas Storage facility finishing with the highest end to a calendar year since reporting began in 2017 at a gas balance of 18.9PJ.

Overall demand from gas-fired generators also decreased during the quarter, however, it was incredibly important that gas was available to meet demand when required.

In contrast, the WEM weighted average Balancing Price continued an upward climb, reaching an all-time quarterly average high of $81.80/MWh, up 6 per cent on the previous quarter and 50 per cent from quarter four of 2021. Drivers included reduced coal generation (down 42 per cent from quarter four of 2021), an increase of gas-fired generation to fill the gap (up 35 per cent from quarter four of 2021), and lower occurrence of negative prices.

In the Western Australian gas market, total consumption increased by 7 per cent compared to quarter four of 2021, driven by a 31 per cent increase in gas consumed for electricity generation. Gas production increased by 9 per cent from quarter four of 2021, despite the sudden reduction of production from the Varanus Island facility caused by a pipeline leak in mid-December.

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