The Australian Energy Regulator (AER) has revealed that the 2020/21 financial year saw the lowest wholesale energy prices in five years, with the National Electricity Market recording prices lower than $75/MWh in all regions.
Leading the way with lower prices was Tasmania, recording an average financial year price of $45/MWh, down from $56/MWh in the previous year.
New South Wales was the highest at $72/MWh, down from $79/MWh in the previous year.
The latest Wholesale Markets Quarterly released by the AER reveals the average wholesale electricity prices in the 2020/21 financial year fell in all regions except Queensland, despite some significant price increases in the last quarter of the financial year.
AER Chair, Clare Savage, said the report shows wholesale electricity prices in Queensland reached their highest Q2 level ever ($141/MWh), while prices in New South Wales reached their highest Q2 level since 2007 ($129/MWh).
Ms Savage said the Q2 price increases in these two regions were largely driven by a high number of planned and unplanned coal generator outages, as well as transmission line outages that limited both states’ ability to import cheaper generation from other regions, especially during May and June.
“Planned outages by generators across the network are not uncommon in Q2, given it is considered a shoulder season before the winter peak,” Ms Savage said.
“But there were some significant key drivers behind the high-priced events during this quarter, in particular the Callide C power station fire on 25 May, which came on top of other outages, as well as the early onset of winter with New South Wales experiencing its coldest day in 100 years on 10 June.
“Reduced supply at a time of high demand meant significantly higher prices across the east coast for more than three weeks from 25 May to 16 June.”
It was a similar story for the gas market during Q2 with the unplanned electricity outages creating volatility for buyers and sellers in the spot market.
Gas generators were called upon to boost electricity generation following the Callide incident, coinciding with the increase in demand for gas for winter heating requirements, which resulted in Q2 prices fluctuating between $5/GJ and $15/GJ.
Ms Savage said customers in the domestic gas market also face continued pressure from unseasonably high prices in the international market. The prices were caused by reduced inventories following high demand in the northern hemisphere winter.
“Unlike electricity, Australia’s gas market is exposed to international competition,” Ms Savage said.
“Our data shows the amount of gas being purchased by big industrial customers from the local spot markets is four times the amount it was five years ago, so the international pressure on prices meant local manufacturers who trade on the spot markets faced significantly higher prices after a number of quarters of relatively low prices.
“The outlook is for high international gas prices to continue during the next two quarters of 2021/22, which means the price volatility most likely will remain throughout the rest of the year.”
Ms Savage said the good news during the quarter was the record usage of the gas day ahead auction, which allowed gas to get to where it needed to be during the unplanned disruptions in the electricity market.
“We saw day ahead bidding that moved gas within Queensland after Callide went down, and we saw more volume shift south to support the southern region when the Yallourn power station in Victoria was affected by flooding,” Ms Savage said.
“It was good to see the auction arrangements introduced in 2019 are working to move gas volume quickly and efficiently to where it’s needed, with participants able to buy capacity at lower prices and avoid contract transportation charges.”
A full analysis of the gas day ahead auction by the AER earlier this year highlighted the auction had led to lower transportation charges in the range of $30M-$60M in the first year of the auction’s operation.