Record Warm Weather in Eastern Australia Fails to Curb Rising Electricity Prices
Published · Updated · 3 min read
Despite experiencing unprecedented warm weather conditions in June, Eastern Australia continues to grapple with escalating electricity prices, according to the Australian Energy Regulator (AER). Although the wholesale power prices remain below the peak witnessed during last year’s energy crisis, the June quarter saw an increase in prices compared to the first three months of this year.
New South Wales recorded the highest spot pricing, averaging $148 per megawatt hour, up from just over $100/MWh in the previous quarter. During the energy crunch of last winter, prices soared to an average of about $320/MWh. Queensland and South Australia experienced wholesale prices averaging around $140/MWh, while Victoria’s prices remained just below $100/MWh. Tasmania, on the other hand, boasted the lowest prices at $65/MWh.
AGL’s recent closure of the final units of its Liddell coal-fired power station in New South Wales’ Hunter Valley contributed to the price hike during the quarter, as noted by the AER. However, supply conditions were comparatively better than the previous year when delayed maintenance at aging coal-fired power stations and prolonged cold weather led to increased energy demand. Additionally, wind energy generation fell short of expectations.
The rise in wholesale prices is also reflected in the updated default retail power prices across the eastern states, which have surged by a quarter or more since July. Surprisingly, despite the Australian government imposing price caps for domestic gas usage at $12 per gigajoule and $125 per tonne of black coal since January, spot prices for gas on the east coast averaged about $14.50/GJ in the April-June period, higher than the previous quarter.
The AER’s report highlighted that the high May prices were largely attributed to production constraints at Longford in Victoria, combined with pipeline capacity limitations on the Moomba-to-Sydney pipeline. However, pipeline capacity enhancements in June helped alleviate the upward pressure on prices, bringing them down below $19/GJ.
Gas demand tapered off in June, partially due to milder temperatures, resulting in gas prices falling below $10/GJ.
Eastern Australia experienced its warmest June ever in terms of maximum temperatures, according to the Bureau of Meteorology. In Victoria, a state heavily reliant on gas for heating, minimum temperatures during June were 1.77 degrees Celsius higher than the 1961-1990 average. This made it the state’s fifth-warmest June by overnight temperatures on record and the mildest since 2014.
On the positive side, renewable energy sources made significant progress during the quarter, with the addition of 1,100 megawatts of new capacity from solar, wind, and battery installations. Wind energy production reached record levels in June within the national electricity market, while solar and wind output averaged 745MW more compared to the same quarter last year, as stated by the AER.
Kane Thornton, CEO of the Clean Energy Council, emphasized during an energy summit in Sydney that Australia’s current pace of renewable energy development is insufficient to replace declining coal and costly gas, ensure grid reliability, and drive down power prices. Thornton urged for doubling the annual investments in renewable energy, aiming to achieve an 82% renewable energy target by 2030. However, despite the urgency, the slow process of obtaining planning approvals and other obstacles has led to a slowdown in the commitment to new projects. In the first half of 2023, only 0.4GW of new large-scale renewable energy projects have been approved, falling far short of the necessary 5GW per annum, Thornton lamented.
