Electricity prices plunge to lowest in five years
Wholesale electricity prices traded at the lowest in five years as the coronavirus lockdown crimped energy demand, especially from businesses in NSW and Queensland.
The latest quarterly report from the Australian Energy Market Operator confirmed the downward trend in prices over the past 18 months.
Average spot wholesale prices in the National Electricity Market were about $32 to $43 per megawatt-hour in the second quarter – down between 48 per cent to 68 per cent on the same period in 2019 and at the lowest since 2015.
Although the coronavirus lockdowns effectively shut the CBDs of Sydney, Melbourne and Brisbane for three months, the AEMO report said the impact on energy demand was modest.
Even though thousands of people worked from home during state lockdowns, AEMO said demand was only 2 per cent lower than the second quarter last year.
COVID-19 contributed an estimated 2.1 per cent reduction in demand, with the biggest impact in Queensland (4.8 per cent) and NSW (2.6 per cent). But this was offset by increased demand in South Australia due to cooler weather.
Large industrial users, such as smelters and mines, continued normal operations during the crisis, with COVID-19 safe guidelines for workers.
Energy use in the commercial sector was significantly reduced, but this was counter-balanced by increased demand in the residential sector as people worked from home and home-schooled their children.
In Western Australia, which is not part of the national market, COVID-19 had no overall impact on demand but shifted consumption from the morning to the evening peak.
AEMO chief executive Audrey Zibelman said the low electricity prices were mostly due to lower coal and gas prices and new renewable energy supply.
Wholesale gas prices were also at the lowest levels since 2015.
“Price decreases were due to decreased demand from LNG and gas-powered generation, declining international gas prices, lower electricity prices and increased supply,” she said.
Federal Energy Minister Angus Taylor said the federal government’s “big stick” laws – which included the threat of divestment for big power companies – were partly responsible for the 10 straight months of wholesale price reductions.
He said lower wholesale power prices – which make up about one-third of residential electricity bills – would provide relief for families and businesses.
“Wholesale prices reaching their lowest levels since 2015 comes at a great time, as many households are concerned about higher energy usage as people are spending more time at home,” Mr Taylor said.
“Low wholesale prices will also bring welcome relief to big energy-using industries and the jobs that rely on them.”
The AEMO report also confirmed the changing nature of Australia’s energy grid, with black coal-fired generation down by an average 1148 megawatts compared to last year – its lowest level since 2014.
Coal had been squeezed out by lower operational demand and lower-priced generation such as renewables.
A report earlier this year predicted wholesale electricity prices could fall another 20 per cent over the next two years due to a global recession.
The AEMO report found there had been a significant increase in comparatively low-priced offers across most fuel types.
Negative spot prices – where sellers pay buyers to take their electricity – was not confined to Queensland and South Australia in the second quarter.
NEM-wide negative spot prices occurred in 3.6 per cent of trading intervals this quarter, according to AEMO, the highest quarterly level on record.
South Australia (5.2 per cent) and Queensland (3.6 per cent) continued to have high-levels of negative spot prices.