The Australian Energy Regulator’s (AER) latest Wholesale Markets Quarterly Report reveals that average annual wholesale electricity prices in the National Electricity Market (NEM) fell by between 44% and 64% and average annual east coast gas market spot prices fell by 43% in 2023.
The drop in energy prices was attributed to milder weather conditions, lower fuel costs, fewer coal supply issues and an increase in cheap wind and solar supply.
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The report also shows wholesale electricity prices during the October to December 2023 quarter fell in NSW, Victoria and SA but increased in Queensland and Tasmania compared to the previous quarter, with gas prices on the east coast spot market increasing slightly compared to the previous quarter.
Both electricity and gas prices during the quarter remained well below the record prices of 2022 and were now closer to longer term annual averages. Once retailers’ wholesale costs adjust to the lower prices going forward, prices faced by consumers should reflect these lower costs.
Electricity demand fell compared to the previous quarter between 9% and 19% in all regions except Queensland, where hot and humid periods drove increased use of air-conditioning units.
However, in periods of high demand there were five high price events, and the market remains vulnerable to more frequent high price events should temperatures increase in the January to March quarter.
The fall in electricity demand in regions outside Qld was impacted in part by rooftop solar output which increased 50% compared to the previous quarter and 17% compared to the corresponding quarter in 2022.
Combined, wind and large-scale solar reached a record high of 26% generation output in the NEM—up from a previous record share of 23% at the same time last year.
Forward prices for electricity fell in all regions for all forward quarters, reflecting mild spot price outcomes during the quarter. However, contract markets are sensitive to spot conditions and will likely be impacted if spot prices increase in the January to March quarter. Changes in forward prices also take time to be reflected in prices faced by consumers.
AER Board Member Jarrod Ball said, “Although we saw increased electricity prices in some regions and a small increase across all regions in the gas market during the quarter, these remain significantly lower than those experienced in 2022 and closer to the levels seen at the end of 2021.
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“The proportion of electricity output sourced from coal and gas fell to a record low of 66%, down from 67% the previous quarter.
“Each region set a new solar output record this quarter, and although relatively little new generation entered the market, a significant increase in new entry is currently scheduled for 2024.”
