Low wholesale energy prices continue

The Australian Energy Regulator’s (AER) latest Wholesale Markets Quarterly for Q2 2020 highlights the lowest average annual spot wholesale electricity prices across all areas in five years and gas prices in four years.

AER Chair Clare Savage said falling electricity wholesale prices in April-June 2020 were due to lower fuel costs for generators and increased use of renewables.

Falling wholesale prices for gas are attributed to more competition, global price drops and cheaper transportation through the day ahead auction process.

Falling electricity prices are attributed to a record number of negative priced trading intervals in 2019-20, almost three times the previous record. Key findings from the report, which highlights the financial year 2019-20 outcomes, include:

  • Record wind and solar generation in 2019-20, the combined average solar and wind output was up by nearly 600 Megawatts (MW) in the past year.
  • Coal generation at its lowest level since the beginning of the National Electricity Market.
  • Annual wholesale electricity prices below $85 per Megawatt hour (MWh) in all regions for the first time since 2014-15.
  • Gas prices below $7.25 per Gigajoule (GJ) in all regions for the first time since 2015-16.

“Unexpectedly high trade through the new day ahead transport auction allowed participants to shift cheaper gas supplies from the north to the south,” said Ms Savage.

“We have seen record high renewable output and record low coal output since the start of the National Electricity Market in 1998. Coal, gas and hydro have been setting significantly lower prices than a year ago. Low fuel prices led to more capacity offered into the market at low prices,” said Ms Savage.

“Wholesale gas and electricity costs make up about a third of an average residential energy bill, so falling wholesale costs should mean good news for consumers,” said Ms Savage.

“It can take time for gas and electricity wholesale price drops to flow through to household bills because many retailers have bought a lot of their wholesale energy a year or two in advance when wholesale prices were higher than they are now.

“These wholesale price reductions have begun to flow through to customers though and retail prices should fall further over the coming year,” Ms Savage said.

These wholesale quarterly reports inform the AER’s biennial Wholesale Electricity Market Performance Report that provides longer-term analysis of the NEM’s performance and will be published later this year.

About the AER

The AER works to make all Australian energy consumers better off, now and in the future.

  • We regulate electricity networks and covered gas pipelines, in all jurisdictions except Western Australia. We set the amount of revenue that network businesses can recover from customers for using these networks.
  • We enforce the laws for the National Electricity Market and spot gas markets in southern and eastern Australia. We monitor and report on the conduct of energy businesses and the effectiveness of competition.
  • We protect the interests of household and small business consumers by enforcing the Retail Law. Our retail energy market functions cover New South Wales, South Australia, Tasmania, the ACT and Queensland.
  • We drive effective competition where it is feasible and provide effective regulation where it is not. We equip consumers to participate effectively, including through our Energy Made Easy website, and protect those who are unable to safeguard their own interests. We use our expertise to inform debate about Australia’s energy future.
Segment: 
Issued date: 
14 August 2020
AER reference: 
NR 30/20
Contact: 
AER Media 0466 409 921 media@aer.gov.au