Mild summer leads to low wholesale electricity prices

Less demand driven by mild summer conditions, an increase in low cost renewable generation and more energy production from rooftop solar led to low wholesale electricity prices in the first quarter of 2021.

The Wholesale Markets Quarterly report released today by the Australian Energy Regulator (AER) reveals prices across the National Electricity Market (NEM) remained lower than expected in Q1 2021, from $27/MWh in Victoria – the lowest Q1 price since 2012 – up to $53/MWh in South Australia.

AER Chair Clare Savage said the wholesale report underlined the effect of the transition of the NEM.

“In summer, and particularly Q1, wholesale electricity prices are usually higher with hot weather prompting more use of air conditioners, and higher demand for electricity pushing up prices, but Q1 this year was different,” Ms Savage said.

“The milder temperatures during the past summer period and an additional 2,500 MW of rooftop solar capacity drove lower demand and lower wholesale prices, which is good news for consumers because it should lead to lower bills.

“The first quarter of this year also highlighted the impact of the energy transition on thermal generators with the lowest gas generation seen since 2005 and coal generation dropping to a record Q1 low - the first time average large scale solar generation exceeded gas generation.

“But equally low demand can impact the stability of the network, which we saw in South Australia in March 2021 when for the first time the market operator needed to use new powers to help stabilise the network by turning off some rooftop solar to increase demand.”

There were fewer prices above $300/MWh this quarter than in any other Q1 since 2012, and there were also near record numbers of negative prices in Victoria and South Australia.

The report also showed in the east coast wholesale gas markets that there was low demand for gas powered generation in the southern states. 

This was offset by near record levels of LNG exports from Queensland, driven by an unprecedented price spike in Asian LNG spot prices. As a result, gas flowed strongly from the southern markets to Queensland.

Domestic gas spot prices remained relatively subdued by comparison to Asian LNG spot prices, with average quarterly east coast gas spot prices ranging from $5.50/GJ to $6.40/GJ.

Sector: 
Segment: 
Issued date: 
17 May 2021
AER reference: 
NR 14/21
Contact: 
AER Media 0466 409 921 media@aer.gov.au