Wholesale electricity prices across the National Electricity Market (NEM) fell to their lowest Q1 level since 2015 as gas prices continued on the downward path established in 2019.
The AER’s Wholesale Markets Quarterly found that Q1 2020 marked the first time since 2015 that Q1 wholesale electricity prices were below $110 per MWh in all regions.
Individual states also recorded the lowest Q1 prices in many years:
- Queensland (2012)
- Tasmania (2015)
- South Australia (2016)
- Victoria (2017)
AER Chair Clare Savage said there were a number of factors behind the falling prices.
“Weather conditions during the period were generally mild, notwithstanding some extreme events and high demand early in the quarter,” Ms Savage said.
“There were reduced costs for gas and coal generators which meant they could offer electricity into the wholesale market at lower prices. There was also an increase in the amount of low priced solar generation coming into the market.”
Ms Savage said that the increasing amounts of low priced renewable generation and lower offers from coal and gas generators were highlighting an emerging trend in the NEM:
“After an extended period where wholesale electricity prices rose and rose, we’re now seeing lower underlying wholesale electricity prices across the NEM.”
In the gas sector, prices in all markets were at the lowest levels since Q1 2016, ranging from $5.20 in Brisbane to $6.27 per GJ in Adelaide.
“This is the fifth quarter in a row that gas prices fell in the Brisbane, Victoria and Sydney markets, and this quarter identifies a positive long-term correlation between LNG netback and domestic spot gas prices,” Ms Savage said.
“Households and businesses should benefit as lower international prices for gas continue in 2020 and into next year. We expect local spot prices for gas to follow the international lead here.”
This edition of Wholesale Markets Quarterly also outlines how extreme weather conditions and bushfires resulted in short periods of high prices in January across New South Wales, Victoria and South Australia.
These quarterly reports inform the AER’s biennial Wholesale Electricity Market Performance Report, which provides longer-term analysis of NEM performance. The 2020 report is due in November.
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.