Energy prices fell in third quarter despite international pressure

Australia’s energy prices fell over the past three months despite surging international gas prices.

An increase in the availability of dispatchable generation helped drive power prices lower, together with increased renewable energy, particularly rooftop solar, and milder late winter weather.

The Australian Energy Market Operator’s latest Quarterly Energy Dynamics Report for the third quarter of 2021 found wholesale electricity prices fell significantly across the east coast National Electricity Market (NEM) in the three months to the end of September.

The report found variable renewable generation grew strongly in the quarter, driven by higher wind and solar output and commissioning of new grid-scale generators.

New records were set for instances of renewable generation, with 61.4 per cent of electricity across the NEM from renewable sources at one point in September. The Western Australian network also set new records for variable renewable generation, supplying 70 per cent of demand on one day in early September.

Minister for Industry, Energy and Emissions Reduction Angus Taylor said the Quarterly Energy Dynamics report highlighted the need for dispatchable energy to support the growth in renewable energy and to ensure grid reliability and to keep prices low.

“Coal outages in NSW, coinciding with the incident at Callide in Queensland, drove up prices across the NEM in July,” Minister Taylor said.

“However, coal coming back online, falling gas prices, easing demand and increased rooftop PV generation during August and September put downward pressure on electricity prices, with September mainland NEM prices returning to average $37 per MWh.

“This shows why it is so critical to have enough dispatchable supply in the system to back up growing renewables, keep prices low and the lights on.”

The Quarterly Energy Dynamics report also covers recent volatility in global gas markets. AEMO notes that record international gas prices in the third quarter have had no discernible impact on the Australian market, with. domestic energy prices moving in the opposite direction to international prices.

“At the start of the third quarter, electricity and gas prices were at the high levels experienced in May and June,” Minister Taylor said.

“However, falling gas prices, easing demand, increased rooftop PV generation and greater availability from coal generators during August and September put downward pressure on electricity prices, with September mainland NEM prices averaging $37 per MWh.”

The Quarterly Energy Dynamics report also covers recent volatility in global gas markets. AEMO notes that record international gas prices in the third quarter have had no discernible impact on the Australian market, with domestic energy prices moving in the opposite direction to international prices.

“Australia’s competitive advantage has always been based on cheap energy. This report demonstrates the importance of ensuring that there is enough gas in the market to supply times of high demand and to provide security for our manufacturing sector,” Minister Taylor said.

“Through the gas-fired recovery, the Government is committed to unlocking gas supply and building more gas storage in the east coast market. These actions will increase our energy security and continue to put downward pressure on gas prices.”

The Quarterly Dynamics Report is available through the AEMO website.

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