The latest snapshot of the energy market from the Australian Energy Regulator (AER) has again shown wholesale electricity and gas prices have fallen.
The 2020 State of the Energy Market Report found that wholesale electricity prices started to decline in the second half of 2019, with this trend continuing into early 2020.
Wholesale electricity prices are the lowest they have been since 2015, with the National Electricity Market (NEM) enjoying 10 straight months of wholesale price reductions when compared with the previous year.
In addition, wholesale gas prices fell sharply.
The AER found agreements the Australian Government formed with gas producers were helping to ease domestic supply concerns.
Increased domestic gas supply has seen a 30 to 40 per cent reduction in the spot price and as low as 60 per cent in some markets in December 2019.
Minister for Energy and Emissions Reduction Angus Taylor said the reduction in wholesale gas and electricity prices must flow on to lower energy bills for homes and businesses.
“The reduction in wholesale energy prices is good news for consumers with wholesale costs making up around one-third of a residential or small business customer’s energy bill,” Minister Taylor said.
“The Government expects the large reductions in wholesale electricity prices to be respected by retailers.
“Even before COVID-19 came along, we had seen significant reductions in wholesale prices and the Government will be evaluating the new prices on offer by the big energy companies against wholesale price reductions.
“Affordable, reliable energy will help small businesses and industry to employ more and create more jobs as the Australian economy recovers from COVID-19.”
The AER also signalled there are still concerns with system reliability.
The AER found the NEM continues to evolve as more renewable generation enters the market, and this poses reliability challenges that the Government is working with state counterparts and market bodies to address.
The Government will continue its reform program as part of ongoing Energy Ministers meetings, and through investments in projects such as Snowy 2.0 and in important interconnectors such as MarinusLink, QNI and HumeLink.
In addition, innovations such as the recent wholesale demand response rule change, and investments in distributed energy systems and demand management technology will flow through to households and businesses in lower electricity bills and improved network reliability.
The State of the Energy Market report reviews the governance, generation, distribution, transmission, supply and demand of energy in Australia. This year, for the first time the report also includes a chapter on the energy market in transition.