The latest report released by the Australian Energy Market Operator (AEMO) claims the injection of renewables into Australia’s energy grid has pushed National Energy Market (NEM) prices down to “historical levels.”
The operator’s most recent Quarterly Energy Dynamics report shows that wholesale electricity prices averaged $63 per megawatt-hour (MWh) in the September quarter, down 71 percent from Q3 2022 ($216/MWh).
The wholesale energy market is where generators sell power to retailers who then sell to businesses and households on the retail market.
By state, South Australia recorded the highest average quarterly price ($92/MWh), followed by New South Wales ($81/MWh), Queensland ($65/MWh), Victoria ($49/MWh), and Tasmania ($29/MWh).
The Labor government’s push to transition to net zero by 2050 has spurred a major change to the composition of both the Australian energy grid and market. The September quarter saw renewables account for 38.9 percent of total supply, up 4.6 percent from the previous quarter.
Black coal’s share of output fell by 3.4 percent, mainly due to the mandated closure of Liddell Power Station in April. Gas also saw its share reduced by 2.3 percent.
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AEMO Executive Violette Mouchaileh attributed the downward pressure on prices to the increased prevalence of renewable energy on the grid.
“Record renewable generation output helped push down average wholesale electricity prices by more than two-thirds, double the occurrence of zero or negative wholesale prices (19 percent), and reduce total emissions by 11 percent compared to the previous September quarter,” Ms. Mouchaileh said.
“The pipeline of new renewables, if supported by firming generation—batteries, hydro, and gas—and transmission, will help meet reliability gaps and share low-cost, low-emissions energy to homes and businesses.”
Contentious Costs
AEMO’s latest report heavily contrasts with its release in August, giving a bleak assessment of the coming years and warning Australians about the imminence of rolling blackouts this summer if investment isn’t urgently directed to fill supply shortfalls.In its annual Electricity Statement of Opportunities 2023, it reported that just under two-thirds of Australia’s coal-fired power generation will cease by 2033, increasing the risk of blackouts in the summer months if not replaced by alternative energy sources.
Rolling blackouts are an emergency procedure used by electricity generators where outages are intentionally engineered to free up supply during periods when it is needed the most. These tend to be during warmer months where demand spikes are spurred for cooling loads.
Deputy Executive Director at the Institute of Public Affairs (IPA)—a Melbourne-based free-market think tank—Daniel Wild said AEMO’s latest report is disingenuous considering it fails to account for numerous factors when reporting wholesale prices.
“It doesn’t take into account the intermittent nature of renewables nor does it take into account the higher costs that will come from all of the infrastructure that will be required to get them onto the market,” Mr. Wild told the Epoch Times.
“It may sometimes be the case that when the wind’s blowing and the sun’s shining, the output cost of renewables is low. However, you’ve got to take into account the monstrous costs of the infrastructure and subsidies.”
Mr. Wild also said the Australian energy market was not competitive.
“Australia’s energy market has for many years featured significant government intervention that has basically made it unviable for new coal operators and even gas operators to come onto the market. There’s been favouritism towards renewables at the cost of taxpayers.”
Transmission Speedbump for Net Zero
The biggest hurdle Australia faces in its attempt to transition towards renewable energy is the construction of transmission lines needed to connect generators and providers to the grid.Energy advisory firm Nexa published a report in June claiming that in order to fulfill the current energy ambitions of the Albanese government, Australia needs to build 10,000 km of transmission lines in just under a decade, equal to a quarter of today’s entire transmission grid.
It further explained that even if generators could produce a sufficient amount of renewable energy, a lack of transmission infrastructure will ensure failure to convey it to consumers. It cites rigorous and uncertain approval processes for licenses as the biggest hindrance to construction.
Significant amounts of red tape have been imposed on renewable developments due to environmental concerns. Numerous developers have passed on contracts to one another amid failure to procure licenses or pass an environmental impact assessment (EIS.)
There is also the reality of cost blowouts and overruns associated with renewable energy projects, the most notorious being those facilitated by Snowy Hydro. Snowy Hydro’s two main projects have seen their completion costs double to around $13 billion.
Snowy Hydro 2.0 which was initially touted by the Turnbull Liberal government as costing only $2 billion. The cost was later revised to $12 billion in August.
