Renewables Push Electricity Prices To Four-Year Low; Emissions at Record-Lows
Australia’s main electricity grid is reporting the cheapest prices seen in more than four years, as emissions drop to record-setting lows with the addition of large scale wind and solar projects to the grid.
The data comes from the Australian Energy Market Operator’s latest quarterly energy dynamics report - which can be accessed here - was released just a day ago, and tracks an extremely volatile first quarter of the year with volatility, a crash in the oil market as well as the fallout of the COVID-19 pandemic.
Electricity futures traded on the Australian stock exchange for the Q2 and Q3 quarters of 2020 fell 11% over the past two weeks, with future prices representing market expectations of economic activity and reduced demand.
Audrey Zibelman, Chief Executive at the AEMO said that “with prolonged bushfires and major power system separation events, changing markets and a reduction in operational demand, and the lowest east coast wholesale energy prices since 2016- it’s been an extraordinary start to the year.”
In spite of that, the national energy market’s spot price fell to the lowest they’ve been since the fourth quarter of 2016 to $66 per megawatt hour. This is down a total of 49% from the first quarter of 2019, where electricity prices were as high as $130/MWh. The report says that “this was driven by lower gas prices, reduced operational demand, increased wind and solar output and a shift to lower priced offers from black coal and hydro generation.”
“Sunny conditions and mild temperatures broke first quarter minimum demand records in both Victoria and South Australia, while a new minimum demand record was set for the second consecutive quarter in Western Australia.”
The price of wholesale gas dropped, too, with the East coast’s price dropping by a staggering 42% compared to the first quarter of 2019, dropping from $9.75 per gigajoule to $5.63; this represents the cheapest gas market prices in four years.
“Although electricity and gas prices were generally lower, this quarter, major power system separation events following bushfire and storm activity created volatility in both energy and frequency control markets,” Zibelman added.
The total national energy market system costs increased to $310 million, which stands at 8% of energy costs for the quarter, which is dramatically higher than the usual 1-2% because of three major separation events during the quarter.
The report noted the early impact of the COVID-19 pandemic, stating that “the most dominant impact is related to the rapid decline in global oil and gas prices which were accompanied by smaller declines in coal prices observed. These pricing declines commenced prior to the imposition of health and safety restrictions and accelerated as a result of the world wide pandemic response.”
“Up to now, Australia has not experienced the significant fall off on energy demand reported in other jurisdictions. Rather, recent mild weather in most parts of Australia have resulted in lower demand of 4 percent compared to previous years. AEMO analysis shows that when normalised for weather, a fall in demand of up to 3-4% in New South Wales in late March represents the highest level of COVID related demand reductions. This compares to 20-30% reductions identified in parts of Europe and the US.”