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South Australia records nation’s biggest fall in power prices

A fresh report from the Australian Energy Market Operator reveals that South Australia has registered the largest decreases in wholesale electricity and gas prices across the country.

A recent report from the Australian Energy Market Operator highlights South Australia’s significant reductions in wholesale electricity and gas prices, marking the most substantial drops nationwide. These declines signal a gradual easing of global gas price shocks and underscore the influence of renewable energy in driving down costs within the region.

According to the latest quarterly report released by AEMO, South Australia saw an average wholesale electricity price of $55 per megawatt hour in the first quarter of this year. This represents a notable decrease of $17, or 24%, compared to the same period in 2023.

“These proven falls in wholesale prices are encouraging signs that we are on the right track” Tom Koutsantonis, Minister for Energy and Mining said.

“South Australia’s high proportion of renewables – which exceeded 75 per cent of generation in 2023 – is key to South Australian prices being far lower than the black-coal states of NSW and Queensland.

“In announcing the draft Default Market Offer for 2024-25, the Australian Energy Regulator said the fall in wholesale prices was the reason it intended to cut the retail benchmark.

“This confirms that retail prices must fall because wholesale costs to retailers are going down.

“I also welcome the growth in the use of batteries. They are charging up from renewables in the middle of the day and then providing supply at peak times, improving reliability while reining back the peak price points.”

In comparison, prices in Queensland surged to $118/MWh, marking a 13% increase, while South Australia remained more affordable than New South Wales ($87/MWh, down 13%) and Tasmania ($67/MWh, down 17%).

These wholesale price adjustments inevitably affect retail prices for households and small businesses. The AEMO report coincides with the recent announcement by the Australian Energy Regulator to reduce benchmark retail prices, known as the Default Market Offer (DMO), starting from July. The proposed cuts, up to 2.5% for households and 8.2% for small businesses, are attributed to the declining wholesale prices.

The AEMO findings align with a separate report by the Australian Energy Regulator for the first quarter of this year, which, despite employing different methodologies, reaches the same conclusion: South Australia experienced the most significant price reductions among all states, while Queensland and New South Wales, reliant on black coal, faced the highest prices.

These reports extend the trend observed by national agencies in January, indicating significant price decreases in the 2023 calendar year compared to 2022, when electricity prices spiked due to the Russian invasion of Ukraine and declining reliability of coal-fired generators in eastern Australia.

Regarding the gas market, Adelaide witnessed the most substantial year-on-year price decline of 7%, reaching $11.65 per gigajoule. This decrease is attributed to the moderation of international gas prices, driven by a mild winter in the Northern Hemisphere and increased storage utilization in Europe in response to the conflict in Ukraine.

In addition, the integration of the Tailem Bend Stage 2 solar farm into the state’s generation portfolio during the first quarter of 2024 further underscores South Australia’s commitment to renewable energy.

Furthermore, the impact of the new Torrens Island Battery is evident in South Australia’s significant year-on-year revenue increase for batteries, which rose to $20.4 million from $9.3 million in Q1 of 2023. Across the National Electricity Market, batteries are providing increased volume at lower prices, resulting in a doubling of battery output.

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