Wholesale energy prices fell by as much as 64% last year in Australia, while reliance on coal and gas dropped to record lows according to the national energy regulator (AER).
It means electricity generators (wholesalers) are selling power to retailers (e.g. AGL, Origin, EnergyAustralia) at a cheaper rate.
However, it doesn’t mean that household energy bills will come down straight away. Here’s why.
Energy prices
Most Australian jurisdictions get power from the National Electricity Market (NEM).
The NEM connects power producers (coal, gas, and renewable) to users (households and businesses), often with an energy retailer in between.
In winter 2022, the energy system struggled and electricity bills rose, due to a combination of global gas shortages, failing coal plants, and insufficient renewable capacity.
Price drop
The AER found NEM prices were 44-64% lower in 2023 than in 2022.
2022 NEM prices were considerably higher than previous years, owing in large part to global pressures such as the war in Ukraine and slow supply chains following COVID-19 border restrictions.
Energy prices for 2023 in Australia were comparatively lower than in 2022, but still higher than previous years.
Renewables
Wind and solar energy generated a record 26% of the grid’s supply last year, up from 23% in 2022.
The AER attributed this to cheaper wind and solar costs.
“The proportion of electricity output sourced from coal and gas fell to a record low of 66%,” said AER board member Jarrod Ball.
High rates of rooftop solar meant that electricity demand was lower in Victoria and South Australia.
Delay
The AER warned that retailers still need to adjust their costs to reflect lower wholesale prices, which could take some time.
A recent consumer survey found more than half of households were increasingly worried about paying for electricity compared to previous years.
Federal Energy Minister Chris Bowen said he was confident higher rates of renewables are driving down energy prices, which he added will “ultimately flow through to consumer bills”.
