Post: Renewables drive lower prices and record low emissions

Renewables drive lower prices and record low emissions

Renewable energy is making significant strides in driving down the wholesale cost of energy and setting new records for minimum demand for electricity from the grid, according to the latest report from the Australian Energy Market Operator (AEMO).

The Quarterly Energy Dynamics Q1 2023 report, published on 28 April, shows that National Electricity Market (NEM) wholesale spot prices for the March quarter averaged $83/MWh, down from $93/MWh and $216/MWh in the previous December and September quarters.

Source: AEMO

One of the key contributors to this record low demand was the record average output of rooftop solar PV, which reached 2,962MW in the March quarter, up 23% from Q1 2022. This helped to set new Q1 records in Victoria, New South Wales, and South Australia. The report also shows that electricity generation from coal and gas declined, with gas-fired generation reaching its lowest Q1 level since 2005. New and recently commissioned grid-scale solar and wind units increased generation in the NEM by an average of 330MW and 134MW respectively, yielding a record quarterly average of 4,654MW, which was 11% higher than Q1 2022. However, the report highlights the need for more investment in new transmission and firming technology to connect the new locations of wind and solar farms and to even out the variable nature of renewable generation.

Instantaneous renewable penetration hit a new Q1 record at 65.8% this quarter, up 4.4% from the previous record, with rooftop solar PV accounting for 36% of supply during this interval. Additionally, total emissions in the NEM declined to the lowest Q1 levels on record at 28.83 million tonnes of carbon dioxide equivalent (MtCO2-e), a decline of 5.1% from Q1 2022, while emissions intensity dropped 4% from Q1 2022 to 0.64 tCO2-e/MWh.

Despite the continuing north-south price divide, black coal generators in New South Wales and Queensland have increased offer volumes in lower price bands following the announced caps on thermal coal prices, which has decreased the average price set by black coal generators. However, constraints affecting the Victoria – New South Wales Interconnector (VNI) continued to bind frequently during the middle of the day, limiting flows northward and further increasing the gap from higher prices in the northern NEM regions to lower levels in Victoria and South Australia.

Finally, in Western Australia’s Wholesale Electricity Market (WEM), the weighted average Balancing Price reached a Q1-record high of $81/MWh for Q1 2023, due to a reduction in generation and transmission availability and changes to the fuel mix. The report provides valuable insights into the current state of the energy market in Australia and underscores the need for continued investment in renewable energy and transmission infrastructure.

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