Cheaper renewables pile into grid and slash power costs
WA Today
January 24, 2024
A record-breaking volume of renewable energy has driven the price of electricity generation down 24 per cent, cutting the use of more expensive coal power and raising the likelihood of significant cuts at the next round of price-setting for household energy bills on July 1.
The steep drop in wholesale power costs – a key component of household bills – is welcome news for the Albanese government, which has pledged to more than double the share of renewables in the grid to 82 per cent by 2030 and to cut $275 from household bills by 2025.
The rise of wind farms and other green power sources has raised hopes of significant reductions to household bills.
According to a new report by the Australian Energy Market Operator (AEMO), the volume of power generated by wind and solar farms rose to an all-time high in the December quarter of 2023, up 14 per cent on the same time period in 2022, taking the share of clean energy to a record 43 per cent of electricity generation.
A global crunch on energy supplies starting in February 2022 drove power bills through the roof – rising by up to $350 a year in Victoria from July 2023 and $450 in NSW. These rises were caused by Russia’s invasion of Ukraine, which spurred a global round of embargoes on Russian fossil fuel exports.
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But the rise of wind and solar farms, as well as rooftop solar panels, helped reduce the impact of the global energy market and cut Australia’s wholesale electricity prices, raising hopes of significant reductions to household bills when the next round of retail prices are set from July 1.
AEMO chief executive Daniel Westerman said the rise of renewables was a “great opportunity” for a lower-cost electricity system.
“More low-cost renewable energy was generated and wholesale energy prices have fallen,” he said.
Wholesale power prices – which are paid by electricity generators and passed onto household customers – averaged $48 per megawatt hour in the last three months of 2023, which was a drop of 24 per cent from the previous three months.
Compared with the same period in 2022, when the global energy crunch was in full swing, the wholesale price was down 48 per cent.
Cheaper renewables are outcompeting coal plants, making their replacement increasingly urgent. AEMO recently forecast that the last coal plant would shut in 2038, five years earlier than previously expected.
“We are regularly seeing records set for the higher contribution of renewables, and lower levels of energy drawn from the grid because of rooftop solar,” Westerman said.
“As our coal-fired generators retire, renewable generation, batteries, hydro, new gas-fired power plants, and new transmission will power our homes and businesses.”
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Another factor driving down prices is the Albanese government’s caps on what electricity generators pay for coal and gas, imposed in December 2022 at the height of the global energy crunch.
Climate Change and Energy Minister Chris Bowen said the government was “making sure Australians get access to the cheapest-cost energy they can”.
“The shift to renewable energy is working exactly as it should with wholesale prices being cut in half over the past year as renewables hit an all-time record output and the Albanese government’s coal and gas caps took effect,” Bowen said.
The government has pledged to raise the share of renewables to 82 per cent by 2030, which is a key component of its legislated climate target to cut emissions 43 per cent in the same time frame.
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