The Australian Energy Regulator’s latest Wholesale Markets Quarterly report released today shows increasing prices in both electricity and gas in the first quarter of 2022, with higher prices projected to continue throughout the year.
In electricity, average prices at least doubled in most regions during January to March, with prices ranging from $64/MWh in Victoria to $89/MWh in New South Wales, while quadrupling to $171/MWh in Queensland when compared to the same quarter last year.
Generally, across each jurisdiction it was high consumer demand met by supply constraints such as generator outages at times of low wind and solar generation and reduced imports from neighbouring regions, that caused prices to rise during the quarter.
Specifically in Queensland, the La Nina weather pattern was to blame for electricity demand reaching near record levels due to warmer weather and increased humidity in the north. This high demand was met with supply issues caused by planned and unplanned generator outages and limits on the Queensland-NSW Interconnector (QNI), which caused high prices, particularly in the evenings between 6pm and 9pm. As a result, Queensland prices during this evening time slot averaged over $200/MWh in the quarter.
Insights
High electricity prices to continue
Higher priced wholesale electricity is continuing into Quarter 2 with Queensland remaining the most expensive region. Across regions, generator outages and calm wind conditions have reduced the availability of lower priced generation.
Planned and unplanned network outages have further restricted Queensland, New South Wales and South Australia’s ability to access lower priced generation during times of peak demand, resulting in market volatility.
From 1 April to 15 May, there have already been 16 times when the 30-minute price has been over $5,000/MWh.
Electricity market pushing up gas prices
Domestic gas prices averaged around $10/GJ in quarter one. However, this has since been overshadowed by the price increases now happening in quarter two, with prices up to $55/GJ recorded in Victoria in May.
These higher domestic prices in April and May have coincided with an increase in the volume of gas-fired power generation used to meet demand in the electricity market due to coal-fire outages, higher domestic demand in the lead up to the Australian winter, as well as high levels of international demand and near record exports.
In response to high international prices, quarter one had near record Liquified Natural Gas (LNG) exports and high domestic gas production. Gas production hit a new record for quarter one at 5,357 TJ/day. High export levels were also facilitated by an increase in southern production flowing north to Queensland.