Figures published on Wednesday by the Australian Energy Market Operator (AEMO) showed wholesale prices averaged $133 per megawatt hour (MWh) in the June quarter (up 23 per cent).

A range of factors combined to drive prices higher, including a sharp reduction in output from renewables amid lower wind speeds and a huge cold snap that saw heating demand spike.

“On the east coast we have seen low temperatures and persistent cold snaps, especially in Victoria, which have driven higher morning peak demands through the tail end of autumn and the first month of winter,” AEMO chief executive Daniel Westerman said.

“Extended periods of low wind have led to reduced wind generation output, which was down 20 per cent from last winter to a quarterly average of 2657 MW, with wind availability down to their lowest levels since [the June quarter of 2017].”

It’s unclear what the spike means for retail prices, however, with retailers facing restrictions on how they can change energy bills and a plunge in regulated prices only recently hitting families.

Australians are being encouraged to check their own plans, with some experts saying hundreds of dollars in savings are potentially on the table for people who haven’t renegotiated this year.

Outlook unclear amid volatility

Grattan Institute energy program director Tony Wood said implications for retail prices moving forward will become clear over the course of the year, rather than just a single quarter.

But he said that volatility in wholesale prices is something Australians should increasingly expect, with the energy market increasingly exposed to weather patterns like cold snaps.

“We are in a system now where firstly climate-related weather events are becoming more common,” Wood explained.

“That doesn’t just affect renewables, it affects the system.”

Crucially, he said while renewables are a predictable source of power throughout the year, an energy system increasingly reliant on them will be more exposed to those weather patterns.

“That’s the system we’ve got a plan for and these recent weeks show it’s going to be tricky,” Wood said.

“We haven’t been building renewables fast enough, and we’ve taken out insurance to keep coal-fired power stations running a bit longer.”

Victoria University Professor Bruce Mountain said there are signs in contract markets that the slow pace of the energy transition has put some upwards pressure on wholesale prices.

“The ongoing failure to expand wind and solar production anywhere near the rate necessary to achieve the transition that AEMO maps out is starting to weigh on [market] participants,” he said.

“They foresee a longer role for both coal and gas, and hence prices that are higher than they otherwise would be.”

Some renewable generation fell substantially over the June quarter, with power from wind down 20 per cent and hydro down 18 per cent. Meanwhile, gas rose 16 per cent and coal 7 per cent.

Fossil fuels are more expensive than renewables, and so prices rose substantially in the face of higher demand as cold weather gripped large parts of the east coast throughout May and June.

But as extraordinary as market conditions have been over the past three months, things could still change over summer and drive prices lower, Mountain explained.

“You might find the market turns come spring and summer and we have lots of sun and not quite as much demand as we imagined,” he said.

“That might mean lots of negative price periods in the summer that will drive prices down.”

Many households could save

Many households have had a torrid time with power bills over the past two years, particularly in 2023 after bills spiked massively following a crisis across the national power market.

But relief has been passed down recently after regulators approved substantial reductions in household utility bills that will now become a reference point for the entire consumer market.

So, if you haven’t had a look at your electricity deal in the past year, now is the time to shop around, with experts recently estimating that hundreds of dollars in yearly savings could be on the table.

The best place to do this is energymadeeasy.gov.au – a government-run comparison service of the cheapest deals in your area.

– TND