COVID, renewable energy combine to spark hopes for power bill relief
The coronavirus and renewable energy generation are driving wholesale power prices to their lowest point in five years, as Energy Minister Angus Taylor warns electricity retailers they are on notice to pass the savings on to their customers.
The Australian Energy Regualtor's June quarter wholesale market report, released on Friday, said the wholesale prices paid by retailers had averaged $85 per megawatt hour in all regions in the national energy market for the first time since 2015. For the first time since 2016, wholesale gas prices dipped below $7.25 in all regions as well.
Energy Minister Angus Taylor is warning retailers they must pass wholesale power price falls on to consumers.Credit:Jesse Marlow
Wholesale electricity prices make up about one third of a retail electricity bill, with the remaining costs dominated by network charges to pay for the poles and wires.
AER chairwoman Clare Savage said the electricity price drop was due to lower fuel costs for power generators and increased uptake of renewable energy.
Coronavirus restrictions across the economy have reduced the nation’s energy demands, which have flowed through to wholesale prices. Meanwhile, the growth in renewable energy generation – which makes up more than 20 per cent of the nation's power and is expected to grow sharply in the coming years – has reduced daytime spot prices, putting more pressure on coal-fired generators.
"We have seen record high renewable output and record low coal output since the start of the National Electricity Market in 1998. Coal, gas and hydro have been setting significantly lower prices than a year ago. Low fuel prices led to more capacity offered into the market at low prices," Ms Savage said.
"Wholesale gas and electricity costs make up about a third of an average residential energy
bill, so falling wholesale costs should mean good news for consumers."
Mr Taylor encouraged consumers to shop around and put retailers on notice to pass on wholesale price drops.
"The government has been clear: lower wholesale prices must be translated into lower residential prices for Australian families and small businesses," Mr Taylor said.
"It is pleasing to see some energy retailers have responded to the lower wholesale prices by offering new deals to their customers. Energy companies must put energy consumers first especially as many struggle with the impact of the COVID-19 pandemic."
Plummeting global demand for gas has flowed through to the domestic market. Mr Taylor said lower prices would help maintain Australia's competitive advantage.
"Affordable gas has never been more important… This is why the Australian Government believes a gas-fired recovery will drive jobs and economic growth," he said.
Tens of thousands of consumers are struggling with energy bills. The Australian Energy Regulator said last month that 94,000 customers had been accepted for payment plans up to the end of March, excluding Victoria, which has different reporting arrangements, and more than 1000 customers were seeking assistance each week.
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