Record levels of renewable energy push demand for electricity from the grid to all-time low for December quarter

Milder temperatures and record levels of renewable energy drove electricity demand to its lowest levels for any December quarter, according to the Australian Energy Market Operator.

Wholesale power prices also retreated during the period, particularly after the Albanese government imposed price caps on black coal and gas that are used to generate power, AEMO said in its quarterly report released on Wednesday.

The average price of $93/megawatt-hour across the national electricity market (NEM) that serves eastern Australia was less than half the $216/MWh cost in the September quarter. Still, it was almost 80% higher than for the final three months of 2021.

Renewable energy from wind, solar and hydro supplied an average of 40.3% of power in the NEM, a record for any quarter since the NEM started in 1998.

It exceeded the previous high, set a year earlier, of 35.8%, AEMO said.

The tail end of the third La Niña event in as many years trimmed power demand for daytime air-conditioning.

A 16% increase in electricity output from rooftop solar panels, or 410MW on average, also decreased demand from the grid.

As a result, operational demand fell 2% from a year earlier to an average 19,431MW, the lowest December quarter reading. New record lows for a quarter were set in South Australia, Victoria and New South Wales, while the 11,892MW use on 6 November was a new low for the NEM in the December quarter.

The government hailed the early signs of a retreat in wholesale power prices as early proof that its price caps were having an effect on household bills. However, wholesale prices make up only about a third of retail costs and are subject to external events, such as an extended fault at coal-fired power plant, or heatwave-driven spikes in demand that could erase price falls.

Wholesale costs may also have been lower due to a drop in gas prices from record highs in June and July. At an average of $17.79/gigajoule, though, the price remained two-thirds higher than a year earlier.

Gas demand actually fell 7% in the December quarter from a year ago in part because of lower LNG production after unplanned outages at export plants in Queensland.

Increased output from renewable energy, with its near-zero fuel cost, also nudged more coal and gas out of the generation market.