Record renewables help bring down Australia’s energy prices and emissions

Australia's record levels of renewable energy helped extend the slide in wholesale power prices in the first three months of 2023, displacing fossil fuels and sending carbon emissions from the sector to new lows for the first quarter.

The latest energy dynamics report by the Australian Energy Market Operator (Aemo) showed wholesale spot prices in the national electricity market (NEM) averaged $83/MWh, down more than a 10th from the December quarter and two-thirds lower than the record average $264/MWh in the June quarter last year.

Rooftop solar output alone averaged almost 3GW for the March quarter, up 23% from a year earlier. That increase contributed to a drop in "operational demand" in the NEM to an average of 14.38GW, or the lowest since 2005. Low demand records were set in Victoria, New South Wales and South Australia.

"Growing renewable output across the NEM helped drive a first-quarter record with 12% of dispatch intervals having negative or zero prices," the Aemo chief executive, Daniel Westerman, said. "Between 9am and 5pm, wholesale electricity prices were negative in South Australia and Victoria 60% and 55% of the time, respectively."

Gas, typically the most costly fuel for electricity generation, provided its smallest first-quarter share of supplies since 2005. Overall gas demand in eastern Australia fell 9%, with domestic consumption dropping to its lowest for any March quarter since 2016, Aemo said.

Aemo's quarterly energy reports offer snapshots of the electricity sector's trajectory. Rising energy costs in the past year have been one propellant for inflation, while supply has arguably become less reliable as ageing coal-fired power plants close or break down.

However the pace of renewable energy's advance, according to the Clean Energy Council, is not yet sufficient to meet Australia's emission goals