In the first quarter of 2024, Australia’s shift towards renewable energy generation continued to impact the country’s electricity landscape, with renewable sources contributing 39 per cent to the grid, up from 37.4 per cent in the same period last year.
This growth in renewables played a significant role in reducing wholesale spot prices by 8 per cent compared to Q1 2023, despite high temperatures leading to increased electricity demand.
The Australian Energy Market Operator’s (AEMO) Quarterly Energy Dynamics report highlighted the impact of this shift, with wholesale spot prices on the East Coast averaging $76 per megawatt-hour (MWh), down from the previous year.
AEMO’s Executive General Manager of Reform Delivery, Violette Mouchaileh, noted that the move towards renewables is progressing rapidly, driving prices down and reducing NEM emissions intensity to new record lows.
However, there remains a price disparity between the northern and southern regions of the National Electricity Market (NEM), with Queensland experiencing an increase in wholesale spot prices to $118/MWh, the highest among NEM regions.
New South Wales followed at $87/MWh, while Tasmania and South Australia recorded lower prices at $67/MWh and $55/MWh respectively.
Victoria had the lowest average price of $52/MWh, despite facing challenges such as a severe storm event in February, which caused transmission line losses and generation outages.
The increase in operational demand across the NEM, averaging 21,552 MW, the highest Q1 average in four years, was particularly evident in Queensland, where a record maximum operational demand of 11,005 MW was recorded on 22 January 2024.
In terms of renewable energy output, grid-scale solar generation saw the greatest increase, setting a new record of 2,164 MW, an 18 per cent lift in quarterly average output compared to the same period in 2023.
Distributed photovoltaics (PV) also reached record highs in several regions, including Victoria, South Australia, Tasmania, Queensland, and New South Wales.
Despite these developments in the renewable sector, wholesale gas prices on the East Coast saw an increase compared to the previous quarter but were 3 per cent lower than in the same period last year, averaging $11.60 per gigajoule (GJ).
This increase in gas prices was driven by a 10 per cent increase in gas demand, mainly due to higher demand for Queensland LNG exports.
The report also highlighted ongoing challenges in the gas market, including declining production from gas fields connected to the Longford Gas Plant in Victoria, which led to the lowest planned capacity since 2004.
Additionally, AEMO triggered east coast gas system functions for the first time, issuing directions to mitigate supply risks following a pipeline rupture on the Queensland Gas Pipeline (QGP) in March.
In Western Australia, the Wholesale Electricity Market experienced seven of the 10 highest maximum average operational demands of all time, with heatwaves pushing demand to record levels.
Demand reduction measures, including Demand Side Programs (DSP) and Supplementary Reserve Capacity (SRC), were activated to ease the strain on the grid.
In the gas market, supply disruptions and increased gas-fired power generation led to domestic production almost matching consumption, highlighting the challenges faced by the industry.
Overall, the first quarter of 2024 showcased the continued impact of renewables on Australia’s energy landscape, driving down prices despite high demand and extreme weather events.
The transition to renewable energy sources is expected to continue shaping the country’s energy future, with implications for both wholesale prices and supply dynamics.
