Electricity price surge

WHOLESALE power prices have jumped by 150 per cent in the last year amid soaring coal and gas costs while heavy rain dampened solar output, Origin Energy said.

Wholesale electricity spot prices surged in the first three months of 2022 to average $90 per megawatt hour across the power grid, Origin data shows.

That marks a 150 per cent bounce from the first quarter of 2021 when prices were just $36MWH and a 58 per cent jump from the last three months of 2021 where prices averaged $57MWH.

The huge bump, which if prolonged will filter through to higher household bills, backs up official data released on Friday from the Australian Energy Market Operator, which found similar inflation had hit the energy sector.

Origin, which has accelerated the closure of Australia’s largest coal plant by seven years to mid-2025, said elevated coal and gas fuel costs were partly to blame after Russia’s invasion of Ukraine roiled international commodity markets and created a new squeeze on supplies.

A volatile La Nina summer also played its part. While hot weather saw Queensland hit record market demand on March 8 and NSW surge higher in February, the two states were also hit with lower solar production as extreme rainfall in March dampened output.

Coal outages in Queensland also hiked pressure on the power grid, while Origin called out periods of high South Australian prices driven by choppy renewable generation and interconnector constraints, which curbed electricity supply from Victoria.

Origin also pointed to a slump in coal output from its own giant Eraring coal plant, down 16 per cent for the financial year to date due to coal delivery constraints from its main supplier.

“Wholesale prices across the national electricity market have risen significantly compared with the prior period driven by higher coal prices, lower solar output associated with the La Nina summer and baseload outages across the national electricity market,” Origin chief executive Frank Calabria said.

Electricity sales volume for the March quarter rose 7 per cent year-on-year, with a 16 per cent lift in business volumes on customer wins more than offsetting a 4 per cent decrease in retail volumes on lower usage.

Its APLNG revenue rose 15 per cent on the prior quarter to $2.57bn and financial year to date revenue more than doubled on higher LNG and realised oil prices while North Asian LNG market prices delivered in the quarter averaged Us$31/mmbtu, as buyers clamour for supplies.

High coal prices and breakdowns of coal units underscored the need to speed up a move to renewables, The Australia Institute said.

“Coal prices are set by global markets. When the coal price rises due to international conflicts, so do our electricity bills,” The Australia Institute’s Richie Merzian said.

“While we remain dependent on coal we will always be at the mercy of high coal prices and outdated and unreliable coal power stations.”

Greenpeace said the market was showing the risks of AGL Energy proceeding with a planned demerger in June.

“The AEMO update shows AGL, Australia’s biggest climate polluter, is hurtling down a path to failure through its obsession with expensive and unreliable coal, which it will attempt to cover up through its proposed demerger,” Greenpeace said.