The third quarter of 2024 saw notable changes in wholesale electricity prices across eastern Australia, driven by fluctuating generation sources and varying market conditions. Prices in the National Electricity Market (NEM) displayed significant volatility, with average prices ranging from $114 per megawatt-hour (MWh) in Queensland to $201 per MWh in South Australia. Tasmania experienced the largest year-on-year increase, with prices up 290%, followed by Victoria at 114% and South Australia at 76%.
The rise in prices was influenced by several factors, including changes in the generation mix, the availability of interconnectors, and shifting demand patterns. South Australia, in particular, recorded a significant price spike to $326 per MWh during the week of 22 September. This increase was attributed to network constraints and lower wind generation, necessitating a higher reliance on gas-powered generation.
Queensland’s prices peaked at $299 per MWh in early August, before declining in the final weeks of the quarter. New South Wales followed a similar trajectory, with prices reaching $509 per MWh during the week of 4 August. Victoria also saw prices rise to $521 per MWh in the same period. Meanwhile, Tasmania experienced more moderate price movements throughout the quarter, although prices surged sharply at the end of September.
Several key factors contributed to these price increases. Wind generation, while 52% higher than the previous quarter, was highly variable during Q3. The inconsistency in wind output led to more frequent reliance on gas and hydro generation to meet demand, pushing up prices. Gas, in particular, played a critical role in setting prices during high-demand periods. Additionally, negative pricing events became more frequent, especially in South Australia and Victoria. These negative prices, typically occurring during periods of excess renewable energy production and low demand, were observed in approximately 30% of intervals in South Australia and 24% of intervals in Victoria.
Unplanned outages and network constraints also played a significant role, particularly in South Australia, which faced challenges due to constraints on the Heywood interconnector. These constraints limited the state's ability to import electricity, increasing reliance on local generation and leading to higher prices when wind generation was low.
The increased demand across the NEM was met by higher levels of wind, gas, and black coal generation compared to the same period last year. Wind generation rose by 703 MW, while gas increased by 346 MW and black coal by 174 MW. Hydro and solar generation both decreased during the quarter, impacted by lower water levels and curtailment during negative price periods. The variability of wind generation remained a significant challenge, directly influencing price spikes when low wind output coincided with high demand. Gas and battery generation filled the gap during these periods, with batteries increasingly setting the price, particularly in South Australia.