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Retail electricity prices fall over summer months

Energy Action

When looking across the NEM, prices in New South Wales, Victoria and Queensland declining approximately 4% between December 2017 and April 2018, and South Australia reducing by 7% over this period.

The fall in prices remains only moderate and is in part attributable to the decline in customer contract renewals following the December quarter where contract expiries are typically at their highest.

Energy Action expects that the NEM will be better placed to manage demand during the next summer where increased renewables generation and battery storage will be available, and the supply of fossil fuels is likely to remain steady. This would underpin lower prices next summer, however, the potential for unexpected price spikes remains.

Ongoing National Energy Guarantee (NEG) developments

With the recent release of the Energy Security Board’s high-level design paper, further details regarding both the emissions and reliability component of the scheme are also informing the outlook for prices.

It’s worth noting that currently only limited detail is known about the NEG, but at this stage Energy Action is recommending that customers do not factor expected savings into procurement decisions at this stage.

Based on available information, Energy Action views the emissions component of the NEG as more developed than the framework to ensure reliability. However, given that the states generally have more ambitious renewables targets than at federal level, and with the high volume of renewables projects expected to empty from the pipeline over the medium term, the trajectory for renewables is likely to outstrip the imposed emission targets.

When considering the reliability component of the NEG, retailers are expected to contract with generators for dispatchable MW, and AEMO will then forecast the shortfall needed during peak times.

Energy Action’s current view is that the proposed factors that can support reliability are expected to extend the life of existing fossil fuel plants. Alternatively, the dispatchable energy would be sourced from demand-side management, in which case the scheme will have similar traits to the Reliability and Emergency Reserve Trader (RERT).