In a boost to household budgets, electricity supply costs are falling as coal and gas-fired generation hits a record low and renewable energy takes a bigger load.
Every region notched a solar output record in the closing months of 2023 which combined with record fossil fuel generation to slash wholesale electricity prices, according to an update from the Australian Energy Regulator (AER).
Separately, inflation data released on Wednesday shows electricity price rises are already easing as bill rebates kick in, up a mere 1.4 per cent from October to December compared to a rise of 4.2 per cent in the September quarter.
The Australian Bureau of Statistics said electricity prices had risen 5.7 per cent since the June 2023 quarter and would have increased 17.6 per cent during this period without the bill relief.
Treasurer Jim Chalmers told reporters in Melbourne further intervention was still being considered.
“The focus for us right now is bigger tax cuts for middle Australia to help with the cost of living,” he said.
“But we are prepared to contemplate any affordable or responsible additional measures we can take in the May budget to ease the pressure.”
While wholesale prices are sharply lower than the peaks of two years ago, the regulator said Australia remained vulnerable to price spikes should heatwaves strike from January to March.
The AER also warned it would “take time” for power bills to reflect recent lower wholesale costs.
Combined, wind and solar farms reached a record high of 26 per cent of generation output in the national electricity market (NEM) from October to December, up from a record 23 per cent a year earlier.
Average annual wholesale electricity prices in the NEM dropped between 44 per cent and 64 per cent and average annual east coast gas market spot prices fell 43 per cent in 2023.
The proportion of electricity output sourced from coal and gas fell to a record low 66 per cent.
Wholesale electricity prices fell in NSW, Victoria and South Australia but increased in Queensland and Tasmania.
Victoria was cheapest, averaging $34 per megawatt hour, while Queensland was most expensive at $79 per MWh.
However, the gap between daytime and evening continued to widen with evening peak prices averaging more than $100 per MWh in Queensland, NSW and South Australia.
Energy analyst Tim Buckley said the regulator would set the next Default Market Offer, which determined what consumers pay, in coming months after wholesale electricity prices halved in the past year.
“This follows the progressive unwinding of two years of hyperinflation in coal and gas commodity prices, both internationally and in our domestic energy markets,” he said.
Wind and solar supported by big batteries and transmission are expected to bring permanently lower prices for homes, businesses and industry.
“After two years of 20 per cent annual retail electricity price rises, consumers can hope for some real energy cost of living relief,” he said.
Gas analyst Kevin Morrison expects declining gas demand to continue as more of the energy system electrifies and batteries provide more competition to gas-fired plants to back up renewables.
Residential and commercial gas demand was at its lowest in a decade and demand from gas-fired generators dropped 27 per cent from the previous three months.
Gas prices on the east coast spot market increased slightly from the previous quarter to $10.83 per gigajoule and southern gas storage remains at a record high.
Trading by producers granted an exemption from a government-imposed $12 per GJ gas price cap had relatively little impact on prices, AER said.