Record solar generation, from both farms and rooftops, drives down power prices on the NEM

Record contributions to the national grid from both large-scale solar and rooftop PV are helping to push down the cost of power, new data shows, with average wholesale electricity prices over the first quarter lower than the preceding quarter.

The Australian Energy Regulator latest Wholesale Markets Quarterly Report shows that forward base futures prices for electricity have stabilised over the first three months of 2023, staying well below levels reached in 2022.

The report says that even despite an increase in demand over the quarter, largely due to heatwave conditions at different times and in different states, average quarterly prices ranged from $64/MWh in Victoria to $114/MWh in Queensland.

The AER says the overall downward trend is partly due to the ongoing effect of the Albanese government’s coal price cap intervention, but also thanks to greater supply of low-priced capacity offered into the market, including from solar.

“Across the NEM, large-scale solar output achieved an all-time quarterly record and was up 22 percent on a year earlier, accounting for 9 percent of the total generation mix in the quarter,” the report says.

“Rooftop solar output also hit a new record,” it adds, with both contributing to downward pressure on daytime prices.

The AER says the strong solar output also led to a record number of negative prices for a first quarter, which put further downward pressure on overall prices.

AER chair Clare Savage says the regulator is currently finalising the Default Market Offer (DMO) for the coming year, and keeping a close eye on electricity forward contract prices given their relationship to wholesale costs.

“The coal price cap interventions continue to place downward pressure on electricity prices, together with strong renewable output”, said Savage.

“At this stage, the late quarter increase in base futures prices does not appear to be having an impact on likely DMO outcomes but we will continue to monitor contract prices ahead of releasing our final DMO determination in May.”

The AER will release its final determination for the 2023-24 DMO by 26 May 2023.