Solar, wind and batteries push down electricity bills for homes and business, despite global fuel crisis

Electricity costs will fall for households and businesses on most parts of Australia’s main grid, as wind, solar and battery storage combine to push down wholesale electricity prices and to insulate the local market from the global volatility being created by conflict in the Middle East.

The Australian Energy Regulator (AER) on Tuesday published its final determination on the Default Market Offer (DMO), which caps the price electricity retailers can charge a small proportion of household and small businesses on standing offers all National Electricity Market states, except Victoria.

In the DMO regions – Victoria’s default offer was set yesterday, by that’s state’s pricing regulator – the AER says the residential flat-rate standing offer will fall by between 3.4-5.0 per cent in New South Wales and by 7.2 per cent in South East Queensland compared to last year.

In NSW, this means households on the DMO could expect an annual bill reduction of between 3.7 per cent ($72) and 7.7 per cent ($211) and between 9.4 per cent ($449) and 20.9 per cent ($1,303) for small business customers.

In South East Queensland, the new DMO settings will see annual bills discounted by 7.2 per cent ($155) for residential customers and 10.4 per cent ($445) for small business customers.

South Australian households, meanwhile, would see a slight bill annual increase of 1.4 per cent (or $33) – although for customers signed up to time-of-use retail offers, prices will fall slightly, by 1.1 per cent ($25) for residential customers and decrease by 12.1 per cent ($673) for small business customers.

Notably, all customers in all states could see improved bill savings on time-of-use offers, the AER says: up to $211 for NSW residential customers and up to $1,303 for small business customers. In South East Queensland, a bill saving of up to $229 could be achieved by residential customers and $601 for small businesses.

The power price cuts represent welcome downward pressure on grid electricity prices amid a fresh flurry of interest rate rises and as the cost of petrol and gas head in the opposite direction fuelled by the ongoing global oil crisis.

A similar outcome was announced in Victoria on Monday, where the state’s regulator confirmed the cost of electricity will fall in all five of the state’s electricity distribution zones, cutting household energy bills by an average of $84 in the coming financial year and by an average of $241 a year for small businesses.

“This is a positive outcome with prices coming down for the majority of households and all small businesses across the three regions where the DMO safety net applies,” AER chair Clare Savage said in a statement.

“The reductions compared to last year reflect easing costs across most components of the DMO, particularly in wholesale energy, where we’ve seen lower electricity contract prices, reduced spot price volatility, and increased output from wind and battery generation during evening peaks.

“Despite uncertainty created by conflict in the Middle East, wholesale energy costs have not increased.”

Savage says this financial year’s price determinations have also felt the benefit of recent government reforms that applies new methodology to calculate the DMO.

“We have adjusted our approach to applying network costs, which is to now blend network tariffs for customers on flat rate retail tariffs to better reflect the mix of older-style legacy meters and newer smart meters across the population,” she said.

“Our energy system is progressing towards full implementation of smart meters by 2030, so this decision reflects this transition.”

Federal energy minister Chris Bowen says the reforms to the DMO settings have given energy consumers in across the NEM “a better go, a fairer chance,” while firmed renewables continue to stabilise the market and push down prices.

“We’ve just hit 50 per cent renewables,” the minister said on Tuesday morning. “Renewables are the cheapest form of energy. When you have more renewables that puts downward pressure on prices.

“Secondly, what we’re seeing is batteries working to what we call flatten the peak. So the biggest pressure on prices is in the night time when coal and gas are called upon more.

“When we’re calling on batteries more, which has saved the renewables from the middle of the day for the night, that is really putting very significant down pressure on prices.”

Tim Buckley, director of Climate Energy Finance, says the reduction in retail electricity prices coming at the same time as renewable energy penetration on the NEM reaches record high shares is “no coincidence.”

“Amazing to see electricity price deflation being delivered in Australia in the middle of the latest fossil fuel war, with its resulting hyperinflation of global fossil fuel prices,” Buckley said on LinkedIn.

“Supply growing faster than demand is the obvious driver of sustainably lower electricity prices, and for all the bleatings and distractions from the LNP about a coal and / or nuclear revival, the reality is almost all new investment in Australia’s electricity market by domestic and foreign investors is into zero emissions renewables, batteries and grid transmission.”

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