{"id":62829,"date":"2022-06-27T15:59:04","date_gmt":"2022-06-27T05:29:04","guid":{"rendered":"https:\/\/www.solarquotes.com.au\/blog\/?p=62829"},"modified":"2024-09-05T08:31:44","modified_gmt":"2024-09-04T23:01:44","slug":"australia-electricity-price-problem","status":"publish","type":"post","link":"https:\/\/www.solarquotes.com.au\/blog\/australia-electricity-price-problem\/","title":{"rendered":"An Idiot’s Guide To Australia’s Electricity Price Problem"},"content":{"rendered":"
\"Electricity

How most Aussies reacted when they found out their new electricity rates.<\/p><\/div>\r\n

Unless you live under a rock, you’d have heard about the blowout in wholesale electricity prices in the eastern states. Things were so bad that on the 14th of June, AEMO suspended the wholesale electricity market for the first time in its history. <\/p>\r\n

It has been called an energy crisis, but I don’t like that term because I think it gives the impression it could be accidental. It would be more accurate to refer to it as a “predictable energy crisis” or possibly an “intentional energy crisis”. The problem isn’t that the grid can’t supply enough electricity. The problem is that too many generators won’t supply electricity unless they’re paid an extreme price.\u00a0<\/p>\r\n

The problem was sparked by the Russian invasion of Ukraine pushing up gas prices, but I don’t know why they rose as high as shown in the image below, given at the time it was only around $40 per gigajoule in Europe:<\/p>\r\n

\"Gas

This graph from the Australia Electricity Market Operator (AEMO) shows gas hitting a cap of $100 per gigajoule in Brisbane. After this, the cap – the maximum price allowed – on natural gas prices was lowered to $40 a gigajoule.<\/p><\/div>\r\n

While no one has to — technically — be doing anything wrong for gas prices to reach such high levels in our current system, a price spike like this is definitely cause for concern.<\/p>\r\n

WA & NT Are Spared<\/h2>\r\n

Western Australia and the Northern Territory have their own electricity problems, but thanks to their own independent grids, they’ve dodged this particular bullet and haven’t had a ridiculous run-up in wholesale electricity prices.\u00a0<\/p>\r\n

What Are Wholesale Electricity Prices?<\/h2>\r\n

Wholesale electricity prices are what generators receive for supplying electricity to the grid. In this article, I’m using the term to refer to average wholesale spot prices for electricity sold on the wholesale market and not traded through long-term contracts.\u00a0<\/p>\r\n

Multiple Reasons<\/h2>\r\n

There are many reasons wholesale electricity prices have risen so high. High international natural gas prices triggered the situation, but that’s not enough by itself, as only a small portion of Australian electricity is generated from gas. The main factors involved are:<\/p>\r\n