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Regulator tips power bills will fall as solar drives down costs by 30pc


Queensland electricity consumers could soon benefit from a cut to their power bills, as wholesale prices fall by between 30 and 40 per cent, according to the Australian Energy Regulator.

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In its latest report on the national electricity market, the AER said wholesale prices had dropped from record highs since 2018 and in 2019-20 annual prices were below $85 per megawatt hour in all regions for the first time since 2014-15.

“We expect electricity retailers will pass on savings from these cheaper wholesale prices to consumers,” AER chair Clare Savage said.

In the past year there had also been a record number of intervals when the wholesale price fell below zero, mostly in the daylight hours when low-cost solar was at it peak.

Savage said that cut in prices was driven by falls in input costs and increased competition from large-scale solar and wind generation.

“In addition, our analysis suggests that while prices have fallen, they remain at levels sufficient to encourage further investment in new generation and storage,’’ she said.

“This transformation has slightly lessened market concentration, as well as affected how participants offer their capacity, price signals for new investment, and markets for managing fluctuations in frequency.

“Flexible generation is becoming more important in firming fluctuations in intermittent renewable generation, and is now setting the price more often in the peak demand periods.

“In the evening peak, average prices tend to be higher. While there is significant amounts of low-priced capacity offered in the evening peak, particularly by coal-fired generation, hydro generators are playing a far more important price-setting role.

“This trend is likely to continue and the role of flexible generation, like hydro, and storage is likely to become more important.’’

The report did not find any concerning exercise of market power by generators, but there were elements of the market that are vulnerable to the exercise of market power.

“While market ownership remains concentrated, this has slightly improved since 2018. Our latest analysis also shows increased competition, coupled with falls in input costs, have been reflected in lower average generator offers, particularly by coal generators.”

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