The normally meek June quarter for electricity markets has been turned on its head with wholesale prices breaking records to an extent that is appalling experts and should scare energy users, regulators and governments.
Market trader and analyst Global-ROAM has described the price surges as “gut-wrenching” for energy users in states such as Victoria, where the average price broke the $100 a megawatt-hour barrier.
That’s up a painful 64 per cent from the second quarter last year, which the analyst notes was already historically high.
The average June quarter wholesale price in the country’s manufacturing heartland state reached $104.92/MWh, beating the extreme prices seen in the 2007 drought and the highest in the 19 years of the National Electricity Market’s history.
But Global-ROAM’s Paul McArdle says that would be simplistic and a mistake, as would singling out any one factor that interest groups might point to, including high gas prices, the rise of intermittent renewables generation, “greedy” generator-retailers, the “drought” in wind levels in May-June or regulatory uncertainty and change.
The change in the market is extreme, even in comparison with the already-startling prices seen in the June quarter last year and in the 2007 drought conditions, says McArdle, who describes the pattern as “mind-blowing”.
As of today it has, if anything, gotten worse with July wholesale prices averaging in QLD 72.94/MWh, NSW 87.13/MWh, VIC $128.34/MWh, and SA $129.88/MWh.
The problem has myriad sources, yes, but it is important to note that the further one gets from QLD the more expensive power becomes. The pattern is identical in gas prices.
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No worries. Demand destruction will fix it before too long.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
