The usually "boring" second-quarter power prices have given way to "astounding, off-the-chart" increases, according to a leading energy analyst.
Research from consultants WattClarity shows average wholesale power prices for east coast states in the National Energy Market (NEM) have jumped between 150 per cent and 240 per cent over the past two years.
Second-quarter (Q2) power prices generally are the least volatile in the NEM, lacking the huge spikes associated with hot weather in the first three months of the year and the cold snaps of winter.
WattClarity analyst Paul McArdle said if the jump in Q2 prices in 2016 were "truly remarkable", then 2017 was "off the scale".
While the wholesale prices are not exactly correlated to retail prices paid by households and business, they do indicate bill shock is on its way.
Most retailers hedge against volatility to an extent, with the least hedged likely to pass on the steepest rises.
"Higher prices will flow through, guaranteed, the size will depend which retailer you're with'" Mr McArdle said.
"What the figures show is the level of risk at play in the NEM is a whole lot higher," Mr McArdle said.
"You can see it in higher prices and lower security of supply."
Retailers have already announced households in New South Wales and South Australia will see their power bills rise by around 20 per cent from this month, while Queensland increases are more modest.
Victoria and Tasmania are priced on the calendar year and will release new prices in December.
| State |
Q2 wholesale power price (Long time weighted average) |
Percentage change vs Q2 2016 |
Percentage change vs Q2 2015 |
Comment |
| Queensland | $85.83/MWh | 15pc | 172pc |
Second-highest on record 1/2 hr prices +$50/MW on long-term average |
| New South Wales | $92.62/MWh | 22pc | 161pc |
Second-highest on record Exceeded only by drought affect 2016 |
| Victoria | $104.92/MWh | 63pc | 238pc |
Highest on record More than 50pc of 1/2 hr prices above $100MW/h |
| Tasmania | $114.27/MWh | -3pc | 239pc |
Just below "crisis" levels of 2016 1/2 hr prices under $50/MWh disappeared |
| South Australia | $115.93/MW/h | 43pc | 155pc |
Highest on record 1/2 hr price above $100/MWh 67pc of the time |
'While our political leaders fiddle, Rome burns'
Mr McArdle said the recent rises seen in Q2 are both more systemic, and actually increasing over time.
"It's clear that there are a number of factors behind these changes, and that these factors play different weights in different regions.
"This will have huge implications all the way through the electricity supply chain — for generators, retailers, traders, and for energy users — small and large."
Mr McArdle said Victoria's break above $100 per megawatt hour (MWh) took it to, "A gut wrenching level for the vast majority of energy users in what has traditionally been one of the more boring quarters".
Both New South Wales and Queensland endured marginally higher Q2 prices during the 2007 drought.
"Whilst that year suffered from transient issues, it is looking like what's affecting prices in the NEM is now more deep-seated, multi-faceted, and systemic," Mr McArdle noted.
The situation in South Australia — with half-hour price blocks now above $100/MWh for 67 per cent of the time — was extreme, more than triple the incidence of two year ago.
In Victoria it is above the $100/MWh level around half the time.
"Quite literally, the incidence for South Australia and Tasmania are both off the chart, with Victoria just scraping in below 2,400 half hours — still more than 50 per cent of the time," Mr McArdle said.
"This is a far more excessive outcome than either Q2 2016 and Q2 2007 (the drought year), and there seems to be worrying signs that this is a continued pattern.
"All the while our political leaders fiddle, Rome burns."
Historical average price not enough to start generators
Two years ago, the average Q2 wholesale price ranged between Victoria's $31KWh and $45/KWh in South Australia.
However the cost structure has shifted dramatically.
"These days generators can't, or don't bid, at anything much under $50/MWh," Mr McArdle said.
Mr McArdle said there are numerous cases of over-simplification for the cause of the price hike which have clouded the issue.
"It's all due to the Hazelwood closure, it's all due due to high gas prices, it's all due to intermittency, it's all due to those greedy incumbent gentailers, it's all due to the wind drought, the list goes on."
Mr McArdle said there was a desperate need to increase the capacity for thinking around the greatly increased number of variables in power pricing.
If not, "it will all end in tears", Mr McArdle warned.
