Data shows the higher cost of fossil fuels is driving wholesale power prices up.

Electricity demand dropped to a record low in several states during a milder-than-usual end to 2021, the Australian Energy Market Operator (AEMO) says. 

Average wholesale prices increased over the year due to the higher cost of fossil fuels, despite their share of the market diving.

At the same time, renewable energy set generation highs in the national electricity market (NEM).

Clean energy was responsible for 34.9 per cent of generation in the last quarter of 2021. At one point on 15 November, renewables supplied 61.8 per cent of Australia’s needs. 

NEM emissions dropped to their lowest quarterly total on record, 8 per cent less than the previous quarterly low set a year earlier, AEMO says.

Still, more expensive fossil fuels pushed up wholesale power prices in mainland states, averaging $57 a megawatt hour. This was down 13 per cent on the September quarter, but nearly a third higher than in the December quarter of 2020.

“Increases in underlying traded prices for black coal and gas were likely to have been influences on offer price levels for some of these generators,” the latest AEMO report says.

“The gap between prices in the northern NEM regions of Queensland and NSW and the southern regions persisted through the quarter, with prices in [the two states] averaging $45/MWh higher than those in Victoria and South Australia, the second largest differential after the June quarter of 2021.”