The state government has tipped a fall in power prices this year, following a significant reduction in South Australia’s wholesale energy price.

The drop was revealed in a newly-published report from the Australian Energy Market Operator (AEMO).

In a positive sign for households, renewable energy is driving down the price of electricity in South Australia, according to the Quarterly Energy Dynamics report released on 25 January.

Plentiful solar and wind during spring reduced reliance on gas-fired generation, which had forced prices higher because of international energy price shocks prompted by Russia’s invasion of Ukraine.

AEMO reported that wholesale prices in South Australia almost halved from $64 per megawatt-hour in the December quarter of 2022 to $33/MWh in the same quarter in 2023.

It attributed the fall to increased power from rooftop solar and grid-scale renewable generators.

Around 30 per cent of South Australian households have rooftop solar, with much of the Fleurieu reaching more than 50 per cent.

According to the state government, wholesale costs make up about a third of the bill retailers charge households. 

It says cheaper wholesale costs will put pressure on the Australian Energy Regulator to lower its annual benchmark pricing for households and should lead to retailers offering better deals.

Renewables also helped decouple SA from the eastern states where ageing coal-fired generation is becoming less reliable.

The AEMO quarterly report found:

• Prices in SA were half or less than the prices in the black-coal-dependent states of Queensland (average $68/MWh) and NSW ($66/MWh).
• SA prices were also lower than in Tasmania ($50/MWh) and just slightly above Victoria ($26/MWh)
• Gas-fired generation in SA fell to record low, averaging 231MW, down 21per cent from Q4 2022. Torrens Island Power Station dropped most year-on-year, from an average of 84MW to 50MW.
• For the first time in the National Electricity Market (NEM), there was a period of negative operational demand – that is, rooftop solar generated more electricity than was needed for the entire state. This was for the half-hour ending 13:30 on 31 December 2023, where demand was minus 26MW. This was the first time that rooftop solar exceeded demand for AEMO’s half-hour pricing blocks.
• East coast wholesale gas prices continue to trend downwards, averaging $10.83 per gigajoule (GJ) for the quarter, significantly lower than Q4 2022's $17.79/GJ, though slightly higher than $10.41/GJ in Q3 2022.

The December quarter showed SA had the second cheapest wholesale prices among the NEM states.

Minister for Energy and Mining Tom Koutsantonis says the figures published by AEMO show very positive signs, with wholesale prices moving strongly in the right direction.

“It is very encouraging to see the cost of electricity generation has fallen considerably from the period when price shocks rippled around the world after Russia invaded Ukraine.

“South Australia’s high proportion of renewables – which exceeded 75 per cent of generation in 2023 – is key to South Australian prices being far lower than the black-coal states of NSW and Queensland.

“Generation and network costs are by far the biggest components of household electricity bills. Retailers must acknowledge that their costs have fallen – and pass on that price cut to households and businesses.”