The Times Australia
The Times World News

.

Electricity prices are spiking, ten times as much as normal. Here are some educated guesses as to why

  • Written by Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria University
Electricity prices are spiking, ten times as much as normal. Here are some educated guesses as to why

Electricity prices in the short-term (“spot”) wholesale markets in Australia are surging again.

As I first drafted this, at 11.30pm on Tuesday, while electricity demands were not high, the prices quoted for each five-minute interval in Queensland, NSW, Victoria and South Australia were around A$250 per megawatt-hour[1], roughly ten times what they would normally be.

So far this year, average spot prices have been about 50% higher than last year in Victoria, South Australia and Tasmania, about 80% higher in NSW, and 150% higher in Queensland.

If it keeps up (which is likely), retail electricity prices will be on the rise again.

That effect is likely to be big. In NSW and Queensland, it could mean increases as high as 50% for large customers and as high as 20% for households.

Why is it happening? At first glance, it’s hard to say. The minute-by-minute readout comes without explanations.

One reason would be that coal and gas prices are surging. Newcastle “spot” coal is trading at five times[2] its price over the past three years.

Gas and coal prices are spiking

Queensland spot gas costs five times what it did before the invasion of Ukraine.

A second reason might be that electricity producers are making hay while the sun shines by withholding generation capacity.

Steven Percy and I examined the electricity price surges that followed the closure of Victoria’s Hazelwood coal-fired generator in 2017, and found that one firm withheld capacity from the market[3], driving up prices.

Subsequently the government introduced so-called “big stick[4]” legislation that imposes penalties[5] for manipulating prices, although it has yet to be used.

We do not yet know whether manipulation can explain some of what we see now. It will require detailed study, and such analyses are contested.

The price of sunlight is not

The best way to restrain price surges in the medium term is to increase the penetration of low-cost energy from the wind and sun, and to back it with storage.

South Australia shows what can be done. The Rann and Weatherill Labor governments, and then the Marshall Liberal government, have all pushed the switchover to renewables.

By 2021, more than two-thirds of SA’s electricity came from variable renewable generation, more than in any developed economy we know of.

For most days in 2021, there was no need for any other kind of generation between 10am and 5pm.

Read more: Labor says power prices are going up, the Coalition says not. Who's right?[6]

This has had a big impact on prices. From having long had the highest wholesale prices in the National Electricity Market, by 2021 SA had almost the lowest.

Conversely, Queensland, which has long had the least renewable generation, now has the highest prices. In the year to date, Queensland’s average wholesale price[7] has been twice SA’s.

When inputs get cheap, prices fall

The reason, backed by econometric analysis[8] is that when a free resource (wind and sun) displaces an expensive resource (coal and gas), prices fall.

Each state government now accepts this and is rapidly moving to decarbonise its supply, which is leading to a new problem. The states that get there quickly are less keen on sharing their cheaper power than they used to be.

Why would SA want to strengthen its interconnection to NSW, only to have its electricity prices dragged up to those of NSW by trade along that wire?

Read more: 20 years on, the national electricity market is on the way out, and it's OK[9]

The newly elected SA government opposed[10] the interconnector currently under construction while in opposition. From SA’s point of view, the current high prices in NSW lend weight to its position.

We have reached the end of the beginning of the decarbonisation of Australian electricity. With the fossils-vs-renewables argument now over other than on the fringes, the argument has moved to whether the National Electricity Market can hold together[11] and the best way the Commonwealth can help states get as much sunlight, wind and batteries into their systems as soon as possible.

References

  1. ^ A$250 per megawatt-hour (www.aemo.com.au)
  2. ^ five times (tradingeconomics.com)
  3. ^ withheld capacity from the market (www.vepc.org.au)
  4. ^ big stick (www.afr.com)
  5. ^ penalties (ministers.treasury.gov.au)
  6. ^ Labor says power prices are going up, the Coalition says not. Who's right? (theconversation.com)
  7. ^ price (www.aemo.com.au)
  8. ^ econometric analysis (www.vepc.org.au)
  9. ^ 20 years on, the national electricity market is on the way out, and it's OK (theconversation.com)
  10. ^ opposed (www.abc.net.au)
  11. ^ hold together (theconversation.com)

Read more https://theconversation.com/electricity-prices-are-spiking-ten-times-as-much-as-normal-here-are-some-educated-guesses-as-to-why-182849

Times Magazine

Headless CMS in Digital Twins and 3D Product Experiences

Image by freepik As the metaverse becomes more advanced and accessible, it's clear that multiple sectors will use digital twins and 3D product experiences to visualize, connect, and streamline efforts better. A digital twin is a virtual replica of ...

The Decline of Hyper-Casual: How Mid-Core Mobile Games Took Over in 2025

In recent years, the mobile gaming landscape has undergone a significant transformation, with mid-core mobile games emerging as the dominant force in app stores by 2025. This shift is underpinned by changing user habits and evolving monetization tr...

Understanding ITIL 4 and PRINCE2 Project Management Synergy

Key Highlights ITIL 4 focuses on IT service management, emphasising continual improvement and value creation through modern digital transformation approaches. PRINCE2 project management supports systematic planning and execution of projects wit...

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Times Features

What Endo Took and What It Gave Me

From pain to purpose: how one woman turned endometriosis into a movement After years of misdiagnosis, hormone chaos, and major surgery, Jo Barry was done being dismissed. What beg...

Why Parents Must Break the Silence on Money and Start Teaching Financial Skills at Home

Australia’s financial literacy rates are in decline, and our kids are paying the price. Certified Money Coach and Financial Educator Sandra McGuire, who has over 20 years’ exp...

Australia’s Grill’d Transforms Operations with Qlik

Boosting Burgers and Business Clean, connected data powers real-time insights, smarter staffing, and standout customer experiences Sydney, Australia, 14 July 2025 – Qlik®, a g...

Tricia Paoluccio designer to the stars

The Case for Nuturing Creativity in the Classroom, and in our Lives I am an actress and an artist who has had the privilege of sharing my work across many countries, touring my ...

Duke of Dural to Get Rooftop Bar as New Owners Invest in Venue Upgrade

The Duke of Dural, in Sydney’s north-west, is set for a major uplift under new ownership, following its acquisition by hospitality group Good Beer Company this week. Led by resp...

Prefab’s Second Life: Why Australia’s Backyard Boom Needs a Circular Makeover

The humble granny flat is being reimagined not just as a fix for housing shortages, but as a cornerstone of circular, factory-built architecture. But are our systems ready to s...