August proved to be a month of extremes. The National Electricity Market (NEM) experienced the highest ever daily average price on the 5th of August followed by the lowest ever weekly average price at the end of the month. In both cases, weather and generation availability were the key drivers (which we will explore in this update). As we move into spring, lower prices are expected to continue as renewable generation increases and demand drops alongside mild temperatures.
Electricity price insights
On the 5th, low renewable generation coinciding with cold weather, caused significant price volatility. All mainland NEM states, except Queensland, saw over two hours of very high prices in the morning, and all the mainland states except South Australia saw over 2.5 hours of very high prices in the evening.
It is unusual for all the mainland states to experience very high prices at the same time, as there is usually spare capacity on the interconnectors that can allow generation to be shared between some states. In the event that there is no spare capacity in the interconnector, only the state short on capacity would experience high prices. However on this day, consistent weather conditions across the NEM and outages of 6 coal units and 7 gas units left the whole NEM reliant on expensive backup generation and saw daily average prices exceed $2,000/MWh for VIC and NSW, over $1,000/MWh for QLD and SA, and just below $1,000/MWh for TAS.
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