The Australian Energy Market Operator’s (AEMO) latest quarterly report shows renewables in Australia are continuing their record-breaking streak. In the final quarter of 2022, green power overtook black coal’s output across its east-coast electricity mix for the first time. While renewable energy generation hit a record high – supplying 40 per cent of the grid’s power during the quarter – fossil fuels fell to their lowest-ever levels.

Future electricity prices for the remainder of 2023 year have also fallen sharply across all mainland states since the introduction of price caps on coal and gas in December 2022. The AEMO’s report shows that the government’s climate and energy policies were starting to work, said Energy Minister Chris Bowen. “The reduced prices were influenced by wind and grid-scale solar, further proof renewables are the cheapest form of energy”, he said. For households, this could mean cheaper electricity bills in the coming months, said Alison Reeve from the Grattan Institute.

AEMO report: From coal to clean

Until now, black coal has been the single largest source of electricity across the National Electricity Market (NEM). This is the fuel that feeds Queensland and New South Wales’ biggest power plants. However, the AEMO figures show that both black and brown coal fell to their lowest average shares since the NEM’S creation in 1998. Additionally, gas power generation fell to its lowest average quarterly output since 2004 due to low demand and high costs.

These trends reflect predictions made by the International Energy Agency’s (IEA) 2022 World Energy Outlook that the global fossil fuel crisis is accelerating the shift to affordable, efficient renewables. The peak use of fossil fuels is also imminent, the IEA predicts, as demand will plateau and then decline steadily from the mid-2020s. 

Renewables in Australia are booming

Output from wind and grid-scale solar grew strongly as new facilities were connected and commissioned. Along with the ongoing boom in rooftop solar panel systems, these large wind and solar farms have been radically squeezing out fossil fuels and reshaping Australia’s electricity market.

AEMO Executive General Manager Reform Delivery, Violette Mouchaileh, said the strong growth in wind and grid-scale solar output lowered the grid’s climate-polluting emissions over the quarter. “This growth, along with the lowest output from coal-fired generation since NEM start (down 926 MW from Q4 2021), saw NEM emissions drop to the lowest quarter on record at 26.4 million tonnes carbon dioxide equivalent – 5.6% lower than Q4 2021 levels”, she confirmed. 

Record high prices for coal states

With wind and solar generating cheaper electricity than fossil fuels, Australia’s coal-dependent states missed out on the price benefits of renewable growth, highlights Giles Parkinson in RenewEconomy. In the December quarter, wholesale prices in Queensland and NSW grids reached record highs – double the price of southern states. This highlights a widening of the “north-side” divide regarding electricity generation and costs. 

The price spikes in the coal-dependent states were largely because of widespread outages at ageing and unreliable coal plants, outlines the AEMO report. Moreover, black coal generators demanded significantly higher prices – mostly well above AUD $100/MWh (megawatt hour). As a result, the average price paid in the quarter was AUD $120/MWh in Queensland and AUD $116/MWh in New South Wales. Meanwhile, in Victoria and South Australia, it was around AUD $63/MWh.