According to AEMO, the wholesale electricity prices in 2022 have increased by 141% compared to the same time in 2021, leading to electrical prices almost quadrupling. This set a chain effect on the demand and supply chain where demand wasn’t met, and more costly energy had to compensate. A lot had to do with variables we cannot control but exactly how did this happen?
At Electricity Brokers we help you fight the price increase with professional comparison and analysis of different energies and electrical rates.
1. Electricity Prices Increased By Disruptions to Coal Supply
60 per cent of the National Electricity Market (NEM) comes from coal-fired electricity. In 2022, coal mining significantly decreased due to existing challenges in the industry. Some coal plants have been disrupted by the severe rain. Others have been experiencing offline suffering from maintenance issues. The supply chain was also disrupted consequently, leading to difficulties accessing coal.
2. Increased Demand In The Electricity Market
The decrease of coal supply meant demand isn’t being met and coal prices increased. This increased the prices of other energy resources and competition in the market. Gas-fired power plants have been used to compensate for the underproduction of coal-fired electricity. However, this is a more expensive electricity resource. The higher demand for gas-fired electricity drives gas prices to rise even higher.
3. Renewables Produced Less Than Expected
The output of renewable energy increased this year compared to 2021. This has been attributed to the increased capacity of renewables. However, the adverse weather caused solar units to underperform and put pressure on the NEM. Household solar units have also underperformed. This increased the households’ non-renewable energy demand.
4. The AMEO Places A Cap On Electricity Prices
The rapid increase in electricity prices led to the Australia Energy Market Operator (AEMO) placing a cap on the wholesale electricity prices. For some suppliers, this meant that the cost of production was higher than the selling cost and stopped producing energy. This put more demand and pressure on other electricity producers. This cap has been since removed, but wholesale electricity prices have remained high
5. Inflation
Inflation is driving the increase of energy generation. Higher production costs have led to higher retail prices in order for businesses to reflect their costs during energy production.
6. Supply Chain Difficulties
Conflict overseas put pressure on the supply chain in 2022, affecting energy supply levels. The Ukraine-Russian war led to some European countries changing where they source their energy. Countries seeking other companies for resources increased global demand and consequently increased energy rates. The global increase in transport costs also affected Australian wholesale electricity prices, as Australia is a big exporter of fossil fuel energy. On top of that, Australia imports a lot of energy as it exports a big majority of the coal generated electricity we produce.
With electricity rates for commercial electricity higher than ever, getting the best offer for your business is crucial. Contact Business Electricity Prices for specially knowledge on business electricity comparison.
