Energy Economy

09 Aug 2022

Energy Prices Across Australia to Remain High Until 2026

09 Aug 2022  by Cornwall Insight   
Research from Cornwall Insight Australia’s Benchmark Power Curve (BPC)1, which looks at power prices up until 2042, has forecast that all states in the National Electricity Market (NEM) will have an annual median price of around $200/MWh, up until FY2025. These high prices are expected to feed into bills over the next three years, after which energy prices are expected to go back to the calendar year 2021 levels of ~$40-80/MWh across the country.

Looking at the next two decades, New South Wales fares the worst, with the median price forecast at ~$218/MWh during the first three years. The huge surge in power price predictions over the past three months is largely due to the geopolitical concerns fuelling the global energy crisis, which Cornwall Insight Australia envisions will last approximately three years.

Figure 1: Captured price forecasts – New South Wales – Neutral case - (price forecast graphs for all states can be found in the full report, which is linked above). Cornwall Insight Australia’s neutral case is largely aligned with AEMO ISP’s progressive change.

As we look beyond 2026, the median prices are expected to remain flat across the country, with a combination of a slight change in operational demand and the increase in renewable energy penetration ahead of coal closures, causing periods of oversupply in the market.

Longer-term prices will likely become less stable as more renewables enter the energy generation mix to fill the gaps left by retiring coal plants. This will see an increase in volatility of supply and potential demand gaps.

Figure 2: Generation mix forecast – New South Wales - Neutral case - (generation mix graphs for all states can be found in the full report, which is linked above)


Saliw Cleto, Modelling and Analytics Manager at Cornwall Insight, said:

“The last few months in the Australian energy market have been very interesting, and the expectation is that we will see energy bills rise to unprecedented levels. Our modelling forecasts that there will be little respite over the next three years, with most states, especially New South Wales, left with average median prices above 2021 levels.

“The general rise in energy costs post-pandemic was already pushing up prices, however the move away from Russian gas across the EU has sent shockwaves through the global energy market. As energy supplies tighten, costs will inevitably rise – something which we estimate to change over the next three years significantly.

“As well as global pressure, Australia is going through a huge energy transition where more volatility in the market is expected. Coal plants are still, by far, the biggest supplier of energy in the country; however, a combination of aging plants and expected early closure means access to coal energy will decline, and the pace at which renewable energy gets commissioned and enabled (by transmission and distribution network upgrades) will be more important than ever. The continued increase of renewables should help to stabilise prices in the medium term; however in the shorter term, the energy market will be under significant pressure.

“Australia is undergoing energy transition at an incredible pace, coupled with an unpredictable global supply, which is likely to lead to hardship for large and small consumers in the short term. The government, generators and suppliers must all work together to ensure a stable energy market is delivered as we move away from coal and towards a more sustainable future.”


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