Australian Chart of the week | Gassed out: are renewables running gas out of the market?

Last week, the Australian Energy Market Operator (AEMO) released its ‘Quarterly Energy Dynamics’ (QED) report for Q4 2020. The report highlighted that operational demand has fallen to its lowest quarterly level since 2001; largely driven by mild weather and strong uptake of rooftop solar. Coupled with record high wind and solar production, this has caused significant reduction in fossil fuel generation and the lowest NEM emissions on record (QED). With increasing renewable energy penetration leading to lower prices, which is sometimes compounded by milder demand, what impact will this have on the commercial viability of fossil fuel generators in the long term?

In this ‘Chart of the week’, we examine the percentage of generation by fuel type and the average wholesale price for the first month of the year (January 2021) across all NEM states. Comparing with January of last year, we provide commentary on the drivers behind the low price trend and the impact this may have on fossil fuel generators.

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