Australian electricity prices and the cost of electricity in Australia per kWh

Australian electricity prices; the cost of electricity in Australia per kWh

This article will show you where you can find up-to-date wholesale electricity prices (aka the electricity spot price) for your state. It will also provide a snapshot of Australian electricity prices at June 2018, and explain how to convert the cost of electricity in Australia per kWh to MWh, and vice versa.

Just a heads up: This article is going to get deep into Australian electricity prices, but if you’re more interested in saving money on energy, you may like to start on our cheap electricity page, where we explain how you can source the best deal for yourself. 

Still here? Let’s crack on and start with a brief explanation of the Australian energy market, which will lead into where to find Australian wholesale electricity prices.

Australian’s electricity markets explained

In Australia, the National Electricity Market (NEM) includes QLD, NSW, VIC, SA, TAS and the ACT. The NEM is an environment where wholesale electricity is bought by retailers to later be on-sold to consumers.

The NEM is a spot market. This means electricity is traded for immediately delivery.

To calculate the electricity spot price, generators offer to supply the NEM with electricity at whatever price they choose. (They can revise this anytime.) From there, the Australian Energy Market Operator (AEMO) chooses which generators will produce electricity, prioritising cheapest first.

The spot price for electricity in each state changes every 5 minutes, and can vary significantly each day. To manage wild fluctuations in Australian electricity prices, retailers will generally enter into a contract with generators to fix wholesale electricity prices.

As you may have noticed, the word “National” is inaccurate. Western Australia and the Northern Territory are not connected to the NEM. (Nor are certain remote parts of Queensland, South Australia and New South Wales.) For WA and the NT, their power infrastructure is too far away from the NEM. It’s thought that the cost of connecting them would outweigh the benefit.

In fact, there may not be a huge benefit to joining the NEM. WA and the NT have very competitive retail electricity prices compared to the other states and territories, as we’ll see.

How are Australian electricity prices measured?

Prices quoted on the NEM are measured in $/MWh (dollars per Megawatt hour).

This unit of measurement may not be familiar to you, so here’s a crash course:

One Megawatt hour equates to using one million watts of electricity continuously for an hour. To put this into perspective, one MWh would power 630 average Australian homes for one hour.

…and here’s how I arrived at that figure:

1 Megawatt hours = 3.6 Giga-joules.

In 2014-15 the average Australian home used approximately 50 Giga-joules of energy.

Therefore, the average Australian household uses 50 Giga-joules ÷ 3.6 = 13.9 Megawatt hours of electricity per annum.

13.9 MWh ÷ 8,760 hours in a year = each house is using 0.00158676 MWh of electricity per hour.

Finally, 1 MWh ÷ 0.00158676 MWh = it would take 630.2 average Australian homes one hour to use 1 MWh of electricity.

Hopefully that gives you have a feel for what a Megawatt hour might be worth in terms of powering your home or business. But what’s one worth? That’s up next: where do we find wholesale Australian electricity prices?

Where to find the electricity spot price

For states and territories connected to the NEM, the AEMO provides a data dashboard that lists wholesale electricity prices. This is available to anyone with an internet connection, and it’s free to use.

In the Northern Territory, the wholesale prices are not readily available, but they are in fact higher than the retail prices. Here’s how that works, as explained by the Utilities Commission of the Northern Territory:

The maximum retail prices for customers with annual electricity consumption less than 750 MWh continue to be set by the Territory Government through an Electricity Pricing Order. The prices set by the Territory Government are below-cost reflective levels, requiring the government to make relatively large community service obligation (CSO) payments (of approximately $80 million per annum) to electricity retailers.

The above rings true, because the NT enjoys the lowest retail Australian electricity prices of any state or territory.

In Western Australia, residential customers do not have a choice of electricity suppliers – it’s Synergy or nothing. However, Synergy do provide 2 options. Customers can pay a ‘single rate’ (where they pay the same tariff 24/7) or opt for ‘flexible pricing’ (where the rate varies between peak and off-peak times).

Synergy do not disclose wholesale prices, only retail prices.

Wholesale electricity prices at June 2018

Here’s a snapshot of wholesale electricity prices as at June 2018:

State or territoryWholesale price $/MWh
South Australia$114.16/MWh
New South Wales$88.06/MWh
Northern TerritoryNot disclosed; subsidised
Western AustraliaNot disclosed

While the NT and WA’s wholesale electricity prices are not readily available, we can assume they are likely similar to Victoria. (Keep in mind NT consumers receive the benefit of subsidies.) I’ll justify this statement when we look at retail prices, in a moment.

Please note that these figures refer to the average RRP (recommended retail price, or average spot price) for the month of June 2018.

These are the wholesale prices. But for us consumers, the real point of interest is the retail cost of electricity in Australia per kWh. Just wait until you see the markups! 

The retail cost of electricity in Australia per kWh

Here’s where to find retail Australian electricity prices…

For states and territories connected to the NEM, these are “contested markets”. In other words, it’s up to each electricity retailer to set their own price, whatever they believe will be competitive.

As a handy point of reference, Cannstar Blue provide tables detailing the average cost of electricity in Australia per kWh for the NEM states (excluding Tasmania). If you clicked through to the tables, you may have noticed that retailers quote prices in cents per kWh (kiloWatt hour). This is a different measure to the wholesale prices quoted above, which are in dollars per MWh (Megawatt hour).

For ease of comparison with the wholesale prices, we’ll quote both measures for you here. Keeping in mind:

1 MWh = 1,000 kWh.

But don’t forget, there are 100 cents in a dollar! (So the calculation is x 0.01 to get from cents to dollars and then x 1,000 to get from kWh to MWh. Or, the figure in cents/kWh x 10 = dollars/MWh).

In Tasmania, you can click through for indicative retail prices with Aurora Energy.

For the Northern Territory, you can click through for current retail prices.

In Western Australia, you can click through for current retail prices.

Here are the current indicative retail prices, including my guess with respect to retailer markups:

State or territoryWholesale price $/MWhRetail price $/kWhRetail price $/MWhEstimated markup
South Australia$114.16/MWh43.67c/kWh$436.7/MWh383%
New South Wales$88.06/MWh33.33c/kWh$333.3/MWh378%
Northern TerritoryNot disclosed; subsidised25.67c/kWh$256.7/MWhLikely similar to VIC
Western AustraliaNot disclosed28.33c/kWh$283.3/MWhLikely similar to VIC

As you can see, when you compare wholesale electricity prices with retail, there are some significant markups. Let’s round out this article with a quick exploration of why that might be. 

What does your retailer do for their markup?

Companies like AGL Energy, Alinta Energy, BlueNRG and Click Energy buy energy wholesale. Then they combine it with transmission and distribution services, before selling the final product to their customers. Of course, they also need to allow for all the other expenses associated with running their businesses.

AGL is Australia’s largest energy retailer, and therefore a good target for further analysis. As a public company, all their data is in the public domain. Let’s take a look at their numbers:

In the six months to 31 December 2017, AGL Energy Ltd revenues were A$6.45 billion (+7%).

Net income was A$622 million (+91%).

AGL is an interesting case, because they are both a generator of electricity, as well as a retailer. They generate and sell electricity wholesale on the NEM. But they also buy it wholesale and on-sell it to consumers as a retailer.

Upon closer inspection, AGL’s wholesale revenue was up 25%, but their retail revenue was up just 4%. As a generator and wholesaler of electricity, AGL have benefitted from rising spot prices on the NEM. Prices hit all time highs in 2017.

But as a retailer, they’re not doing anywhere near as well. And overall, their net profit margin for the trailing 12-months to 31 December 2017 was 6.43%. This is a number most people would consider fair and reasonable, and not a sign of price gouging of their consumers.

Markups don’t necessarily correlate to profits

So it’s important to realise that markup does not equal profit. Having said that, there is often enough fat in the markup to negotiate successfully with your retailer for a better deal. We’ll cover this in future articles.

In the meantime, if you’re looking for a full service electricity broker to help you find cheap electricity rates for your Commercial & Industrial (C&I) site, small business (tariff) site, or to manage your residential (home) energy: Look no further than Bulk Energy. Contact us and start saving. 

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