Why do price spikes happen and how long do they last?

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Wholesale price spikes occur on occasion throughout the year and are caused by demand on the grid stretching the available supply of energy. They are defined as when the wholesale price rises to between $3/kWh and $19/kWh (or $21/kWh in SA).

We're expecting a scorching summer, with Australia set to experience the first El Niño summer in years. When it gets really hot, it can seriously strain the power grid, causing prices to go wild. Normally, there are a few hours each year when the demand maxes out the grid's capacity. During these times, coal and gas generators jack up their prices to a whopping 100 times the usual rates, which makes the wholesale price shoot up temporarily.

These price spikes occurred for 1.5 - 11.5 hours a year in 2023, depending on which state you were living in, usually lasting for around 45 mins on average (see more info on price spike frequency). 

All energy companies pay this higher wholesale price for the power they sell to their customers during price spikes - but most of them simply charge you higher rates year-round to cover their costs on the assumption that you’ll use heaps of expensive and dirty power during these times. This means that with most traditional energy companies, you can still end up paying for price spikes even if you reduce your usage when they happen.

Amber gives you a unique opportunity to completely avoid paying these higher prices - both year-round, and when price spikes happen.

Bear in mind that you may see price spikes forecast with greater frequency than they occur. This is because prices can be very unpredictable due to market factors. It's important to check back regularly when a price spike is forecast to see what happens closer to the time. 

There is a higher likelihood of price spikes occurring in the early evening on very hot days, because this is when everyone gets home from work and runs their air conditioners. 

Price spikes are different to higher wholesale prices which you'll see in the Amber app more regularly than price spikes. These high wholesale prices are generally best avoided by shifting your energy usage, as they often coincide with less renewables in the grid. However, if you can't shift your usage at this time but will not make such a significant impact on your energy bill as energy used during a price spike will.

As an example, using a typical 2.4kW dish washer for one hour will cost you the following:

- $0.36 when the wholesale energy price is $0.15/kWh (low wholesale energy price)

- $1.22 when the wholesale energy price is $0.51/kWh (higher wholesale energy price)

- $7.20 when the wholesale energy price is $3/kWh (low price spike)

- $45.60 when the wholesale energy price is $19/kWh (peak price spike)

 

 

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