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The Grattan Institute: Politicians Should Tell Australians the Truth About the Future of Energy Costs

High electricity prices are here to stay, according to a new report by the Grattan Institute, that calls on politicians to tell Australians the truth about the future of energy costs.

The price paid for electricity traded in the NEM also more than doubled, from about $8 billion to $18 billion and household bills increased by up to 20 per cent in 2017 alone.

But it is impossible for governments to fix the problem because most of the price rises have been caused by issues beyond their control.


The Close of Coal Stations

Numerous old, low-cost, coal-fired power stations closed, including The Northern in South Australia in 2016 and Hazelwood in Victoria in 2017.

Although they were low-cost to operate, they faced big maintenance bills that weren’t worth paying given low market prices as a result of historic oversupply. Their closure reduced supply and so pushing prices up. This accounts for about 60 per cent, or $6 billion, of the increase in the value of electricity traded annually in the NEM between 2015 and 2017.

Prices of key inputs rose

The price of key inputs, especially gas and black coal, rose just when the plants they fuel were needed more often, pushing prices up further. This accounts for nearly 40 per cent of the increase. In both cases, the market responded efficiently and appropriately to the changing circumstances.

The report identifies three underlying causes

Generation monopoly

Finally, major electricity generators ‘game’ the system: they use their power in concentrated markets to create artificial scarcity of supply and so force prices up.

Gaming has mainly occurred in Queensland and South Australia, but there are signs of it in Victoria since the closure of Hazelwood, and it could emerge in NSW as supply tightens with the scheduled closure of the Liddell coal-fired power station in 2022.

Read the Grattan Institutes full report here.

How you can take back control

To tackle the future of your business’ energy requirements you should enlist an expert to help navigate you through the potential minefield that is our energy market.

In mid-June 2018 we saw a spike of our 8% in energy prices over a one-week period. WHY? Because of the cold snap on the east coast.

What could that mean for you? Well, if you were unfortunate enough to renegotiate your contracts that week, you were likely hit with an 8% premium over the length of your contract. Timing is everything!

We have helped innovative businesses rely less on grid-power to protect their operational budget from future energy costs. If feasible for your business, a Choice Energy solar system will have a notably positive impact on the way you use power – helping you not only useless from the grid but also pay less for the energy you use.

Take back control of your energy

Speak to one of our Choice Energy Assessors for a free energy evaluation today!

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