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Clean Power australian electricity price

Published on February 24th, 2013 | by Giles Parkinson

14

Those Australian Electricity Price Increases We Keep Hearing About (Charts)

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February 24th, 2013 by
 
This article was originally published on RenewEconomy:

Australian consumers have been buffeted by some hefty electricity price rises in the last few years, and face yet more in the next couple of years. But how long will it last, and what sort of price will householders be facing in 2020?

It’s not the sort of question – or time horizon – that customers would normally be worried about, unless you are considering the value of producing your own energy – either with solar PV or some other, and possibly with battery storage – or if you are in the market to manufacture or sell such systems.

That’s what makes this forecast by AGL economists Paul Simshauser and Tim Nelson so interesting. In an article written for a CEDA policy paper, the two economists argue that nominal electricity price rises can be contained, and a fall of 10 per cent in real prices (adjusted for inflation) can be achieved. This, though, is dependent on the government follows its recommended policy actions, a lot of which centres around the deregulation of pricing regimes, and the greater deployment of time-of-use pricing.

What’s interesting about this graph is the contrast between nominal electricity prices (shown in the coloured bars), and real electricity prices expressed in 2013 dollars (shows in the black line).

For nearly three decades, nominal electricity prices were steady, jumped in the 1980s, steadied again, and then surged in the last five years as utilities scrambled to cater for surging peak demand and replacing ageing infrastructure (and, one now suspects, indulging in a lot of overbuilding).

Real prices fell from the 1950s until the mid 2000s. In fact, according to this graph, the cost of electricity is only now back to where it was in the 1970s.

The other highlight of the graph is the component of the bill. Again, the cost of renewables represents a tiny band that actually gets smaller by 2020 – network costs and generation costs (fuels such as coal and gas) form the largest components, followed by the retail costs and margins. Food for thought, perhaps, for advocates of renewable and decentralised energy.

(You may need to click on the graph to see it all).

australian electricity price

Just to reinforce that last point, about the cost of renewables, it is worth reproducing another graph included in the paper.

This graph below, which tracks the increase in NSW electricity prices from 2008 to 2013, is not new, but it makes a nonsense of the opposition of the conservative state governments to renewables targets and incentives on the basis of costs, and raises the question why the mainstream parties in the federal arena continue to hedge their bets on the issue.

Perhaps this graph should be published on NSW electricity bills, rather than the government-mandated, politicised and misleading claim that green schemes are adding more than $300 to the average bill.

sydney price increases

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



  • kenny

    It’s because of grid connected rooftop solar power that causing this high price of electricity.

    http://www.brisbanetimes.com.au/queensland/treasurer-wont-rule-out-seeking-mandate-to-sell-electricity-assets-20130222-2ev24.html

  • Otis11

    time-of-use pricing is a great solution – allow people and corporations to see what electricity costs at different times and allow them to make the best decision for their particular case.

    Hiding the true cost of electricity from the end user just incurs more inefficiencies and causes the average price to rise!

    • kate

      what are you talking about, hiding the true cost of grid solar power incurs more cost.

      • Otis11

        This is a common misunderstanding. Solar PV generates power during the day – which happens to be the time of highest demand. Moderate supply of solar PV power to the grid actually decreases the cost of power on average. See my response to Kenny’s comment above for more information.

        • Otis11

          Well, I realize these comments were trolling, I chose to respond in a logical argument anyway to expose them as I don’t have banning powers… and Kenn’s comment got banned, so here’s what it said:

          That article is not blaming the rooftop solar alone, it’s blaming:
          “network costs, the solar scheme and the carbon tax for the hike.”

          Of these, rooftop solar power is not a problem – but the “scheme” which they are using to encourage it could be (although this is unlikely). Let’s look at the problem.

          A major increase in cost of electricity is the carbon tax. When Australia levied a tax on carbon they made an entirely “new cost” for an entire sector of their power grid. This caused part of the supply to become more expensive, and because of merit-order pricing, the entire grid became more expensive.(actually, the cost was not new – it was just new to apply it to the power providers) This is the most significant portion of this rise and can be explained in greater detail if necessary – just ask and I’d be happy to continue.

          The solar “scheme” could be argued to contribute to the cost, but if the person doing the analysis understands all of the parameters, it would have to be a fairly poor policy to add a significant portion to the cost of electricity. To my knowledge, it is not possible for the Australian policy to fall into this category as they did a feed-in tariff sponsored by tax payer money. Now I could make the argument that the country as a whole saves money from this, but that’s irrelevant here because this affects taxes, not the cost of grid electricity, so that is not impacting the cost.

          Finally, networks costs. These are always going to raise the price of electricity and are inherent in our grid as we need a way to build and maintain networks, but the funny thing here is that roof solar actually decreases these costs when used in moderation! (and by moderation I mean less PV power production than power use – I have yet to see a case that exceeded this on a significant enough scale to be worth mentioning.) This happens because as more power is generated where it is used, the grid simply sees a reduce in demand. Less demand means less extra infrastructure needs to be built to distribute the power, hence less costs.

          I wrote this relatively rapidly, so just comment if there are any questions. But the main point is no – the writes are overlooking many things in their assessment of PV power.

          • http://zacharyshahan.com/ Zachary Shahan

            Thanks for the extended comment!

            Yes, anytime we mention solar & Australia we get trolls dumping the same wild claims and links. Extensive comments that refute them don’t sway these people (if they are indeed people) at all, and they come back with the myths again in the next post about solar & Australia.

            Hopefully they won’t be coming here again with their nonsense, but I wouldn’t bet on it.

          • Otis11

            While I realized it was not likely to sway the troll, I think the readers who see the comment and a rebuttal are more likely to learn something and be swayed than readers who just see the “deleted comment” section.

            Plus it give the more open feeling to the forum and allows people to ask questions without worrying about getting labeled as a troll. While these were almost assuredly trolls there are other ways to deal with it.

            Just my opinion though. =-)

          • http://zacharyshahan.com/ Zachary Shahan

            The downside: research shows that:

            1. myths stick in people’s heads even if they see rebuttals (and especially if the rebuttals are more complex, ironically). and down the line, they often forget the “right answer” and remember the myths as true.

            2. articles with a “negative atmosphere” in the comments section leave people with a negative feeling of the topic of the article (no matter what the actual content of the article or comments is).

            interesting stuff.

            and, bottom line –> it’s a thin line between what to leave and refute vs what to simply mark as the spam that it is.

            i think we’ve given these people their 15 minutes of fame. (i can’t even say i’m certain they’re people — i know that bots are programmed to do what they do, and these commenters don’t really engage in discussion)

          • Otis11

            Ah, good rebuttal! Haha.

          • http://zacharyshahan.com/ Zachary Shahan

            Believe me, I have struggled over decisions regarding comment moderation for a long time — was very happy when i saw some research on the matter that helped to guide me a bit on this.

  • SolarOne

    Why the large increase in distribution costs?

    • Ronald Brakels

      Partially from meeting electricity demand in an extremely peaky grid spread over vast geographical distances in a nation with high capital and labour costs. And partially from stupid mistakes. One major stupid mistake was to greatly overestimate demand for grid electricity which resulted in generating and transmission capacity being overbuilt. Another stupid mistake was that distributers saw their job as building distribution networks rather than supplying customers with electricity. This has resulted in expensive upgrades to supply peak demand that could have been avoided with a much lower expenditure on solar capacity. And overall gold plating of systems. For example, we recently had a record breaking heatwave in Australia with no interuption in electricity supply. A properly designed grid would have had minor failures.

      • kate

        The cost of instaling grid solar power has caused the price rise, that no mistake.

        • Ronald Brakels

          How? The people of Sydney have paid about an extra $10 billion as a result of increased electricity prices since 2008. In that time they have generated about 1 billion kilowatt-hours from rooftop solar. So just how does a kilowatt-hour of solar electricity manage to cost the people of Sydney $10? More to the point, how could the people of Sydney be so stupid as to use an energy source that costs them $10 a kilowatt-hour? Australians aren’t all morons, you know.

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