By Mike Foley and Nick Toscano
Household power bills will remain at boiling point when the regulator resets prices next year as an El Nino weather system is tipped to prompt higher electricity demand this summer.
In an update to be released on Thursday, the Australian Energy Regulator reveals wholesale electricity prices – which retailers pay for power before on-selling it to customers – increased in the three months to June 30.
Power bills show no sign of falling as cost-of-living pressures push household budgets to the wall. Credit: Virginia Star
The regulator attributes the rise to the closure in April of AGL’s Liddell coal-fired power station in NSW and higher seasonal demand, which forced the grid to source more expensive electricity from gas-fired generators and pumped hydro.
Wholesale prices remain well below their record highs reached last winter, when breakdowns across Australia’s ageing coal-fired power plants and soaring fossil fuel prices spurred by the Ukraine war plunged the market into crisis.
The report says wholesale energy prices are set to remain elevated and have been revised up for the first half of next year, putting in doubt Labor’s pre-election claim that its climate and energy policies would cut household power bills by $275 a year by 2025.
Fifty-one per cent of respondents to the latest Resolve Political Monitor, which surveyed 1610 people between July 12 and 15 for this masthead, said they would struggle to pay off an unexpected bill.
Each May, the regulator sets annual default electricity offers – price caps on what retailers can charge customers who don’t take up special deals. Forecast wholesale prices were a major factor in the regulator’s default offers for the 12 months to May 2024, which pushed annual household power bills up by more than $430 in NSW and $350 in Victoria.
And with the El Nino weather pattern forecast for this summer expected to drive demand for air conditioning, and a global energy crunch pushing up coal and gas prices, high wholesale energy prices are expected to keep the pressure on power bills.
The Bureau of Meteorology last month updated the chances of an El Nino weather system – which typically brings heatwaves and bushfires to Australia’s east coast – developing to 70 per cent, from 50 per cent previously. The Reserve Bank warned on Tuesday that Australian shoppers could face an El Nino-induced hit to food prices next financial year, further exacerbating cost-of-living pressures.
A drop-off in coal-fired power plants’ bids to supply electricity to the grid during the June quarter was largely due to the closure of the 52-year-old Liddell coal plant, first flagged in 2015.
“Had Liddell’s capacity been available, prices would have been lower,” the regulator said in its report.
However, it said Liddell’s exit was partly offset by around 1100 megawatts of new capacity from solar, wind and batteries coming online during the quarter.
Australian Energy Regulator board member Justin Oliver said it was pleasing to see prices had stayed well below the highs reached during the “extremely challenging” second quarter of 2022, with fewer coal plant breakdowns and high gas storage levels helping avoid supply and demand shocks.
“We’re pleased the factors that drove the high prices at that time weren’t present to nearly the same extent this year,” he said.
Separately, CSIRO and the Australian Energy Market Operator’s GenCost report into the cost of electricity generation based on technology type found that renewable energy was the cheapest option, while nuclear technology was the most expensive.
The Albanese government’s goal is to generate 82 per cent of electricity through renewable energy by 2030. GenCost forecast that up to 90 per cent renewables, including transmission lines and back-up battery or gas power, would cost between $70 to $100 dollars a megawatt hour in 2030.
It also found there was no prospect of the emerging small modular reactor technology being deployed in Australia before 2030, but once up and running it would be far more expensive, costing between $200 and $350 a megawatt hour.
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