The Australian Energy Market Commission’s outlook for residential electricity prices over the next couple of years is a mixed bag of news.
The Commission believes electricity prices will fall on average nationally over the next two years from the middle of next year as more wind and solar power based generation comes online; offsetting this year’s price increases.
However, there are winners and losers among the states. The following table indicates predicted movements in average annual electricity costs for residential customers. Movements in 2016/17 to 2017/18 are already in place in most states, with the exception of Victoria, where a significant electricity price rise kicks in from January 1, 2018. The AEMC notes price trends in the report are not a forecast of actual prices.
| State | 2016/17 to 2017/18 |
2017/18 to 2018/19 |
2018/19 to 2019/20 |
| SE QLD | +3.4% | -7.0% | -7.2% |
| NSW | +10.2% | -5.8% | -7.3% |
| ACT | +20.3% | +8.0% | -4.1% |
| VIC | +15.9% | -6.6% | -9.7% |
| SA | +17.0% | -6.9% | -7.8% |
| TAS | +2.0% | -5.2% | -7.9% |
| WA | +10.9% | +7.0% | +5.6% |
| NT | +0.5% | +2.5% | +2.5% |
Unlike previous years where network costs (poles and wires) had the biggest impact on electricity bills, this year’s report indicates wholesale electricity costs are now the single biggest driver of change.
The AEMC expects residential electricity price rises in recent years to be reversed by varying degrees in most states as approximately 4 gigawatts of Renewable Energy Target-funded wind and solar generation enters the system; putting downwards pressure on wholesale prices.
Of the 5,300 MW of new electricity generation capacity committed or expected to be added to the National Electricity Market in 2016/17 to 2019/20, 4,900 MW is renewables-based. In 2019/20, this new renewables capacity is expected to represent approximately 10 per cent of the NEM’s generation capacity and 8 per cent of energy output.
Looking further ahead, the AEMC warns of the potential of a “roller coaster” on pricing as a result of lower cost renewables forcing more coal and gas out of the market.
“Without investment in replacement dispatchable capacity, wholesale prices will go up again and remain volatile,” said AEMC Chairman John Pierce.
But “dispatchable” doesn’t need to mean a return to more fossil fuel – energy storage in its various forms (e.g. pumped hydro and batteries) enables dispatchability.
“We have a window right now for the COAG Energy Council to continue its work on mechanisms that can work in the long term interests of consumers and keep the lights on as the energy sector continues to restructure,” said Mr. Pierce
The full 2017 Residential Electricity Price Trends report can be downloaded here (PDF).
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In this context does a price fall mean that prices will not rise as much as they might otherwise have done. I’m very scepticle about a report written by this mob, hardly independent and who have presided over our energy debacle, especially if it involves the likes of Mr Pierce.