Household electricity bills are set to skyrocket up to 30 per cent by mid-2013, with the Gillard government’s renewable energy scheme responsible for 11 per cent of that increase, a report by the government’s chief energy adviser has found.
The costs of the Renewable Energy Target – which provides generous subsidies for rooftop solar schemes and large-scale projects such as wind farms – will explode by 360 per cent over the three years to June 30, 2013, as power companies try to meet the target of sourcing 20 per cent of their energy from renewable sources by 2020.
The report comes as Australia’s biggest carbon emitters press for states that refuse to wind back costly rooftop solar and other programs to be penalised in the GST carve-up or be denied funds under the Commonwealth Grants Commission.
The Australian Industry Greenhouse Network, whose members include BlueScope Steel, said the case for reform was only growing and demanded the immediate withdrawal of commonwealth and state renewable energy programs that the Productivity Commission found were costing billions of dollars but achieving little.
On household prices, the biggest impost will be to fund more than $33 billion in capital works on ageing distribution networks that deliver power, with most of the spending required in NSW and Queensland.
Households are also being stung because of rising gas prices, the finance risks “associated with uncertainty around carbon pricing” and state-based feed-in solar tariff schemes.
The report found that prices could rise by as much as 40 per cent in some states, over a period that covered July last year to June 30, 2013. The national average was a 30 per cent increase, or 5.8c per kilowatt hour, which after inflation would mean a 19 per cent jump in household power bills.
The report by the Australian Energy Market Commission was released after a meeting of energy and resources ministers in Perth, who vowed to hold special meetings to “consider energy security implications arising from the introduction of a carbon price”.
The document will add further weight to this week’s warnings by the Productivity Commission that the renewable energy incentives being demanded by the Greens are pushing up costs for little environmental gain.
While the commission and big businesses are urging that subsidies for renewable energy be scrapped with the introduction of a carbon price, Resources and Energy Minister Martin Ferguson yesterday stared down the demand. He said the government’s approach to clean energy in Australia was through setting a price on carbon and the renewable energy target.
But Mr Ferguson said he expected that the states would wind back their myriad green schemes when the carbon price was introduced.
“There are a range of renewable energy incentives at the moment that need to be rationalised over time,” Mr Ferguson said after the meeting.
“That will be the response of the state and territory governments if we succeed in getting through the parliament the price on carbon.”
Mr Ferguson said there was no proposal to dump the state and territory feed-in tariff schemes that pay households between 20c and 60c for each kilowatt hour of power they feed into the grid from their solar photovoltaic panels.
On energy security, the ministers said the introduction of a carbon price would have a significant impact on the electricity generation sector and agreed to monitor developments.
The ministers revised the timetable for scrapping price controls on electricity and gas, and agreed to revise reliability standards for poles and wires that critics say have allowed some power companies to price-gouge.
The move comes a day after fresh warnings by the Business Council of Australia that keeping price caps could make it difficult to pass a carbon price through to energy consumers.
Under the revised timetable, crucial reviews into whether a state has competitive retail energy markets – which are the trigger for states to deregulate prices under a 2006 federal-state deal – will be held in NSW next year, in Queensland in 2013 and in South Australia in 2015.
The energy ministers agreed to direct the AEMC to review the distribution reliability standards framework in the National Electricity Market, which delivers power to more than eight million end-use consumers in the eastern and southern states. The Duffy-Parry report in NSW found the higher reliability standards had led to a blowout in revenue-raising and spending that was passed back to the consumer.
After releasing the AEMC report, the ministers cautioned that some of the data in the report was outdated because a number of price determinations and policy announcements had occurred since the report was completed on November 30.
Since the report was written, appeals against regulatory rulings have increased distribution network charges in South Australia and Queensland; these charges make up about 40 per cent of a typical bill.
Under a ruling that will be finalised on Tuesday, NSW households are facing rises of between 16.4 per cent and 18.1 per cent from July 1, with further increases of between 2 and 10 per cent likely mid-next year.
In Queensland, prices will rise 6.6 per cent from July 1. In South Australia, prices rose 12 per cent from January.
However, since the report was written, the federal government has twice announced cuts to incentives for household solar panels, and these cuts take effect on July 1.