The surge in renewable energy such as wind farms in South Australia has left households with whipsawing electricity bills as power companies push through a round of steep price rises.
AGL, the dominant supplier in the South Australian market, is hiking its charges by 10 to 12 per cent from the beginning of July, well ahead of the 7 per cent rise flagged by Origin Energy. EnergyAustralia is to outline its new tariffs later in the week.
This compares with price rises of around 8 to 10 per cent in NSW.
Coming as the Victorian government has raised the target for renewable energy to supplying a quarter of the state’s needs by 2020 and 40 per cent by 2025, the experiment unfolding in South Australia is proving salutary.
“South Australia is the market at the end of the world,” says Gavin Dufty, director of policy and research at the St Vincent de Paul Society.
“It has moved so far ahead of the rest of Australia in terms of changes of generation”, with a prominent role for renewable energy which has forced the closure of coal-fired power stations, he said.
“Not only are they paying through the nose for their electricity, but with large price declines last year, and now the big rises this year – you can’t get stability in household budgets.
“It is undermining the credibility of the energy markets, which is no good for anybody. The state and energy ministers need to come together” to look at measures to help stabilise the situation, Mr Duffy said.
Surging power prices have pushed households to install solar panels, and South Australia has led the way with more than a quarter of households investing in panels, around twice the rate of Victoria and well ahead of the estimated 10 per cent of households in NSW, according to data from the Australian Energy Market Commission.
“Those with money will do that, and will be OK,” says Ross Womersley, the executive director of the South Australian Council for Social Service. “But the people we worry about can’t afford to make that investment, and will be left holding up the grid at increasingly expensive prices.”
David Rylah, trading and pricing manager at specialty energy advisor Energy Action, said the South Australian experience indicates what may unfold in Victoria as it pushes further into using renewable energy.
“Victoria wants increased renewables so you could extrapolate that brown coal generators may come to the end of their economic life.
“Therefore the South Australian experience may extrapolate to the Victorian experience. In South Australia, if the wind is blowing, the generators are on. If not, they don’t. It is either feast or famine.”
Large, baseload power generators enable electricity retailers to commit to supplying households and businesses at competitive prices.
But renewable energy supplies only intermittently, which pushes up the price the retailers can “hedge” or write firm supply contracts at.
“There is a shortage of hedge product relative to demand in South Australia,” Rylah said. “That has been evident since last November, but households have been insulated until now, with the contract being reset.”
Late last year, the wholesale price for electricity in South Australia spiked to more than $100 a megawatt hour of electricity, settling more recently at around $80, which is well above the level of around $45 in Victoria.
Prices are higher again in NSW and Queensland, at $50-52 and over $60, respectively. “Which is a curious fact given the electricity generation market is over-supplied,” he said.
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