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Wind farm subsidies rise, hitting consumers’ power bills

The market price of the subsidy households end up paying to wind farms has surged by up to 270 per cent in just two years.

A grab-bag of green schemes is expected to add between $90 and $190 to power bills in 2016-17 depending on where consumers live, according to the Australian Energy Market Commission (AEMC). Within this, the price of providing a leg-up to large wind, solar and hydro setups was put at $29 to $44 – a charge that had and would rise by 23 per cent a year.

The accuracy of these predictions is in question though, because of a leap in the price of Large-scale Generation Certificates (LGCs) that deliver subsidies to wind farms and the other big renewable projects.

Electricity retailers have to buy a growing number of LGCs each year to comply with the Federal Government’s Renewable Energy Target (RET). They pass on these costs to customers.

The market price of LGCs has “gone through the roof”, said Matt Harris, head of climate change and renewables consulting at Frontier Economics, which the AEMC uses for its modelling.

A year ago an LGC certificate bought on the open market cost $54. It now costs $86, a jump of 60 per cent. In June 2014 the LGC price was barely more than $20. Today’s rate is a 270 per cent higher.

The AEMC’s estimate of Large-scale Renewable Energy Target (LRET) costs to residential consumers has at its heart an LGC price of just $46.52.

However, the AEMC said it had not underestimated LRET costs. It said its LGC price was a “long-term” figure and that the market price contributed only a small percentage to overall LGC costs.

A big chunk of retailers’ LGC needs are met via long-term contracts with wind and solar farms at fixed prices likely to be less than the current open market price.

Frontier Economics’ Mr Harris – who worked Malcolm Turnbull when the now-PM was Opposition Leader the first time, in 2009 – said the main reason for the LGC price surge was a supply crunch. This had been caused by a “long lag in investment” in new renewable generation capacity as a result of “policy uncertainty”. Mr Harris could not discuss the modelling done for the AEMC.

Wind’s subsidy windfall is not its only impact on consumers – it is also pushing up the price they pay for electricity.

In South Australia – which has the biggest number of turbines in the nation – the wholesale power price is currently 50 per cent higher than anywhere in the National Electricity Market.

When EnergyAustralia raised SA retail prices by an average of $260 a year from July 1, it said $210 of this was due to the cost of it buying power there.

News Corp Australia has previously reported futures markets indicate soaring wholesale prices could add $100 to $240 to annual bills in within two years.

The increase in the prices of LGCs and wholesale electricity have driven shares in the stockmarket-listed wind power generator Infigen 440 per cent higher in the past year.

Its revenue has jumped 25 per cent in the past 12 months and stock analyst David Fraser of Shaw & Partners said it was likely to lift by another 13 per cent next year.

The number of LGCs retailers have to buy this year rose by 14 per cent to 21.4 million and will increase by another 21 per cent next year to 26 million and then 10 per cent the year after.

Ready to Switch on

MEANWHILE, the Big Energy Switch campaign for more affordable power has entered its last week, having gathered 83,000 supporters and counting.

“We’ve now got more people on board than you can fit in the Olympic Stadium but that’s no reason to stop signing up. The sky’s the limit,” said Joel Gibson, campaign director at One Big Switch, which is running the campaign.

“The winning offers are due any day now in inboxes around the country so the best way to make sure you get them is to join.”

The Big Energy Switch is attempting to unlock group-discounted energy offers to fight the high cost of power.

Go to www.onebigswitch.com.au for more information

There is no obligation to take up any offer. News Corp Australia and One Big Switch will earn a commission from any accepted deals. News Corp is a shareholder of One Big Switch.