What Causes the Surge in Australian Electricity Prices?

Electricity prices in Australia are on an upward trend and for many, this is bad news.

Australian Prime Minister Tony Abbott says that the rise in electricity prices can be traced to two causes—(1) country’s carbon tax and (2) renewable energy target. The former has been recently repealed by the Senate while the latter is still being reviewed by a government-commissioned panel.

But there are also numerous suggestions that the country’s unnecessary investment in network infrastructure is to blame for high electricity prices.  The Federal Treasury says that 51% of the average electricity bill goes towards payment of network charges.

New Infrastructure Responsible for Electricity Prices

In 2009, companies that maintained energy networks in Australia were allowed to build new infrastructure to meet what was then projected as a huge demand for electricity. Thus poles and wires, among other things, were put up in New South Wales and Queensland at a staggering cost of $45 billion.  The upgrade was approved of course; the Australian Energy Regulator gave the project the green light.

The problem, however, is that the huge demand for electricity in Australia has not materialised, and may never happen at all because Australians are now turning to new and renewable sources of energy like solar power.

Climate change adviser Ross Garnaut was among those critics of network companies when he accused them in 2011 of boosting their infrastructure spending to increase their profits while passing the burden of high electricity prices to the energy consumers.

Dropping Demand

The network companies insist that they need to invest on new infrastructure to meet rising power demand in Australia, but recent studies show that energy demand is actually on the decline. This is largely due to Australians installing solar panels on their rooftops to counter increasing electricity prices. More than 1.3 million households in the country have solar panels, and the number is expected to shoot up with the prices of solar panels especially from China becoming more affordable.

An energy economist, Greg Houston, says the solar consumption of Australians is affecting the energy market. Muriel Watt of the Australian Solar Institute adds that the solar take up has put to waste the industry’s investment on the electricity distribution network.  She says that more than $45 billion would be put to waste because the consumers won’t need electricity from the network, making the so-called poles and wires ‘stranded assets.’

Solar power panels have not only lessened the demand for electricity from the grid, but have also contributed to the higher electricity prices. The Energy Supply Association of Australia says that power corrupts as households with solar panels get power from the grid during peak times like early in the evening.

This contributes to the rise in electricity prices. Likewise, households with solar panels are able to avoid the high network charges that are imposed across the units of energy used.

Power triggers corruption and unfortunately, millions of Australians who have been paying a fortune in electricity prices, are the ones suffering the consequences.

The Author

Motivated and dynamic journalist with a strong interest in sustainable solar powered technology. My work in journalism and new media has provided me with a medium to produce content concerning emerging renewable energy.

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