Power prices set to fall over next two years, thanks to new solar, wind capacity
The Australian Energy Market Commission (AEMC) estimates that power prices will fall over the next two year as more solar and wind capacity comes online across the country.
The AEMC’s latest report on national residential electricity price trends found prices jumped sharply by 11 per cent in 2017.
It states the cost of wholesale electricity has become the biggest cause of rising household power bills. This contrasts with previous price trend reports, which found network costs were the main driver of change.
Consumers to see power prices drop thanks to RET
A combination of high gas prices, closures of the Hazelwood and Northern coal-fired plants, and a lack of follow-up investment, contributed to 2017’s alarming price increases.
But AEMC Chairman John Pierce said consumers could expect to see power prices fall from mid-2018 as Renewable Energy Target-funded renewable energy projects come online.
“We expect these price rises will be reversed over the next two years as around
4,000 MW of RET-funded wind and solar generation enters the system,” he said.
According to Mr Pierce, this new generation will boost supply, resulting in downward pressure on prices.
The report estimates residential electricity prices will fall by an average 6.2 per cent from 2017-18 to 2019-20.
The AEMC also warns that uncertainty surrounding energy policy is stalling investment in dispatchable power generation. This uncertainty is likely to put upward pressure on power prices in the medium term.
Mr Pierce said without more investment, wholesale energy prices would remain volatile, and consumers would pay the price. “The rollercoaster will be repeated,” he said.
Window for action closing as RET end-date looms
Australia has a clear window between now and 2020 to plan for the expansion of renewable energy into the National Energy Market (NEM).
Mr Pierce said COAG governments must work on integrating energy and emissions policy before the Renewable Energy Target expires in 2020.
The entry of solar and wind capacity will continue to accelerate the retirement of coal-fired power, and the government’s National Energy Guarantee (NEG) must adapt to this change.
To this end, the AEMC is working with other market bodies on the Energy Security Board on the NEG design.
The AEMC analyses cost trends across the NEM. These include wholesale generation, network costs, and the impact of environmental and security policies. Prices identified in the report do not reflect actual price trends.