Rising electricity prices reveal true cost of national policy inaction
Electricity prices are rising because of sustained national policy uncertainty and arbitrary constraints on gas supplies, the energy industry said today.
Releasing the Australian Energy Council’s submission to the Finkel Review, its Chief Executive, Matthew Warren, said “recent price and reliability issues are not the result of the electricity market failing, but the result of sustained policy interference and resulting uncertainty.
“This is driving up electricity prices to unsustainable levels. The impact on the industry, its customers – households and businesses - and the economy generally is now critical.
“We are now experiencing the legacy of sustained energy policy inaction: ageing power stations keep closing but there is no plan about how they will be replaced. We are running out of power.
“This is translating into unacceptably high wholesale electricity prices in the forward market. By point of reference, the price impact we are now seeing is effectively equivalent to a carbon price in excess of $50 a tonne.
“This suggests the economy is likely to be better off with the development of durable and efficient national energy and climate polices which will return investment to the market and are likely to reduce electricity prices.
“The energy industry urgently needs investment grade national energy and climate policy that will enable new capacity to be built, as well as access to new gas to run it.”
The Australian Energy Council’s submission highlights immediate and short-term reform priorities, which include:
- States winding back existing support schemes, such as renewable targets, as part of a return to national policy design.
- Removal of barriers to networks (and in turn retailers) offering more cost-reflective pricing, including any barriers to the market led rollout of smart meters.
- Development of new electricity support service markets that improve the stability of the grid.
- Revised powers for the electricity market operator to help them better manage high levels of intermittent generation.
- Development of a process to resolve legitimate landowner concerns that can allow the removal of moratoria on onshore gas exploration and production.
- Careful implementation of gas market reforms as set out by Australian Energy Market Commission and the Australian Competition and Consumer Commission.
The full submission is available here.
About the Australian Energy Council
The Council represents 21 major electricity and downstream natural gas businesses operating in competitive wholesale and retail energy markets. These businesses collectively generate the overwhelming majority of electricity in Australia and sell gas and electricity to over 10 million homes and businesses.
Media contact Carl Kitchen 0401 691 342