Renewables to drive down national electricity prices


Are the days of never-ending power bill hikes over? Read on.

Key Points


  • AEMC forecasts 6% drop in electricity prices in 2024.
  • This is the result of lower wholesale costs and reduced environmental costs.  
  • Increased network investment costs will increase prices in some areas.

Households can expect to pay around $77 (or 6%) less for electricity in 2024 than they do today, as cheaper renewable energy flows to consumers, reducing prices to their lowest levels since 2017.

That’s according to the Australian Energy Market Commission (AEMC) – the federal government’s expert energy policy adviser.

The AEMC’s 2021 annual residential electricity price trends report examines the direction household electricity prices will take over the next three years.

It found lower wholesale costs and reduced environmental costs in most regions are continuing to drive overall prices down. 

AEMC Chair Anna Collyer says the forecast illustrates how integrating renewables in a smart way makes it possible to have both lower emissions and lower costs for consumers.

“We can now see far enough into the future to be confident that power prices paid by consumers will continue to trend downwards over the next three years, despite the staged exit of Liddell power station in 2022 and 2023, one of the biggest coal-fired generators in the national electricity market.

“While wholesale costs and environmental costs are trending lower, we are starting to see increases in the cost of network investments, and this is likely to accelerate over the next decade as more network investment is required to connect dispersed new generation to the grid.

“There are also regional differences across states and territories in the national electricity market that will affect price outcomes. And what energy offer you have, how much you use, and whether you also have solar or gas will also affect your bill.”

However, power bills are expected to rise by about $20 in 2022/23, once Liddell Power Station closes. 

"Prices are expected to … fall again as lost capacity is replaced by a combination of solar, wind, gas and batteries," Ms Collyer said.

"While we have just under 2,500 megawatts (MW) of generation expected to exit the grid over the next three years, there are almost 5,500MW of committed new large-scale generation and storage projects coming online over the same time period.

"This is in addition to 4,130MW of new rooftop solar PV [photovoltaic] capacity, which will also influence prices by lowering demand and through exports."

States and territories forecasts


Forecasts for the Northern Territory, Queensland (outside the South East region), and Western Australia are not available on the AEMC website.

ABC News reports South East Queensland is predicted to see the biggest price drop, with annual bills falling 10% ($126) by 2024, to reach their lowest level in more than a decade.

The report predicts the state’s price falls will be driven by new solar and wind farms, and new battery storage coming online in the state.

Other states are predicted to experience the following net increases and decreases over the coming years.

NSW

VIC

TAS

SA

ACT

$50 decrease
by 2024

$99 decrease
by 2024

$125 decrease
by 2024

$35 decrease
by 2024

$77 increase
by 2024

ABC News reported Ms Collyer saying the modelling showed prices in the Australian Capital Territory will experience greater fluctuations, increasing by $99 this financial year and $123 the following, before falling by $145 in 2023/24.

"A comparatively large number of Australian Capital Territory consumers, 28.7%, are still on standing offers rather than cheaper market offers – so there are savings available to households if they shop around for a better deal," she said.

The report said the price rise would be driven by rising wholesale and network costs.

It said environmental costs in the Australian Capital Territory would also increase due to the costs of large-scale Feed-in Tariff schemes.

South Australia


According to the ABC, a modest drop of $35 in South Australia is predicted despite the closure of the Torrens Island and Osbourne units over the next few years. 

"This illustrates how integrating renewables in a smart way makes it possible to have both lower emissions and lower costs for consumers," Ms Collyer said. 

South Australia is set to be hit by higher network investment costs, which are predicted to accelerate over the next decade to cope with the steep rise in power being returned to the grid from households. 

The state recently set a world record by generating more electricity from solar than it consumed for periods of time on five different days. 

The report does not include the Northern Territory or Western Australia. 

"They're not part of the national electricity market, they both have quite different markets, and in each case, the government asked us to not pursue the price trends in those regions because it wasn't as meaningful for their customers," Ms Collyer said. 

Source: Australian Energy Market Commission and ABC