Why Electricity Prices are Going up
On Tuesday the Australian Energy Market Commission (AEMC) released its report on electricity retailing which pinpointed why retail prices are going up.
According to the report consumers are experiencing increases in retail prices because of the increases in wholesale prices.
These in turn are being boosted by a lack of investment in generation due to uncertainty as a consequence of the absence of an emissions reduction regime and the retirement of the Hazelwood generator in March 2017, which supplied capacity of 1600 MW, equivalent to around 20% of Victoria’s electricity consumption.
This came on top of the retirement of the Northern Power station in May 2016, which supplied 546 MW of capacity; increases in gas prices, partially due to high demand for gas for export markets; and the moratorium on gas exploration and development implemented by the states.
There is the additional problem that uncertainty in the wholesale market has led to a decline in stable forward contracts between wholesalers and retailers.
This is the nub of the renewables problem: there is no guarantee that wind and solar power
can deliver reliable despatchable power so wholesalers with a big renewable component cannot enter into significant forward contracts.
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