Climate Change

29 Sep 2022

Australia Set to Face High Power Prices as Coal Plants Retire

29 Sep 2022  by   
Australia is set to face high electricity prices for several years as massive new investment will be needed in transmission lines to hook renewable energy projects to the grid as coal-fired generation is retired, energy regulators said on Thursday.

Image: Getty

Reports released by the Energy Security Board and the Australian Energy Regulator (AER) both flagged that consumers will face energy price pain stemming from the costs of switching to cleaner power.

Power prices surged to record highs in June due to a string of local and global factors, and the AER said electricity contract markets and coal and gas price projections "suggest those high prices will persist over at least the next 2 years".

"As we release this report, we are concerned that energy is becoming less affordable for consumers," AER Chair Clare Savage said in the State of the Energy Market 2022 report.

"In coming years, we expect upward pressure on network costs as inflation and rising costs of capital combine with significant upcoming network investments."

Soaring gas prices are also likely to contribute to higher power costs, with gas-fired generation essential during peak demand periods.

"There is significant risk that new gas projects will not come online in time to prevent expected supply shortages," the AER report said.

The reports came the same day as the country's top power producer AGL Energy AGL.AX announced it was bringing forward the closure of its coal-fired generation by 10 years to 2035 and would invest A$20 billion ($13 billion) in renewable energy to help replace that capacity.

At the same time, the state of Queensland said this week it would shut all its coal-fired plants by 2035 and invest A$62 billion with the private sector on renewable energy.

Regulators highlighted that maintaining a stable grid was challenging and costly, with more reliance on intermittent wind and solar power and more frequent outages at coal-fired plants.

In Queensland alone, services to maintain a stable grid cost A$234 million in 2021, the AER said.

($1 = 1.5394 Australian dollars)


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