A recent report by the Australian Energy Market Operator has led Australia’s Industry Minister, Ian Macfarlane, to warn that Household Electricity prices could rise by more than 10% by 2016.
In an article in The Australian Newspaper of 22nd December, 2014, MacFarlane notes that there is not enough Renewable Energy Capacity currently being commisssioned, and that this could cause prices to rise.
What is the The Renewable Energy Target (RET)?
The Renewable Energy Target (RET), is an Australian Government Scheme administered by the Clean Energy Regulator. It is designed to reduce emissions of greenhouse gases in the electricity sector and encourage the commissioning of renewable energy production by financial incentives. The aim is to ensure that at least 20% of Australia’s electricity supply will come from renewable sources by 2020.
The scheme has been in operation since 2001, with the 20% figure being set in 2009 (previously it was 2%).
Why would a lack of Renewable Energy Capacity lead to a price rise in domestic electricity costs?
If the RET is not met, then the scheme technically moves into default. Under the provisions of the scheme, the price of the renewable energy certificates sold by renewable energy generators such as wind farms, is allowed to rise, and this would cause wholesale electricity prices to double, and domestic electricity prices to rise by more than 10% in two to three years.
Why is this in the news at the moment?
Actual electricity consumption has not increased in Australia as much as has been predicted. This is largely due to an industry reduction in electricity use, and household increase in solar electricity generation.
MacFarlane wants the figure to be reduced to 27,000GWh, and is using this report to highlight to need for a “realistic compromise” on the figure.
The Federal government wants to reduce the RET to 20% of actual electricity consumption, not 20% of forecast electricity consumption. This would mean commissioning 27,000GWh of Renewable Energy Capacity, as opposed to the currently legistlated figure of 40,000GWh.
Will the proposed changes to the Renewable Energy Target effect Domestic Electricity Prices?
MacFarlane says that if the scheme goes into default, then prices will rise. If the changes lead to the scheme not going into default, then prices will not rise from the penalty factor.
There is currently too much uncertainty about the scheme to make solid predictions about electricity prices. However, it would seem a good time for householders to continue to assess their electricity usage, and continue to value good house designs that minimise electricity usage. Contact us at BERA today if you would like to discuss obtaining an Energy Efficiency Rating for your property.