Power bills tipped to fall in next two years as political stoush over coal continues

The debate about net zero is heating up in Australia

The debate about net zero is heating up in Australia Photo: Algae.Tec

It might surprise you after years of spiralling price rises, but your electricity bill is set to fall.

Contracts for energy futures – power that will be bought this year and in 2021 – are down between 13 and 17 per cent, the Australian Energy Market Operator (AEMO) says, and that decline will mean falling bills for consumers.

“During the next two years, retail prices will go down,” Australian National University honorary associate professor Hugh Saddler told The Business.

“[There will be] a gradual decrease, a small but steady decrease, over the next couple of years in residential electricity prices.”

Last year was the hottest and driest on record in Australia, and the second hottest globally, which scientists attribute to climate change.

Even though the heat and bushfires have trimmed the amount of power produced by hydro and coal-fired plants, the spot price for electricity fell almost 20 per cent in the last quarter of 2019, compared to a year earlier.

“The main reason is the sun is starting to displace coal-fired generation,” Victoria Energy Policy Centre director Bruce Mountain said.

“We’re getting more and more zero or marginal-cost generation from the wind and the sun.”

Paying to generate electricity as solar surges onto grid

The boom in renewables has meant there is less reliance on coal-fired generation.

Although coal-powered plants are slower to respond to demand and must keep running, gas-powered plants are expensive to run but easier to turn on and off, and are being used to smooth out demand at the start and end of the day when the sun is not shining.

Hugh Saddler, from ANU’s Crawford School of Public Policy, says some states have experienced periods of negative power prices. Photo: ABC News/Ben Harris

So much solar power is storming into the national grid in the middle of the day that states including South Australia are now experiencing periods of negative prices for power.

“What that means is that the generators that are going through that period actually have to pay to generate electricity, which is not great for the economics of a coal-fired power station,” Dr Saddler said.

However, slumping futures prices are not beneficial for the development of renewables, either.

“When prices come down, the incentive to invest is weaker and so you expect to see less clamour for new investment,” Dr Mountain said.

“The issue is not so much the price but the policy frameworks, governments chopping and changing, a lack of clarity means investors discount future prices.”

Coalition coal stoush continues

The new figures from AEMO come amid an escalating battle over coal within the federal government.

Former resources minister Matt Canavan is among members of the Coalition who want the government to fund a new coal-fired power station at Collinsville, North Queensland.

“Really, renewable energy are the dole-bludgers of the energy system,” Mr Canavan said last week.

“They’re not on all the time. They just turn up to work when they want to.”

Meanwhile, new Resources Minister Keith Pitt has called for calm on the issue.

“We look to use whatever technology’s available, particularly if it does reduce emissions and keep power prices down,” he said.

However, former prime minister Malcolm Turnbull, whose leadership was bedevilled by the climate change issue, did not mince words at a lunch in Canberra.

“Those people who are advocating that the government should fund coal-fired power are basically making a case for higher emissions and higher power costs,” he said.

“And that is nuts,” Mr Turnbull said, emphasising each word.

‘The private sector would not touch it with a barge pole’

Experts have backed Mr Turnbull’s assessment of the future of coal-fired power generation.

Asked by The Business if they would invest in a potential new plant, the answers were emphatic.

“It would be daft in every sense of the word,” Dr Mountain said.

“The private sector would not touch it with a barge pole. The on-average cost of production … including paying back the capital outlay [for building it]. Coal is completely done.”

Dr Saddler echoed the sentiment.

“Absolutely not. I don’t know why I would invest in something where I had to pay to get the product out the door, which is frankly what we’re talking about with negative prices.

“It would be a crazy thing to invest in and if I were government, I’m certainly not going to throw taxpayers money towards it. It would just be a complete waste.”

A decade of policy chaos and uncertainty has seen energy markets move on their own.

However, analysts say time is running out to transform the national grid to accommodate the fluctuations of renewable power.

“On current projections, we will be switching off our coal-fired power stations over the next 20 years,” PwC energy, utilities and resources leader Mark Coughlin said.

The question we have got from a policy point of view is what we replace them with?

“We’ve got a very limited timespan to get this right.

“We estimate there’s probably one to two years for Australia to really get the settings right so we can invest into the system … as we start to see some of those coal plants turn off in the early 2020s.”


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