Australia: With focus on gas production, power bills can go up by $1k a year

Analysts have warned that Australian households could see their annual power bills rise by several hundred dollars, potentially reaching up to $1,000, under the Coalition’s plan to delay the expansion of large-scale renewable energy and increase reliance on gas-fired electricity until nuclear plants are operational. Peter Dutton’s proposal to build seven nuclear plants has faced opposition from various parties. Analysts predict this plan would lead to higher prices over the next decade before nuclear energy becomes available.

The Coalition has not provided many specifics, but Dutton announced a halt on solar and wind farm investments, proposing increased use of gas to fill the gap left by retiring coal plants over the next 20 years. Gas is a more expensive power source than renewables or coal, and new gas sources are unlikely to be cheaper since the most affordable gas reserves have been depleted. Increased gas use could also raise greenhouse gas emissions, exacerbating the climate crisis.

Tristan Edis from Green Energy Markets explained that wholesale electricity prices are driven by the costliest fuel used, which is often gas, leading to prices of $250-$300 per megawatt hour, significantly higher than average. Gas currently provides less than 5% of electricity in the national market, used only when demand peaks. Edis suggested that if the Coalition prioritizes gas over renewables, household power bills could increase by $500 to $1,000 annually.

Dr. Roger Dargaville from the Monash Energy Institute highlighted the difficulty in predicting exact bill increases due to the lack of details but concurred that an increase of up to $1,000 per year is possible. He noted that transitioning from coal to gas would result in steep price hikes. Dargaville advocated for more renewable energy supported by storage and occasional gas use as the most cost-effective solution.

Dr. Dylan McConnell from the University of New South Wales estimated that replacing renewables with gas could raise annual bills by $400 to $500. He stated that slowing renewable energy rollout and relying on gas would incur substantial costs.

These analysts’ forecasts contrast with the Coalition’s claim that their approach would provide cheaper, cleaner, and more reliable electricity compared to the current government’s goal of 82% renewable energy by 2030. Although Labor promised to reduce average annual power bills by $275 by 2025, bills have instead increased, which the Coalition attributes to the rise in renewable energy. However, analysts point to fossil fuel factors like the Ukraine war affecting gas and coal prices as the primary cause. Regulators predict a potential 7% decrease in household prices next year.

Shadow Treasurer Angus Taylor suggested that short-term strategies, including more gas use, could reduce power prices before nuclear energy is available. The Coalition has yet to detail its plans for gas and renewable energy but hinted at supporting household solar while delaying large-scale renewable projects. Dutton proposed nuclear plants on existing or former coal plant sites but did not provide cost estimates or explain how legislative bans on nuclear power would be lifted.

A survey by the Australia Institute found that 65% of Australians are unwilling to pay more for nuclear power, though nearly 25% are open to it, with 4% willing to pay over $500 extra annually. Executive Director Richard Denniss noted that regardless of political affiliation, most Australians do not support a costlier nuclear future.

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