Retail electricity prices in Australia are expected to rise by 50% over the next two years, with Federal Treasurer Jim Chalmers said to be weighing up market intervention to stop those costs spiralling further.
The Australian Treasury has assumed in the federal budget presented in Canberra last night that retail power prices will increase by an average of 20% nationally in late 2022 and a further 30% in 2023/24.
These startling rises stem from Australia’s drive to decarbonise its electricity supplies. After enjoying a long run of cheap electricity, Australian consumers are now facing what will be a severe attack on household budgets.
By comparison, with 80% of our electricity already coming from renewable sources, New Zealand may escape such rises.
At present the electricity sector in NZ contributes up to 70% of the gross emissions reductions required under the country’s 2050 net zero carbon target. An independent report by Boston Consulting Group says the country should invest $42bn in new electricity generation, distribution, storage and other technologies by the end of the decade to decarbonise the economy more quickly.
BCG was commissioned by the country’s big four power generators and several lines companies to look at future options.
It said it had taken a ‘holistic’ approach to deliver greater and faster reduction of emissions and development of renewable electricity.
It said moving the country to 98% renewable electricity energy by 2030 would deliver emission reductions faster than the Climate Change Commission has proposed.
“Deep, rapid decarbonisation at the lowest cost to consumers relies on a swift build of renewable generation,” the report said.
BCG says this would mean overbuilding on renewable energy, greater use of battery storage, and some residual use of coal- and gas-fired stations, which would increase prices, but the impact on household bills would be limited by increased energy efficiency.
The report’s $42bn estimate was made up of $10.2bn in large-scale renewable generation, $1.9bn in flexible generation to meet peak demand and dry years, $8.2bn for network transmission including a new Cook Strait cable, and $22bn for local distribution.
“Our modelling shows that it makes economic sense for NZ to reach 98% renewable electricity by 2030. This, combined with accelerating electrification of transport and heat, will deliver 8.7m tonnes of CO2 equivalent of emissions reductions in 2030.”
It said these targets were attainable if investment incentives favoured renewable projects, overseas investors were brought in to fund such projects, investment was in advance of the need for renewable projects rather than “just in time”, and planning laws allowed faster consenting of projects.
The report foresaw lesser roles for biomass and hydrogen in the near term at least, while it said the mooted Lake Onslow pumped storage development in the South Island, currently under investigation by the government, had benefits but also disadvantages.
A significant step to electrifying the economy would come through more electric vehicles, with a target of 1 million by 2030 suggested, more than doubling that target by 2040, and a further doubling by 2050.
Point Of Order sees considerable merit in the BCG report, particularly in light of the sharp rises in electricity in countries like Australia and the UK, where fumbling over climate change policies has had dire consequences.
Even a superficial examination underlines the worth of what BCG proposes, compared with – for example – the uncertainties in the government’s Lake Onslow plan.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton