Another year, another electric shock.
In what's becoming something of an event, Australian households — at least those outside Western Australia — are being softened up for further punishing rounds of power bill hikes.
For the past three years, much of our inflation has been driven by exorbitant rises in the cost of electricity and sat behind the extraordinary lift in interest rates that have drained households of cash and sent businesses to the wall.
While the price hikes moderated last year, the previous two years saw a combined 40 per cent surge in household energy prices, and this year price hikes of between 2 and 9 per cent are anticipated, depending on where you live.
That prompted the federal government to dole out energy rebates in an effort to limit the damage on households which, given an election is looming, will likely be extended in next week's federal budget.
Power prices to rise nearly 9 per cent for some from mid-year
Photo shows A flat lay of a calculator, an electricity bill and a mobile phone displaying an ABC article about electricity prices.
For a nation that is one of the world's biggest energy exporters, it is a situation that defies logic and reeks of an epic policy failure.
This time around, we're told the rollout of new poles and wires to expand the grid to areas where renewable energy is being built is to blame.
Three years ago, it was Russian President Vladimir Putin's invasion of Ukraine and its disruption of global energy markets.
No-one, it seems, is willing to call out the obvious culprit, the one identified by Anthony Albanese, Scott Morrison and Malcolm Turnbull at various points of their prime ministerships.
We export too much gas and don't leave enough to use at home.
Lower electricity costs mean lower inflation
Gas is the key determining factor behind our electricity prices.
That's because, unlike unwieldy coal-fired generators, it can be switched on in a flash to immediately cover a shortfall in the system.
Given it is the final ingredient in the power generation system, the price of gas determines the price of electricity. It's what is known as the marginal cost supplier.
Unfortunately, the price of gas on the east coast has trebled in the past decade after three gas export consortia were given permission to export LNG without adequate provisions to ensure enough was kept for domestic users.
And despite repeated intervention by federal governments and three prime ministers, the situation remains unresolved.
Future gas policy must ensure domestic supply
Photo shows The silhouette of a steel lattice gas tower at dusk with a flare at the top
A recent report by a former director of the Australian Competition and Consumer Commission, John Runciman, dismissed calls that the problem could be solved by simply producing more gas.
Now with the Institute for Energy Economics and Financial Analysis, Runciman argues that the three exporters deliberately drain the domestic market of gas.
"In recent years, Australian LNG exporters have continued to export gas beyond that required to meet their long-term contracts … to take advantage of high prices," he wrote.
"Queensland LNG exporters have collectively shifted from being net contributors of gas into the domestic market to net withdrawers, thereby worsening the supply/demand outlook."
The intervention by the Albanese government to put a cap on domestic prices worked for a while, locking in a $12 a gigajoule cap, much to the horror of the gas exporters.
Domestic gas prices dived more than 30 per cent, with wholesale electricity prices following. Since then, however, gas prices have headed north and electricity prices have risen even more sharply.
Gas prices have been steadily increasing, as have household power bills. (ABC News: Brendan Esposito)
The economics behind renewables' overthrow of base-load power
After almost a quarter of a century, Australia is as split as ever on how best to reconfigure our electricity system.
Our coal-fired generators are wearing out and continually breaking down. But there is a bigger problem with coal and nuclear-powered plants. They can't compete against lower-cost renewable-energy providers.
During the day, renewables flood the market and cause wholesale prices to crash. But base-load power generators such as coal and nuclear stations are incapable of shutting down and so are forced to operate for lengthy periods at a loss.
For a country like Australia, geographically large with a small population, base-load power plants are incompatible with intermittent renewables.
We need to accept that net zero won’t happen
Photo shows White silhouette cartoon of donald trump next to words 'climate crisis won't stop for a climate denier' on a red background
What is needed is either large-scale energy storage or, until that is adequately developed, gas plants that can pick up the slack during periods when renewable providers are offline.
Bringing down the price of gas, therefore, not only would deliver immediate power bill relief but would also enable a quicker rollout of large-scale wind and solar plants.
As inconceivable as it sounds, one strategy is to build gas import terminals so that we can buy gas from offshore.
David Llewellyn-Smith, the chief strategist at the MB Fund and MB Super, argues that risks allowing the import price, not our export price, to become the price setter.
"That price is $25/Gj today, double the local price," he says.
"An average gas price of $25/Gj will deliver an electricity bill shock of around 40 per cent."
Can nuclear power deliver?
Ridding the power system of fossil fuels has been the accepted strategy for meeting emissions targets.
The Coalition's planned construction of seven nuclear power plants on the sites of existing coal-fired generators — if they could be built on time — would not sit easily with a large-scale renewable network in place.
Nuclear reactors would struggle to break even in peak renewable generation times, although it is entirely possible that energy storage systems will be much better developed in the next 40 years.
Even so, the cost of nuclear power is far and away the most expensive, according to global electricity cost specialist, investment bank Lazard.
Who's right in the energy transition?
Photo shows A close-up of solar panels on top of a house
In its 17th annual investigation — based on American experience — nuclear power is the most expensive at $US182 ($287) per megawatt hour.
The cheapest is onshore wind at $US50 a megawatt hour, beating solar at $US61.
Coal comes in at $US118 a megawatt hour, while gas peaking — the plants designed to cut in when power runs short — is the second-most expensive at $US169 a megawatt hour.
Even more interesting are the cost trends. Since 2009, the cost of onshore wind generation has dropped 65 per cent.
The fall in solar-powered electricity generation has fallen 83 per cent and full-time gas-generated electricity is down 8 per cent.
The cost of generating electricity from coal plants has risen 7 per cent over that period, while gas peaking plants have seen a 38 per cent rise in their cost of production.
It's becoming more costly to generate electricity from coal, while renewables are becoming cheaper. (Reuters: Mick Tsikas)
According to Lazard, nuclear-powered generators have seen the greatest cost lift, with a 49 per cent rise during this period.
That's because nuclear plants are hugely capital intensive and their inherent danger necessitates much more stringent operating regulations. Then there's the disposal of spent fuel, a cost that has risen dramatically in recent years.
On projects as large as these, cost and time overruns are to be expected.
In the UK, the Hinkley Point C nuclear plant got underway in 2009. It's expected to be finished in 2031, eight years after the planned date and at possibly triple the cost at 46 billion pounds.
Even worse, the operator has struck a deal that it will be paid an astronomical price for the power it generates.
If that happens to be higher than market prices, taxpayers will foot the bill.
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