When it comes to the cost of doing business, electricity prices dominate. CCN looks at the outlook for the year ahead.
Falling wholesale electricity prices and new laws requiring energy retailers to pass on rate cuts to customers are expected to lower power bills this year.
Retail electricity prices are tipped to fall by 7.1 per cent by 2022 – an average saving of $97 per household – according to the Energy Security Board (ESB).
In its latest report on the health of the national electricity marketthe ESB credits new low-cost renewable generation for driving down wholesale prices and warns that severe weather and ageing coal power plants are threatening reliability of supply.
The ESB found that 16 per cent of Australia’s electricity was generated by wind and solar in 2018-19, and the share of these renewables is forecast to increase to 27 per cent in 2022 and 40 per cent in 2030.
Lead by Tasmania, which uses almost 100% renewables, and South Australia, with 53 per cent Australia is in the top tier of renewable share alongside Ireland, California, Germany, Spain and Portugal.
A new report from the Australian Competition and Consumer Commission (ACCC) states that average household energy bills rose by seven per cent in 2020 as a result of people spending more time at home, while small businesses used 17 per cent less power due to a reduction in business operations performed onsite.
Although the pandemic has led to an increase in residential energy consumption across Australia, major falls to wholesale prices should help lower bills, according to ACCC Chair, Rod Sims.
The price retailers pay for energy from generators – reportedly dropped by 50 per cent in mid-2019 to early 2021, according to the ACCC report.
Today it isn’t all about electricity. Solar and wind are still the cheapest new electricity generation with the cost of hydrogen electrolysers predicted to fall sharply this year.
Modelling undertaken by the Australian Energy Market Operator (AEMO) and CSIRO has found the cost of batteries is falling faster than any other generation or storage technology.
The findings are contained in Gencost 2020/21, the latest annual study drafted by AEMO and CSIRO to quantify the cost of electricity generation and storage from different technologies.
The biggest mover over the past year has been the cost of battery storage while the study predicts sharp growth in hydrogen produced with electrolysis from 2030.
The study assumed pumped hydro is a largely mature technology with small opportunities to become more cost effective as it is deployed.
While the projected cost of pumped hydro has actually increased compared to the 2019/2020 Gencost findings, the report still sees an important role for the technology that becomes more cost effective in longer duration applications.
The cost of solar PV is predicted to continue to fall, but the latest findings show a slowing in the reductions associated with large-scale systems due to local challenges in the Australian industry with several developers going out of business.
The report notes that both large-scale and rooftop solar benefit from advancements in components they have in common, so similar trends are observed in capital cost reductions.
The report also notes that reductions in cost of onshore wind are slowing as the technology becomes more established, but it is still tracking at around four per cent for each doubling of cumulative global capacity.
Despite the slowing fall in capital costs, wind continues to improve its capacity factor which makes it one of the lowest cost generation options available.
A drop in electricity costs is necessary at a time when wholesale gas prices surged to five year highs last month. The spot price for natural gas is at its highest since 2016.