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Wind and solar power surge will lower electricity bills

Wind and solar power surge will lower electricity bills

Households should get some welcome relief from soaring power costs over the next two years as more wind and solar energy comes into the market under renewable energy targets, the Australian Energy Market Commission says in its annual review.

The report comes as the Australian Energy Market Operator is inviting more suppliers to bid into the market in Victoria and NSW in the coming days as temperatures rise into the mid-30 and generating units at Yallourn and Liddell coal power stations are out of action.

The AEMC says a typical household bill of $1433 a year will fall by 12 per cent over the next two years. Typical bills jumped 11 per cent this year thanks to wholesale prices doubling over the previous two years as coal-fired power stations closed in Victoria and South Australia and gas prices spiked.

Wholesale electricity costs will fall by about a third to $405 as National Electricity Market costs fall, network charges will rise slightly to $628, and charges for environmental measures such as renewable energy targets and solar feed-in-tariffs will increase by a fifth to $89.

The national trend masks sharper movements in the components of the bill, and large differences between states.

Among the states, South Australians and Tasmanians - at the extremes of the NEM with weaker interconnection than the larger states - have the highest annual bills of $1889 and $1868, with South Australians paying the highest wholesale prices and Tasmanians the highest network charges.

ACT has highest green energy costs

Consumers in the ACT have the highest environmental charges, $251 rising to $364 to fund the territory's renewable energy contracts. By 2019-20 the ACT will also have the highest annual bills at $1755, from Western Australia at $1723, after bills in all the other markets bar WA fall.

Households in NSW ($1289 falling to $1125) and Victoria ($1281 falling to $1080) enjoy the lowest bills although many Victorians also use large amounts of natural gas for household energy needs, adding more to their energy bills.

The AEMC attributes the expected wholesale price reversal to a 4900 megawatt flood of new wind and solar energy capacity coming onto the market as the federal Renewable Energy Target rises to its peak in 2020.

But the agency warns that as the flood of intermittent renewable energy forces further coal plant closures - AGL Energy plans to close the ageing Liddell power station in 2022 - prices could rise again unless policymakers enact new policies to bring more dispatchable power capacity into the grid, such as the proposed National Energy Guarantee.

It says that without new policies to balance increased quantities of wind and solar power in the energy mix with dispatchable capacity, prices will continue to ride the roller coaster and consumers will be prey to more blackouts, outages and shortages of the types that hit South Australia, Victoria and NSW last summer.

Dispatchable capacity is capacity that can be switched on and off at will - such as gas peaking plants, batteries, pumped hydro and demand response or demand management.

National Energy Guarantee

"Without investment in replacement dispatchable capacity, wholesale prices will go up again and remain volatile," AEMC chairman John Pierce said.

Mr Pierce is a member of the Energy Security Board (ESB) along with the heads of the Australian Energy Market Operator and Australian Energy Regulator. The ESB devised the National Energy Guarantee after the Clean Energy Target recommended by Chief Scientist Alan Finkel was rejected by government hardliners.

"We have a window right now for the COAG Energy Council to continue its work on mechanisms that can work in the long term interests of consumers and keep the lights on as the energy sector continues to restructure," Mr Pierce said.

Financial Review

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