Renewable energy to have high impact on electricity prices

The Energy Users Association of Australia (EUAA) is concerned an unexpected rise in the cost of renewable energy will hit electricity prices next year. The association said it had investigated the likely cost of the Expanded Renewable Energy Target (ERET) for 2011.

EUAA executive director, Roman Domanski said the size and cost of the ERET will be uncertain as the scheme will be supplemented by a range of state-based schemes such as feed-in tariffs, which compensate the owners of renewable energy installations (in gross or net terms) and other mechanisms like the New South Wales Solar Bonus.

“We have examined the outlook for electricity costs under the ERET and, based on conservative assumptions, found that the LRET is likely to add $2.20 per megawatt hour (MWh) to the cost of electricity in 2010, whilst the SRES will add nearly double that at $3.80/MWh for a combined increase of $6/MWh. It could be higher,” Mr Domanski said.

“To put this in context, it is around 7 per cent on top of everyone’s electricity bill at a time when electricity prices are already increasing steeply and stretching the budgets of businesses and families. The total cost of the scheme is estimated to increase from around $500,000 million in 2010 to around $1.2 billion in 2011, an increase of 140 per cent in one year,” he said.

“Moreover, these costs can be expected to increase further as the ERET gets bigger and due to its add-on costs, such the need to provide conventional power generation to back-up renewable energy when the sun is not shining or the wind not blowing, as well as the need to connect renewable energy to the grid. These add-on costs are not cheap.”

While the EUAA supports greater use of renewable energy where this can be done efficiently and at reasonable cost to all electricity users, Mr Domanski said the implementation of the ERET and state-based renewable subsidies would not be able to achieve this.

“(The) costs of these schemes will be borne by electricity users who are already seeing their electricity bills skyrocket due to factors such as very large increases in network charges in states such as New South Wales, Queensland, South Australia, Western Australia and Tasmania. Victoria has so far been spared the network price increases but has seen large increases in the price of electricity due to other factors such as the roll out of smart meters,” Mr Domanski said.

The EUAA will be providing its members with additional information about the costs of the ERET, and is working with them so that they are well informed about the scheme and can opt for solutions that minimise its impact on them.