Power bills drop $28 a year thanks to renewable policy, since dumped by the government
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Power bills drop $28 a year thanks to renewable policy, since dumped by the government

Most Australians will pay $28 less on their annual electricity bill within two years largely due to a measure soon to be killed off by the Morrison government that encourages renewable energy and cuts carbon emissions.

A report into residential electricity price trends by the Australian Energy Market Commission, due for release on Friday, comes as Energy Minister Angus Taylor repeated his government’s mantra on lowering electricity bills and downplayed a revolt from the states demanding more federal action on climate change.

The report found electricity prices will generally be stable or falling over the next two years due to a pipeline of new renewable energy supplies that will drive wholesale costs down.

The Australian Energy Market Commission says large-scale electricity projects supported by the Renewable Energy Target will drive falling prices over the next two years. The Morrison government will not extend the target after 2020.

The Australian Energy Market Commission says large-scale electricity projects supported by the Renewable Energy Target will drive falling prices over the next two years. The Morrison government will not extend the target after 2020. Credit:Joe Armao

By mid-2020, the average consumer will pay about $28 less than today, as the national average annual power bill falls from $1367 to $1338, the commission says.

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Anne Pearson, chief executive of the commission, said the large-scale renewable energy target was pushing down electricity prices nationally as the price of certificates drop. Under the scheme, large renewables projects create certificates according to the amount of power they generate. The certificates are purchased by electricity retailers to meet their obligations under the renewable energy target – a policy the Morrison government says it will not extend once it peaks in 2020.

The AEMC said the price falls prompted by a renewable energy influx would offset  increases elsewhere, such as network charges.

The AEMC said the price falls prompted by a renewable energy influx would offset increases elsewhere, such as network charges.Credit:Bloomberg

The report found that despite the overall price benefits of the large-scale renewable energy target, it contributed to periods of more volatile and potentially higher wholesale prices in the absence of policies to encourage investment in replacement generation and firming capacity.

The commission says managing the costs of connecting new electricity generation to the grid "will be a major challenge in the year ahead".

An estimated 9732 megawatts of new generation and battery storage is expected in the four years to 2020-21.

The vast majority of this – almost 9000 megawatts – will come from intermittent generation such as wind and solar. The rest will come from thermal generators such as coal and gas-fired plants, and battery storage.

The drop in wholesale prices prompted by the renewables influx also exceeds slight increases in other costs that affect power bills, such as "poles and wires" network charges and environmental policies such as state-based renewable energy targets.

In NSW prices are expected to fall despite rising environmental and transmission network costs. Prices will also drop in Victoria, where falling wholesale and environmental costs will offset rises elsewhere.

Prices are also forecast to fall in other jurisdictions except the ACT, Western Australia and the Northern Territory, where they are expected to rise slightly due to local factors.

Mr Taylor said the Energy Market Commission's report "reflects the strong action taken by the Australian government to bring down electricity prices", including implementing recommendations by the Australian Competition and Consumer Commission and demanding that retailers reduce their standing offers. However, the Energy Market Commission said its report does not factor in those measures.

The Morrison government has put lowering power bills at the centre of its energy policy in the lead up to the federal election, after it dumped emissions targets for the sector.

Energy Minister Angus Taylor played down an acrimonious meeting of energy ministers.

Energy Minister Angus Taylor played down an acrimonious meeting of energy ministers.Credit:Alex Ellinghausen

At a meeting of the nation’s energy ministers on Wednesday, Mr Taylor blocked a push by the NSW Liberal-National government for a national pathway to net-zero emissions by 2050.

In an opinion piece published that day in the Australian Financial Review, NSW Energy Minister Don Harwin said the Morrison government's decision to dump carbon emissions targets for electricity would keep power prices high by creating policy uncertainty and delaying investment.

Speaking on ABC radio on Thursday, Mr Taylor said the electricity sector would easily meet its pro-rata share of the Paris target of cutting emissions by 26 per cent by 2030 based on a 2005 baseline.

However the Paris target applies to the whole economy and the government has few policies to lower emissions in other sectors.

Nicole Hasham is environment and energy correspondent for The Sydney Morning Herald and The Age.

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