In an energy market that has collapsed under years of strain, prices have spiked and supply is tight. How did we get here? Will price caps help households? And where will it end? | EXPLAINER by Nick O'Malley and Angus Thomson
For years, just about the only thing the various voices in the Australian energy sector could agree on was the need for “certainty”. Fossil giants, renewables advocates, market analysts were all calling for it. But certainty of what?
That shift would cost a fortune and take a generation, even if done right. Done poorly, it would cost more and take longer.via either regulations or a tax on carbon – the transition never happened. Meanwhile, the coal generators have lumbered along, backed by an influx of cheap renewables and by gas peakers that could be switched on when there was high demand. But while gas has filled the gaps, it has been costing more as the wells closest to cities have run dry and the export market has grown.Encouraged by state governments determined to act on climate, renewables kept flowing in, straining the transmission system, or “grid”.
Obviously, by capping wholesale prices, pressure on the price you might expect to pay is relieved. But the money you pay your retailer is not just for electricity. That wholesale price accounts for roughly a third of your power bill. Retail costs add about 10 per cent, but almost half the cost goes into maintaining the network that takes the electron from the coal, solar or wind generators to the power switch in your home.
“If people have a less pessimistic outlook than that, I’d be overjoyed to see their thinking,” he says.The first thing you can do is reasonably simple – shop around among energy providers for the best plan. The government’s Energy Made Easy website will help, but make sure the price being advertised is the one you’ll actually be paying, says Choice’s Chris Barnes.
That response offers a guide to what Australian governments might do to help households cut their bills – regulate better housing standards, subsidise those energy efficiency measures mentioned above, and even restrict gas connections in new housing developments to free up future supply.