Households and businesses in Australia will pay more for electricity and gas in the coming months as energy providers work to deal with soaring wholesale costs.
The latest of the “Big Three” energy providers, EnergyAustralia, announced its price hikes set to affect around two-thirds of its 2.4 million customers on Aug. 1. The other one-third of customers are currently on fixed-rate contracts and are shielded from price increases.
Average prices will increase 5.5 percent (or A$111 per year) for households in Victoria, 17.9 percent ($362 per year) for New South Wales, 18.9 percent ($367 per year) for Queensland, 14.9 percent ($312 per year) in South Australia , and 13.3 percent ($259 per year) in the Australian Capital Territory.
Small business owners will have to contend with a 5.8 percent increase in Victoria. 12.3 percent in New South Wales, 18.9 percent in Queensland, 12.9 in South Australia, and 4.9 percent in the Australian Capital Territory.
Gas users will also see prices climb, with residents in South Australia to see a 7.9 percent increase ($82 per year), and those in New South Wales ($82 per year) and the Australian Capital Territory ($151 per year) to see increases of 8.9 percent.
More Energy Supply Needed
Mark Brownfield, the chief customer officer at EnergyAustralia, said the price hikes reflected a “doubling” of wholesale electricity and gas costs.
“Australia is in the midst of an electric shock, and our job as a generator and a retailer is to keep pumping power into the system to support our 2.4 million customer accounts, including those who may be doing it tough,” he said in a statement on July 5.
“The only solution to higher electricity prices is an increase in the supply of power. The fundamental issue is that coal and gas are in short supply. You can see that from the export prices over the past year, with coal up 243 percent and gas up 148 percent.”
He encouraged customers to explore fixed-price contracts and called on energy generators to provide energy security, more supply to limit pricing volatility, and to “get to net zero as quickly as possible.”
EnergyAustralia’s move comes after Origin Energy (4.2 million customers) and AGL Energy (4.5 million) announced similar price increases.
Smaller energy retailers have struggled the most to cope with increasing wholesale prices, with several taking the extraordinary step of asking their customers to shop around for better deals.
“Things have changed and very quickly—and the best thing you can do now is switch and save as much as you can. Staying with us could mean your prices have to double soon,” Luke Blincoe, CEO of ReAmped Energy, told his customers on May 31.
Embrace of Net-Zero, Rejection of Fossil Fuels Leaves Energy Grid on the Brink
Australia’s energy crisis stems from an ongoing transition to net-zero, including the push to develop more renewable energy sources and a lack of support for existing fossil fuel systems and development.
Energy generators have been reluctant to invest in maintaining coal-fired power plants, while at the same time, development of new oil and gas fields has been limited by strict environmental standards. For example, in April last year, the Victorian state government rejected a plan by AGL to build a liquefied natural gas terminal due to its “unacceptable” environmental impact.
On top of this, the Australian gas industry is not obligated to ensure reserve supply for local use (like in Western Australia).
These combined factors have left the energy grid without the extra capacity to deal with unforeseen events or crises.
In May, a perfect storm erupted, putting pressure on Australia’s energy market. One was a polar vortex that swept through the southern and eastern states driving up domestic energy demand significantly.
The other was the war in Ukraine and imposed sanctions on Russian gas and coal imports globally. This had a worldwide cascading effect and drove up demand for these resources across Europe (hence increasing wholesale prices).
Australian customers and businesses were effectively left to compete with European consumers for the use of their own coal and gas.
Yet the Australian Labor government and the Australian Energy Market Operator have avoided pushing too heavily for more fossil fuel development and have remained committed to opening up more investment in “clean energy” systems like wind turbines, solar panels, and battery storage to provide that extra support for the energy grid.
However, local business leaders, engineers, academics, and lawyers in the sector have already pointed out the array of challenges, extra government support, and the creation of new unproven industries (hydrogen) that would be needed to prop up a renewable energy grid.
“All of our new energy options—from renewables and storage to biogas, hydrogen and energy efficiency—are hard to accelerate amid global supply chain woes, skills constraints, and unease from communities around energy megaprojects,” according to the head of the Australian Industry Group Innes Willox.