Energy bills Australia: Household bills could be halved by 2050 with net zero emissions: Grattan Institute
Grattan proposes setting emissions limits for coal-fired power plants as part of the federal government’s so-called “safeguard mechanism” that forces the nation’s 215 largest industrial polluters, such as smelters and factories, to reduce their emissions by 4.9 percent annually.
This would be a controversial move, given that energy is exempt from safeguards to prevent rising electricity bills, and Climate Change and Energy Minister Chris Bowen has already ruled this out.
He said the government has plans to increase household energy efficiency, as well as the development of wind and solar power plants, and will consider more options to reduce emissions in the 30s.
“We are looking at a range of post-2030 regulations to continue to encourage investment and decarbonisation: The government has no plans to include electricity in the Conservation Mechanism,” Bowen said.
Grattan’s modeling predicts that wholesale electricity prices will rise from their current level of less than $50 per megawatt hour to more than $100 per megawatt hour by 2035.
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But energy prices will not double in parallel with this increase, as wholesale prices make up less than 30 percent of the electricity bill, which includes retail margins, taxes, and pole and cable costs on the network.
“The safeguard mechanism already restricts emissions in the industrial and transport sectors, so its use in the electricity sector would be a natural choice,” Grattan’s report said.
The Australian Energy Market Operator has stated that the operating costs of aging coal-fired power plants are increasing and they will be rapidly closed down in the next decade due to competition from renewable energy sources.
Tony Wood, senior researcher at the Grattan Institute, said that when coal power plants are shut down, excess electricity supply to the grid from renewable sources will decrease, wholesale prices will rise in the short term and “within 10 years prices will be back to roughly their current level”.
The report assumes governments will take the steps needed to meet climate goals, such as building transmission lines to connect regional wind and solar farms to urban centers and implementing the federal government’s Capacity Investment Plan, which uses taxpayer money to undertake the construction of private renewable energy projects worth a total of $70 billion.
“This may or may not be done,” Reeve said. “They will probably get all the money out the door, but whether the projects will actually be electric is a different matter.”
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