Lower prices offset carbon tax
Demand for power across the National Electricity Market serving the eastern states and South Australia fell another 1.4 terrawatt-hours in the year to August compared with the 12 months to July, said Hugh Saddler, principal consultant at Pitt & Sherry.
On a per capita basis, electricity use peaked in 2006-07. Rising power prices, greater energy efficiency measures and slumping demand from energy-intensive industries such as smelting, have combined to drive down demand since then.
Analysis by Pitt & Sherry shows costs for users have dropped along with wholesale prices, helping consumers cope once the carbon tax kicked in - even before households received their federal assistance.
"The per capita carbon cost in 2012-13 varied between $43 in Tasmania and $179 in Victoria, with its much more emissions-intensive electricity," said a report by the firm.
"However, over the preceding few years, total non-carbon wholesale costs fell by almost as much (or sometimes more) because of the combination of lower wholesale prices and reduced consumption."
That compensation - roughly $10.10 a week for most households to offset an estimated $9.90 rise in bills - cushioned some of the impact of the much larger increases in network expenses and other costs unrelated to the carbon price.
"The compensation was sort of needed and merited, but it wasn't compensation for the carbon price but for the huge increases in network costs," Mr Saddler said .
Also contributing to falling wholesale prices has been the rise of renewable energy, adding to the squeeze on coal and gas generators, said Russell Marsh, policy director of the Clean Energy Council.
"Renewable energy does in fact have an impact on prices," Mr Marsh said. "It does help to keep wholesale prices lower than they would otherwise have been."
August underscored the advance of wind energy, in particular, with monthly output figures smashed in part because of added capacity but also because of favourable weather.
In August, wind farms supplied 8 per cent of the NEM demand, or 1024 gigawatt-hours, far above the previous record - set a month earlier - of 749 gigawatt-hours, or 5.7 per cent of the total, the Clean Energy Council said.
South Australia led the way, with 37.9 per cent of the state's demand met by wind power, or 452 gigawatt-hours, while other wind energy records fell in NSW, Tasmania and Victoria.
Frequently Asked Questions about this Article…
According to energy consultant Pitt & Sherry, increased competition among generators and falling wholesale power prices have helped to offset much, if not all, of the carbon tax effect. Analysis in the article shows lower wholesale prices combined with reduced consumption meant users' costs fell even after the carbon tax was introduced.
Demand across the NEM serving the eastern states and South Australia fell by about 1.4 terawatt‑hours in the year to August compared with the previous 12 months. The article cites rising power prices, greater energy efficiency measures and slumping demand from energy‑intensive industries such as smelting as the main drivers of the decline.
Pitt & Sherry’s analysis found that wholesale price falls and reduced consumption helped bring down costs for users, cushioning households from the direct impact of the carbon tax. Those reductions meant consumers were better able to cope with the carbon price even before federal compensation payments were received.
The article notes federal assistance amounted to roughly $10.10 a week for most households to offset an estimated $9.90 rise in bills. Hugh Saddler from Pitt & Sherry said the compensation was important but largely compensated for large increases in network costs and other non‑carbon related expenses, rather than being pure compensation for the carbon price itself.
The Clean Energy Council’s Russell Marsh is quoted saying renewable energy helps keep wholesale prices lower than they would otherwise be. The rise of renewables — and particularly stronger wind output — has added to the squeeze on coal and gas generators and contributed to falling wholesale prices.
In August, wind farms supplied 8% of NEM demand, or 1,024 gigawatt‑hours — a new monthly record compared with the previous record of 749 gigawatt‑hours (5.7%). South Australia led with wind meeting 37.9% of the state’s demand (452 gigawatt‑hours), and other wind records also fell in NSW, Tasmania and Victoria.
Pitt & Sherry reported that the per capita carbon cost in 2012‑13 varied between $43 in Tasmania and $179 in Victoria, with Victoria experiencing the highest per capita carbon cost due to its more emissions‑intensive electricity supply.
The article indicates a shrinking market, rising competition and growing renewable output are driving down wholesale prices, which can squeeze traditional coal and gas generators. For investors, those trends suggest increasing pressure on fossil fuel generators and a strengthening role for renewable energy providers — factors worth monitoring when assessing energy sector investments.
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