CHOICE membership

Energy Costs Skyrocketing

The market is changing and those with solar will be relative beneficiaries.

If my charges doubled I’ll still be well ahead of my pre-solar days. Some of the possibilities re who will have the best deals might turn near 180 degrees to the companies that own generation. It looks to be a wild ride.

3 Likes

It is not just Discover Energy doing doubled pricing. It appears the worst are the smaller resellers who cannot absorb any of their cost increases.

1 Like

l am waiting to see if my provider, Red Energy, raises its prices…its power is sourced from Snowy mountains hydro so will be curious how they justify any possible rises

It doesn’t matter the source of the generation. If you are connected to the main grid (living in QLD, NSW, VIC, SA or TAS), there will be an increase in electricity charges. As the network is interconnected (states and generation), what happens with one type of generator impacts on all prices.

An easy way to explain it is if the pool or wholesale price of electricity increases, which it has, generation (to the uncontestable market which is almost all domestic consumers) to the market will be paid the pool price for the electricity. This occurs irrespective of whether it is renewable to non-renewable generation. This ABC article has tried to explain it for the Tasmanian situation, which generation almost all the time is through renewables.

It is a bit like conventional farmed wheat world price increases, so does organically grown wheat. The two markets are intertwined and what happens in one, impacts on the other.

3 Likes

Prices are not segregated by source. It is complex but you can have the situation where if the price of gas goes up the price of all goes up.

1 Like

Thanks for the replies…l may to think about expanding my solar set up

3 Likes

The house we bought already had solar (in Qld) so that meant unlike the previous owners, we never got the same benefit on price for solar produced as it doesn’t transfer. I try to use my power through the day where I can. We upgraded our solar a couple of years back to a better system and while we make some savings, I also ensure there’s a regular monthly direct debit into our power bills. Because we live rurally, we also only have one choice of provider and technically it’s owner is the state government so that we’re not disadvantaged a great deal by where we live.
Apart from the oven running on occasions in the evening (not a common thing) we try to run things like the dryer and washing machine through the day. The only time we manage to get in Credit with our solar is at the end of summer or some time in autumn and that credit is usually chewed up in winter anyway. Of course with the wet weather of late, our ‘sunny’ days have been very limited. We’ve had one sunny day (today) this week and more rain is expected tomorrow. Still happy we have solar, would hate to think what our bills would be like without the solar.

2 Likes

Two views of the problem that say much the same thing.

4 reasons our gas and electricity prices are suddenly sky-high

and

Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia

Note that the growth of sustainable energy is not mentioned - quite the contrary.

Will the new PM upset the gas industry and use his powers to hold back some gas from export for domestic use? We wait with bated breath.

1 Like

Last month I switched to Diamond Energy after reading the choice review saying “Diamond Energy provides power to 13,000 customers across Australia, generating electricity solely from renewable sources. The company claims to provide more sustainable power than their competitors, at an affordable price.”

I understand that coal and gas prices are increasing due to the war in Ukraine and our dysfunctional energy market here in Aus.

However what I don’t understand is why those factors would cause green energy prices to jump by over 25% from July 1. I mean, it’s not like Putin is throwing shade over Australian solar farms.

I have an email from them saying the all day rate is jumpnig from 23c/kWh to 28.33c/kWh. That’s a nearly 25% increase. Talk about post purchase dissonance!

Anyone know what’s going on there?

1 Like

Hi @craigiebabe, welcome to the community.

In relation to why power prices have increased, including for renewable/green energy, it was discussed in my earlier post in this thread.

1 Like

Ok I see in this thread that the suggestion is that “prices are not segregated by source.”

However if that was the case, then why is it that energy providers charge more for green power than for non-green power? I was charged a premium of >10% when I selected the green energy option with my previous retailer.

Seems to me the energy retailers can indeed have their cake and eat it too.

1 Like

The reason why green energy has been more expensive to buy from a consumer point of view, includes:

  • renewable energy has been more expensive to supply to the main grid and the costs to move towards higher percentage of renewables costs will increase further. I explain why here.
  • the premium was to encourage investment in renewable electricity. If consumers are willing to pay a premium, it creates a demand/market.

Other reasons can be found here…
http://www.cleanenergyregulator.gov.au/RET/Pages/Scheme%20participants%20and%20industry/Individuals%20and%20small%20business/GreenPower0224-9157.aspx

In relation to segregation of prices, while some generators have short to medium term contracts to deliver electricity at a contracted price, the retail cost of electricity is very much influenced by the pool or market price. This means prices are not truly segregated as the pool price is the retail cost of electricity bought outside fixed price contracts. While there may be contracts,) most retail electricity is set by the state government energy regulators. The regulated price is directly influenced by the pool/market price. When the average pool/market price is high for extended periods, like it is at the moment, regulated prices which most domestic consumers pay for electricity also goes up. This impact is irrespective of the cost of generation and demonstrates there isn’t segregation.

It is worth noting that the market price is driven by two main factors (and a number of minor factors). These two main factors are the average cost if generation within the market and the demand. Where generation costs increase, say due to higher fossil fuel costs or through more expensive generation types (which is that happening at the moment), this impacts on the average generation cost increasing the average regulated or retail price. When demand meets or exceeds supply/generation (which has also happened recently), then standard economic principles apply where price increases. The same applies when there is excess generation capacity… cheaper/profitable forms of generation supply the market resulting in lower market prices.

Electricity in the grid also isn’t segregated. The flow doesn’t discriminate between renewable or non-renewable generation sources. To segregate, it would require two separate networks.

Edit: to clarify contract prices. Contracted prices stabilise short term price movements. Contracts are renegotiated regularly and are principally based on the pool price (a good example is the regulated prices set by state energy agencies for domestic consumers - when the longer term pool price increases, the benchmark/regulated prices also increase). Consumers are aware that for the 2022-23 year, their electricity prices have increased substantially due to a higher average pool price… When the pool price is higher, the contract and benchmark price is also higher. This is due to the fact that a generator has the opportunity to supply to the market electricity at the pool price. If the contract price was low, then there isn’t the incentive to sign a contract. This also shows why electricity prices aren’t segregated between generators or generation types. Even Diamond Energy has indicated this on their website by stating"

With the significant increases in wholesale electricity prices, the government regulatory bodies have announced increases to the benchmark electricity prices. We are expecting to increase our rates and amend our discounts and solar feed in tariffs.

The other example which shows that pricing isn’t segregated is using the FiT for domestic solar systems. If you have a PV system and have installed it more recently, you will know that the FiT changes from year to year. The FiT goes up or down, like the average market price. When the average market price goes up, FiTs also generally go up (our own FiT increases from 6.501/kW this year to 8.883kW next year - a 35% increase). Having a PV system one knows that the cost to supply the electricity to the grid hasn’t changed from year to year. If prices were segregated, then the price from year to year would be fixed and removed from the average market price. This isn’t the case as the price for generation isn’t segregated from the average market price.

As outlined in the previous paragraph, segregation could only be achieved with two separate networks (or a separate network for every generator) and possibly the regulator prescribing the price that the generator gets for supplying the market (this was recently done by setting $300/MW - and while it caused a cap on prices, it caused supply constraints - generators where cost of generation exceed $300/MW removed themselves from the market. Such an approach would be a strong disincentive to not invest capacity in the Australian electricity market.

1 Like

Welcome to the community @craigiebabe.
They are segregated, with each retailer responsible for choosing which generator/s and the conditions they contract for.

It’s not possible to generalise and say the costs are the same for all retailers. Although all must use the network monopolies (approx 50% of total costs for transmission and distribution) to get the power purchased to the customer. The power may have been purchased on a contract or on the spot market from the generators. To confuse everyone the latest daily concerns and examples of pricing relate to the wholesale prices offered on the spot market. How the spot and long term contract wholesale prices differ is explained as follows.

Diamond and any other ‘green power’ retailer is free to choose which wholesale suppliers of electricity it contracts with. For 100% renewable it would need to contract with a number of suppliers including wind, solar PV, hydro and storage (EG battery or pumped). Demand is variable as is supply while customer consumption looking ahead uncertain. It’s unlikely Diamond would get the best prices without commitments to take a fixed or minimum amount. It would be competing for any shortfall in it’s customer daily and hourly (5 minute intervals) needs for additional supply from the renewables available at that time, IE the spot market. While some of those sources may be very cheap generation (EG wind from SA or hydro from Tasmania) those generators sell their uncommitted renewable or ‘green power’ on the spot market at the agreed market price. Retailers also often hedge against the variability, which adds a further cost, which will be different for each retailer.

The discussion concerning the true cost of renewables may seem a little illogical, when others suggest renewables are more expensive or cheaper than conventional coal and gas generation. All forms of generation compete in the same market. Since the dominant suppliers of generation use coal and gas their costs - prices dominate the spot market at peak times and when supply from renewables is limited. When renewables can supply the majority of the demand the spot market price is very low.

The increase in pricing from Diamond will reflect the AER approved changes/increases in the rates charged by the distributors. There may also be an increased cost to Diamond in any hedging against future variability. Suppliers of power from renewables can also increase their prices because the wholesale contract price is not regulated. They are not obliged to contract at a lower cost to Diamond who still needs to compete against all the other retailers. There are other factors that can influence your offer depending on your state/territory and distributor. The NEM pricing and regulation is not uniform across all it’s customers.

P.S.
Link to details of the AER approved price increases 2022-23 for the default offers in each supply area.

1 Like

Other points of view

2 Likes

I find West rather over the top. For example, where did any reputable analyst or government speaker say that we would have to subsidise FF indefinitely?

He is right about some things though. We are stuck in a bind due mainly (as West points out) to the inaction of the previous government but that doesn’t mean there is any quick fix free of nasty side effects, or any quick fix at all really. This may well involve paying more for FF for a while but if there is no choice there is no choice.

Suck it up people, a majority voted for representatives who wanted to do as little as possible, or who wanted to take action but were never given enough power, for decades and now all of us will have to deal with the consequences. That’s how democracy works.

This particular problem is a very close analog of the politicisation of all climate change. For decades we were told acting early would have the least cost solution. Well as a nation we didn’t take that advice and now we pay more. Look forward to other kinds of transitions that ought to have been started 30 years ago that will cost more; the electricity generation, transport and marketing system is not unique in that.

2 Likes

He was referring to the suppliers. And it was an implication, rather than an instruction :slight_smile: