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.
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Ok I see in this thread that the suggestion is that āprices are not segregated by source.ā
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.
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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 hereā¦
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 isnāt 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 capacityā¦ cheaper/profitable forms of generation supply the market resulting in lower market prices.
Electricity in the grid also isnāt segregated. The flow doesnāt 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 priceā¦ 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 isnāt the incentive to sign a contract. This also shows why electricity prices arenāt 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 isnāt 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 hasnāt 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 isnāt the case as the price for generation isnāt 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.
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Welcome to the community @craigiebabe.
They are segregated, with each retailer responsible for choosing which generator/s and the conditions they contract for.
Itās 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 āgreen powerā 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. Itās unlikely Diamond would get the best prices without commitments to take a fixed or minimum amount. It would be competing for any shortfall in itās 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 āgreen powerā 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 itās customers.
P.S.
Link to details of the AER approved price increases 2022-23 for the default offers in each supply area.
https://www.aer.gov.au/news-release/aer-sets-energy-price-cap-to-protect-consumers
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Other points of view
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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 doesnāt 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. Thatās 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 didnāt 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.
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He was referring to the suppliers. And it was an implication, rather than an instruction 
There is a choice.
Consumers face paying more for using natural gas at home. Itās important to consider the major portion of domestic gas usage is by industry and for electric power generation. Of electric power consumption consumers are NOT the largest user.
The increased cost of energy supplied from natural gas will impact every consumer product. For those employed in energy intensive industries the risks of being unemployed through loss of demand or external competition are also real.
There are solutions. At some risk of upsetting the multi nationals and select shareholders invested in Australiaās FF and gas industry. Apparently they can choose to export the gas locally produced at the lowest cost while selling (higher cost? ) production domestically at a premium.
What weāve had, however, for more than six years, have been ongoing domestic gas shortages on the east coast and massive price hikes. And, for large periods of time, theyāve sold gas into Asian markets at much lower prices than they sell into the domestic market.
P.S.
The frustration for consumers will be having to pay for an ongoing and now premium for energy as well as pay for the upfront costs of converting to renewables. Not so easy with high inflation or prospects of recession, where every dollar counts.
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I agree with most of what Verrender says, I have played a similar tune here a few times.
A gas reservation policy and getting a fair return to the taxpayer for extracting their gas were the responsibility of several previous federal governments. That boat has sailed.
I donāt see Albo doing a repeat of Gillardās stoush with the FF industries. In this political environment he may eventually win but it will cost a great deal of capital to do it and he has a long agenda that needs support. I donāt see him denting the piggy bank that much the first week he gets behind the despatch box.
Secondly releasing the pressure on east coast gas supply will moderate the price of power but is not going to counteract all the coincident factors that have cause the current spike. We are going to have to wear some costs regardless.
There is a silver lining to this cloud - well maybe a pale grey one. Spiking gas prices will encourage domestic users to go electric sooner! Pity the manufacturer who has no choice.
[Edit] The Treasury has waved his gun about again, will he pull the trigger? If he does will it have the desired effect or will the exporters all say āSorry nothing to spare, itās all contracted offshore, terribly, terribly sorryā.
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New member coming to this late. The thing I find so odd is that nobody is talking about energy efficiency as part of the equation.
Itās estimated that fairly simple measures could reduce average household energy consumption by a quarter, much more in some households. If the new government want to help people with cost of living and reduce energy prices by reducing demand, it could first send vouchers (Covid help style) to spend on WELS 4 (max 7.5L/min) and 5 star (max 6L/min) low flow shower heads and on tap aerators. Some households still have the old 20 litres per minute shower heads, and most sold today are around 9-12L/min, much more than needed for a good shower (with a well designed head). Saving on water bills and energy bills for heating water can be significant, even thousands a year for some. [See here though I canāt vouch for the accuracy https://www.showertimer.com.au/savings-calculator/ ]
I just replaced an 18L/min shower head with an 8L one and a 9L one with a 5L/min Methven one (also gives a better shower!) in our new home with two teenagers. Now I canāt wait for our next billā¦
So what Iām getting at is the new government could take the kind of energy and water saving schemes many councils/states have run in the past (schemes where tradies audit and install) to a new level for a couple of years with will and imagination. Thereās plenty of low hanging fruit aside from big ticket items like solar and heat pumps: change lights over to LEDs, install low flow shower heads and tap regulators, install draft excluders and insulation, install low flush toilets, garden hose regulators etc.
Basically retrofit the national housing stock, creating jobs, reducing carbon emissions, reducing energy prices, reducing water use for the next drought, and maybe even winning the next election when people realise they enjoy permanent saving on bills worth hundreds or thousands a year.
The Japanese reduced electricity consumption nationally by 10% the year after Fukushima, 20% during peak periods. It seems odd to me that while gas prices go through the roof, and this is helping fund Putin, we donāt talk about reducing demand in any meaningful way. I would have thought environmentalists would make more of it too as a strategy for smoother transition to renewables.
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Welcome to the Community @guyzer
Perhaps not in this topic, but if you search the Community using the search tool 
for āenergy efficiencyā and similar terms you will find a number of related topics and posts.
That is not completely true, for example
Could more be done, such as banning conventional gas fired boilers and requiring condensing models such as is required in the UK already? Yes - some efforts could be better, but there are some in progress.
Further Victoria for one has a years old program that has replaced incandescent and halogen lights with LEDs, and shower heads with low flow models, and has other related programs, free to the user. Truth said they are not high end products so the āfreeā may not suit everyone.
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I note that energy efficiency has been included in other community forums. But sadly, it does not get enough attention in govt and our building code needs to be strongerā¦
The ABC reported this year, that Living in seven-star energy-efficient homes would cut Australian energy bills by an average of $450 a year and help address climate change by reducing emissions, according to a new report from the Climate Council. It also helps reduce peak demand, which is where prices soar.
Gayle
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Yes. Expanding on those kinds of schemes is what Iām thinking. NSW focuses on LEDs and heat pumps at present, but their shower head one lapsed a while ago. They could have more impact if designed to reach older and low income people and generally give people more choice of products to install by using voucher or credit systems that could be used to make cheaper choices free or subsidise more expensive installations.
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Absolutely agree on the building codes Gayle. We are so far behind other countries even though few parts of Australia really require heating and cooling in well designed homes. Installation costs of solar are also much lower if integrated into construction, but builders have little incentive to do this.
I think it will be a while before many governments and the construction materials industries think and act like Amory Lovins but I hope we get somewhere close soon.
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There are many reasons for that.
There have been Council and State based campaigns on and off for years, including light-bulb give away and all kinds of approaches. Hardly a month goes by without one of the major media outlets posting an article about how to save on power bills. Branches of government and building industry representatives have had web sites on such topics for ages including material on energy efficient housing. Yet very few seem to have listened to any of it. There comes a time when you have to admit that having lead the horse to water it will not drink no matter what you do.
There are mixed messages from some governments. Last year NSW had a big scheme by the then Planning Minister Stokes to improve housing resource usage. This was one of few systems to address things like roof colour in the planning system. This year after pressure from lobbyists the new Minister the incomparable Anthony Roberts rolled over and quietly killed it with no explanation.
Better resource usage can make the transition away from FF easier but the fact is the major task that absolutely must be done is re-building the energy market and finding a way for FF dependent industries to change or cease. The latter is an essential component of any transition that gets very little air play. What are we going to do with those coal miners? Having got the rough end of the pineapple for a decade the green lobby is intent on getting climate change action done. For all those reasons activists are reluctant to dilute the message until problem #1 is well under control.
It may be that shooting power prices and baking summers is the only thing that will motivate some people. Politicians are not the only ones who can not plan ahead for more than a few weeks.
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Have just received notice from electricity provider āthat your electricity rates will be changing from 01 September 2022ā as ā¦ āthe wholesale cost of energy we buy and generate on your behalf has increased significantly this yearā I notice that daily supply charge rates have also been increased by 5.390c per day which equates approximately to an extra $50 per quarter. Further, I suggest it is highly unlikely that a reduction of this supply charge would accompany a reduction in tariff should that eventuate. Very stealthy!
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The ACCC says: LNG exporters must divert gas to the domestic market to avoid shortfalls.
This is a consequence of the Australian Domestic Gas Security Mechanism (ADGSM). This was set up in 2017 to coerce the gas miners into keeping domestic gas supply up and prices down. This is step one in a very convoluted process which, if ever completed, ends in the government forbidding gas exporters to export gas until the shortfall is fixed.
We should note:
- The trigger has never been pulled since 2017, despite prices staying high and impacting both domestic and industrial users.
- It only applies to non-contracted gas, so a supplier can be free of any influence by making sure they have it all contracted. There is of course the temptation to gamble if spot prices look to be rising. The Ukraine debacle may be relevant.
- The present relevant Minister Ed Husic is rattling his sabre again and says he will reform the process but as far as we know thatās all.
- The industry is notoriously secretive about revealing its supply availability and forward contracts. Possibly Husic can demand they supply the data but I am not aware of the details.
What does all this mean for the consumer? In my view, if you can afford to then get rid of your gas appliances. If you are stuck with having gas prepare for more pain.
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The other outcome is NG supply and prices drive the cost of open cycle peaking electricity generation. This meets both peak demand and calls for generation when there are gaps in supply. Coal generation failures, water shortages for hydro and low days of renewable generation also bring in high cost gas generation.
Electricity generation from NG open cycle plants is included indefinitely as part of backup and intermittent support in the longer term plan for Australiaās electrical energy transition plan.
The renewables solution to using gas for industry and generation includes green hydrogen (in various forms), pumped hydro (short and long term storage), and increased distributed storage/generation. All are a long way off in time and money from being delivered. The following suggests one more immediate part solution.
Comment:
The greatest source of daily variation in demand is residential consumption. Something a modest home battery or street level battery resolves efficiently. Also of significant benefit to reducing peak grid demand and network upgrade costs. It is part of the longer term, planning and assessments by the responsible government bodies. The priority or urgency assigned and support are a matter for government policy.
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lāve recently made a couple of changes hereā¦had to replace my 45y.o. leaking roof, so installed insulation (didnt have it b4), replaced my 13y.o. Dux heat pump hot water system (is that a record?) with a more efficient EvoHeat one. lām also waiting on quotes to replace my old solar installation - we got in early when the rebates/grants started (solar & dux heat pump) but only got 6 panels, so lām going to maximise the roof coverage which will be about 5Kwā¦hopefully lāll see better energy cost outcomes considering my likelihood of only having 10 years more work b4 my body goes on strike
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Itās useful feedback, and good you remain interested the community @redeye
There were many reports from early adopters of poor outcomes with heat pump HWS. Especially compared to the silent and long lives of the old technology electric and gas storage systems.
We had a home at one point in our lives with an early design Rheem rooftop solar HWS and electric boost. It was still going strong (20+ years old) when we moved out. We hardly ever needed the boost. A heat pump is great alternative given you are able to use solar PV.
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