Federal Election 2019: Power price relief on the way — but not immediate

Major parties say their policies will deliver cheaper power — but consumers should not set their hopes too high on immediate power bill cuts, experts say

• Almost $30bn invested in renewables in past two years
• Analysis: Billions needed to shore up power for future
• Opinion: Let’s not get hysterical about climate change

Consumers should not set their hopes too high on a new federal government bringing immediate cuts to sky-high electricity prices.

Years of uncertainty on policy direction have led to a backlog of needed investment in projects which require lengthy assessment to pass regulatory and financial hurdles.

Generation, transmission and storage projects are on the way but won’t be operational any time soon.

The first glimpse of relief will be a Default Market Offer and reference price from July 1, an initiative supported by both major parties.

“Our policies to introduce new supply and competition, as well as introducing a clear reference price across the National Electricity Market, will ensure Australians get a fairer deal on their power bills,” a government spokesman said.

“Households changing to default market offers from standing offer tariffs could save up to $479 in South Australia, $696 in NSW and $660 in South-East Queensland.”

The offer, set by the Australian Energy Regulator, will replace standing offers in NSW, South-East Queensland and South Australia. Other jurisdictions already have or are developing regulated price offers, including the Victorian Default Offer.

Standing offers — electricity contracts for consumers who have not picked a market offer — are being used by retailers to create confusion about discounts and as subsidy for cheaper contracts, according to the Australian Competition and Consumer Commission.

However, few customers remain on standing offers — 7 per cent in Victoria, 10 per cent in SA, 16 per cent in NSW and 20 per cent in south-east Queensland.

The Coalition has big ticket projects on the go.

“Under this Government we have seen record levels of investment in renewables; investment in grid-scale storage such as Snowy 2.0, Battery of the Nation and six other hydro projects; and efforts to increase our reliability and flexibility of coal and gas assets,” the government spokesman said.

“Our Underwriting New Generation Investments program has demonstrated that there is a high level of interest in bringing new supply into the market, including through coal-fired generation.”

The ALP is charting its course to a more rapid renewables future but acknowledges coal remains in the mix.

“Coal and gas are important industries going forward, they are important for our exports and they’re part of our energy mix,” Opposition Leader Bill Shorten said.

“But I am going to take real action on climate change … the biggest reason households are paying higher energy bills is because there’s no energy policy.”

Energy spokesman Mark Butler said Labor would introduce the National Energy Guarantee — a concept previously supported by the Coalition — which has reliability and emissions-reduction obligations.

“The Government’s own modelling claims that the NEG would bring down power prices by $550 per year for households,” Mr Butler said.

“According to Reputex, wholesale electricity prices will be 25 per cent lower under Labor’s emission reduction target compared to the Liberals’ target, when implemented through the NEG.”

Mr Butler said government must prepare for “the inevitable closure” of coal-fired power stations.

“Australia’s power generation fleet is ageing, with 75 per cent of Australia’s coal fired power plants operating beyond their design life,” he said.

“The best and least-cost approach to energy policy is to have a stable policy to support the necessary investment in renewable energy plus storage, which is the cheapest form of new energy.”

It’s unlikely Labor or the Coalition will bring about immediate power price reductions.

Neither side will bring immediate reductions in prices, said Guy Dundas, energy fellow at the Grattan Institute.

“There are a lot of renewables in the pipeline and that will bring prices down, but they take time to come on,” he said.

“There will be relief but it’s probably about two years away.”

Mr Dundas sees no prospect of a commercial investment in new coal-fired power unless government “throws a lot of money into it”.

The Australian Securities and Investments Commission and other bodies are watching private sector decisions.

“It is possible for directors who fail to consider climate change risks now, today, actually could be found liable in the future for breach of their duties as a director,” ASIC commissioner Cathie Armour said.

“We think it’s an obligation on company directors and management to consider climate risks.”

The Australian Industry Group has called for bipartisanship to break the cycle.

“Unfortunately, deep political conflict over energy and climate, particularly at the federal level, has made public policy into a glaring source of uncertainty inhibiting the investments we need,” Ai Group chief executive Innes Willox said.

“This situation needs to stop.”

The Energy Security Board — the body providing whole of system oversight — also calls for clear policy direction.

“We can’t just go on with the uncertainty for too much longer,” Energy Security Board chair Kerry Schott said.

What the major parties say

COALITION

■ Ensure retailers can guarantee enough power to meet demand.

■ One-off concessions of $75 for singles and $125 for couples on certain energy bill.

■ Targeted investments including Snowy Hydro 2.0, Tasmania’s Battery of the Nation and Marinus Link inter-connector.

■ Underwriting of new generation with 12 projects shortlisted including 4 projects in SA, 1 in Tasmania, 2 in Victoria, 3 in NSW, and 2 in Queensland.

■ Fund feasibility studies by communities on microgrids in remote and regional areas.

LABOR

■ Double investment in the Clean Energy Finance Corporation by $10 billion, supporting new generation and storage — including $2000 rebates for batteries for 100,000 households and a $1 billion hydrogen fund.

■ $5 billion for transmission and distribution links to unlock supply of cheaper energy.

■ Establish an independent authority to co-ordinate response to the closures of coal-fired power stations.

■ Pay $20,000 to manufacturers who sign up to a power efficiency program.

Originally published as Federal Election 2019: Power price relief on the way — but not immediate