Renewable energy generation to drive down electricity prices

Here’s some good news just in time for Christmas — household electricity costs are predicted to drop for the next two years. Find out how much you’re likely to save.

Victorians can expect two years of power price relief, according to a trends report.

Australian Energy Market Commission analysis estimates a typical household is likely to save $36 in 2019, and a further $36 in 2020.

Bills are estimated to rise again by $11 in 2021 — in part to cover the cost of home rooftop solar panel subsidies.

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The Australian Energy Market Commission analysis estimates power prices will fall over the next two years in response to rising renewable generation capacity. Picture: AAP

The residential electricity price trends report predicts a big increase in renewable energy generation, combined with flat demand, will drive down wholesale costs considerably over two years with savings to flow through to consumers.

On the flip side, federal incentives to promote an uptake in home rooftop solar panels are expected to contribute to prices shifting up again in 2021 as retailers pass on the costs to all consumers.

The AEMC examines changing costs in the market to assess likely impacts on power bills. A typical Victorian household’s annual market offer is estimated to fall 3.2 per cent to $1096, excluding GST, next year.

A 3.3 per cent drop is anticipated in 2020, then a 1 per cent rise in 2021.

Generic power lines pic for TCP letter to the editor on Ergon price hikes. Must credit Thinkstock

Wholesale costs will make up about 40 per cent of bills next year; and regulated “poles and wires” network costs 42 per cent.

Federal and state environmental policy costs are expected to account for $90, or 8 per cent, of a typical 2019 household bill.

They are likely to drop to $84 in 2020, before again rising to $89 in 2021.

The costs include the federal renewable energy target, state feed-in tariffs for solar customers who supply power to the grid, and a Victorian energy efficiency scheme.

A residual component, which includes retail operating costs and margins, takes up 9 per cent.

AEMC chief executive Anne Pearson said managing the costs of connecting large-scale solar and wind power in the years ahead would be a “major challenge”.

“We must avoid over-engineered solutions to stop gold plating and price spikes,” Mrs Pearson said.

AEMC analysis is based on a two-person household on an average lowest market offer and connected to both electricity and gas.

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@KarenCollierHS