International Energy Agency’s new warning over power price pain

High prices for electricity could be a global reality for some time, an energy agency has warned, but Vladimir Putin could ultimately be the biggest loser.

Global energy prices are likely to remain high for some time, the International Energy Agency (IEA) has warned in its latest report, confirming forecasts that appeared in Tuesday’s Federal Budget.

Releasing its annual World Energy Outlook on Thursday, the IEA estimated the global average cost of electricity supply had risen by almost 30 per cent in 2022, on the back of record prices for natural gas and coal.

“There remain huge uncertainties over how this energy crisis will evolve and for how long fossil fuel prices will remain elevated, and the risks of further energy disruption and geopolitical fragmentation are high,” the IEA stated in its report.

The upcoming Northern Hemisphere winter was likely to be a “perilous moment” and the winter of 2023/24 “could be even tougher,” the report warned.

Some 100 million people could be forced to burn firewood for cooking as a result of the energy crisis, the IEA estimated.

The outlook follows the grim forecasts for Australian energy prices that appeared in Tuesday’s Federal Budget. According to Treasury estimates, retail electricity prices will increase by 20 per cent in late 2022, and a further 30 per cent in 2023–24.

Global energy prices are likely to stay high for some time but the market is fundamentally changing, the IEA said in its latest World Energy Outlook. Picture: INA FASSBENDER / AFP

The Budget allocated $40.9 million to the ACCC for “increased oversight of gas markets,” while the government was “exploring options for further reforms that may be required to ensure Australian customers have access to energy at reasonable prices”.

Shadow Treasurer Angus Taylor continued to slam the government for its broken promise to bring power bills down by an average of $275, saying it was “time for this government to take responsibility and deal with these incredibly tough issues”.

“This is an extraordinary time that needs a government that has a plan, not just a series of gloomy forecasts. That’s all we saw from the Budget,” Mr Taylor said.

Opposition Treasury Spokesperson Angus Taylor. Picture: Martin Ollman/Getty Images

Climate Council member and energy expert Andrew Stock. Picture: Supplied

The IEA laid much of the blame for increasing global prices on Russia’s invasion of Ukraine, saying it had prompted “a wholesale reorientation of global energy trade, leaving Russia with a much-diminished position”.

Russian fossil fuel exports will “never return” to their pre-2021 levels, according to the IEA, with their share of internationally traded energy dropping from 20 per cent last year to 13 per cent by the end of the decade.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” the IEA said.

Among other predictions, the IEA said coal demand would peak in the next few years, natural gas usage is expected to plateau by the end of the decade, and oil use would reach a high point in the mid-2030s.

Russian President Vladimir Putin. The invasion of Ukraine will likely hobble Russian energy exports for decades, the IEA said. Picture: Alexei Babushkin / SPUTNIK / AFP

Andrew Stock from the Climate Council, who was formerly an executive with Origin Energy, said the report “points to an obvious, affordable solution – a rapid transition to renewable energy”.

“This week’s Federal Budget spelled grim news for Australians already feeling the pinch, with a big spike in power prices on the way. The IEA report has made it abundantly clear that fossil fuels are the root cause of this problem, particularly gas, which is the most expensive form of power in Australia,” he said.

Originally published as International Energy Agency’s new warning over power price pain