Energy shock treatment keeps coming for Chris Bowen

Energy prices remain a central and growing concern for households, government and the economy that shows no signs of improvement. Chris Bowen’s inability to fix the energy price problem is a political failure of epic proportions. With the federal election looming, voters are entitled to ask themselves if ideological fascination has been allowed to derail common sense. High energy prices disable industry and weaken households, and will do little to solve the global problem of addressing climate change on which the rush to dismantle existing power structures is based. This is particularly so given Donald Trump’s decision to withdraw the United States from the Paris Agreement and China’s determination to push ahead with construction of hundreds of new coal-fired power stations.

Australia is not alone in dealing with high power prices as a consequence of trying to switch to new forms of electricity generation. Similar problems are being experienced in Germany, the United Kingdom and elsewhere in Europe, where electricity costs are rising and energy security is being challenged. The result is a loss of industry and manufacturing capacity to low-energy-cost destinations in both Asia and the US. This is a trend Mr Trump is determined to accelerate.

The latest draft determination by the Australian Energy Regulator for an increase in the default market rate of up to 9 per cent is all bad news. Politically, it means the Albanese government’s promise while in opposition to cut electricity bills by $275 a year has turned into the reality of a price increase of $1300 with no end in sight.

The energy transition remains badly off course with project delays and cost overruns. The Snowy Hydro 2.0 project remains mired in controversy, the delivery of large-scale renewable energy projects has been in a state of paralysis for most of the Albanese term of government, and community resistance to future projects is building. Like the promise to cut electricity bills by $275 a year, Labor’s target to get 82 per cent of electricity from renewable sources by 2030 looks similarly misplaced.

Mr Bowen’s claim that the answer to higher electricity prices lies in simply building more renewable energy projects appears to be misplaced. As Graham Lloyd writes on Friday, the reason for this is spelled out in the AER’s draft determination. Mr Bowen was quick to blame reliability problems at coal-fired generators for the looming price increases. But the AER makes it clear there was a range of factors behind the increase in average wholesale market spot prices across 2024. Factors included high demand, local generator and network outages, “and low solar and wind output that drove high-price events”. The AER says these high-price events have also affected the price of wholesale electricity contracts for 2025-26. This is an admission that intermittency is a structural problem, as has been demonstrated by wind droughts in other parts of the world. This strengthens the need for back-up in the form of on-demand gas or grid-scale storage, neither of which are cheap. It also means Mr Bowen’s plan to keep building renewables will not solve the problem.

The latest increase in electricity prices will no doubt feature in the upcoming federal election campaign. But the situation is more important than politics. The time has long passed for a credible plan to secure the national electricity market and stabilise prices. Uncertain economic times and geostrategic challenges make energy security and cost more important than ever.