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THURSDAY 02 AUGUST, 2012 |

Gas No Panacea For Australia's Rising Electricity Prices

by Energy Matters

Delivering Energy Price Security In An Age Of Uncertainty

Contrary to popular belief, a heavy reliance on natural gas for electricity generation in Australia could see power prices soar - the key to reining in electricity costs is renewable energy.

According to AECOM's senior consultant in Energy Strategic Advisory, Dr Jenny Riesz, Australia's growing participation international gas markets could increasingly expose it to associated price volatility, in the same way our petrol prices are linked to global fuel markets.

"In addition, because these markets comprise long lived assets with long development timeframes, any exposure of consumers to high electricity prices would likely occur for an extended period of time until more competitive generation assets were developed and implemented," said Dr Riesz; co-author of a recently released paper titled "Delivering Energy Price Security In An Age Of Uncertainty".

Another risk factor associated with international gas markets is their vulnerability related to threats to infrastructure from natural disasters and geo-political instability.

Dr Riesz says Australia has an opportunity to recognise the potential threat to our energy price security and learn from international experience. She believes increased focus on Australia's Renewable Energy Target (RET) is key.

"By achieving the RET through developing wind and other renewable energy sources, Australia would essentially be investing in a diverse generation portfolio and reducing the risks associated with its gas market, such as international price influences."

Dr Riesz points out that at gas prices of $11-$12 a gigajoule (GJ), wind generation becomes competitive with a combined cycle gas turbine (CCGT), even without a carbon price and RET support. With a carbon price of $23 a tonne, wind competes at only $9-10/GJ.

"Similarly, recent and continued cost reductions in solar photovoltaics put this technology at only a small additional cost."

"Delivering Energy Price Security In An Age Of Uncertainty" can be viewed in full here (PDF).

AECOM is a global provider of professional technical and management support services to a broad range of markets, including transportation, facilities, environmental, energy, water and government. The company is a corporate member of Australia's Clean Energy Council.