The Clean Energy Council says new analysis shows renewable energy projects under the Renewable Energy Target (RET) scheme are already reducing power prices for industry across the country, despite increasing gas power prices.
The Ai Group report predicts a bleak future for gas users. High supply costs and permanently transformed export-driven market have driven up electricity costs for Eastern Australian businesses and households over the past year.
Although prices were improving, thanks to federal export restrictions, Australia’s ongoing energy crisis could only be described as going from “worse to bad.”
“This latest report outlines that the price improvements since 2017 have been strictly relative,” said Ai Group’s CEO Innes Willox.
“New supply is essential to avert a return to the scarcity pricing of 2017.”
Renewable Energy Target projects set to cut gas use
Willox said three major barriers need to be overcome in order to improve electricity prices and supply:
- Gas prices driving up electricity costs.
- Australia’s failure to source flexible supply beyond gas.
- Policy uncertainty deterring investment.
Gas generation is currently an important share of total electricity supply. It is essential to provide flexible capacity to meet swings in supply and demand.
But with little hope of vastly reduced costs in gas supply, Ai Group recommends shrinking gas’s role in Australia’s energy mix.
Fortunately, reducing the volume of gas generation is easy. New renewable energy such as wind and solar power is now cheaper than new gas plants or new coal. Surging renewable energy development under the RET will see gas use decline sharply, the report states.
CEC head Kane Thornton said dozens of new projects were already creating more competition in the energy market.
“The [Ai] report says solar, wind and energy storage will gradually replace gas power and this will help to push prices down further,” he said.
Gas power prices: certainty required from government
In addition, a decade of political dogfights on climate policy has left immense uncertainty for investment in energy beyond 2020.
On this point, Ai Group recommends the Federal Government and COAG mandate the National Energy Guarantee (NEG) to provide a market-based approach to emissions and supply that industry and customers desperately need.