Skyrocketing energy prices across Eastern Australia are almost entirely a result of Australia’s dependence on fossil fuels. Coal and gas exports have linked domestic energy prices to global prices, exposing Australia to volatile global prices. Producers are now making windfall profits from both Australian and global consumers.
Gas prices have reached record levels across eastern Australia including a 50-fold spike in Victoria, forcing the market operator to impose price caps in NSW, QLD and Victoria.
The biggest electricity price hikes have occurred in coal power dependent states Queensland and NSW, compared to those states less dependent on coal power – Victoria, SA and Tasmania. The market operator and regulator have both identified exposure to coal and gas prices, coal power stations breakdowns and coal supply issues as the main causes.
The new Government needs to reduce Australia’s exposure to volatile global fossil fuel prices by working to reduce dependence on coal and gas. In the short-term the Federal Government should constrain gas exports and in the medium term, implement its Powering Australia transmission plan to enable more renewable energy supply and storage, and expedite electrification of households and industry.
Key points
- The Australian Energy Market Operator (AEMO) and the Australian Energy Regulator (AER) have both identified coal power station outages, coal supply problems an, rising coal and gas prices as the main causes for increasing wholesale and retail electricity prices.
- Continuing reliance on coal power stations for electricity has left Australia vulnerable to ever increasing breakdowns and volatile global coal prices as our coal power stations are forced to compete with export customers.
- The decision a decade ago to allow gas exports from Gladstone linked Eastern Australia to global gas prices making Australia vulnerable to global gas supply shocks.
- Coal and gas exporters are making windfall profits from the crisis, on top of enormous subsidies handed out to the gas industry in the lead-up to the federal election.
- In the immediate term, the Federal Government should constrain gas exports by activating the Australian Domestic Gas Supply Mechanism (ADGSM) to ensure a secure supply of gas at reasonable prices to Australian households and industry.
- In the medium term, the Federal Government should implement its Repowering Australia plan to accelerate the rollout of renewable energy and storage and expedite the electrification of households and industry to reduce gas dependence.
- The Federal Government should wind back recent subsidies to the gas industry to support the immediate and medium term response.
“Australians are paying the price for a decade of chaotic energy policy, an obsession with keeping coal power stations running and doubling down on gas,” said Richie Merzian, climate & energy program director at the Australia Institute.
“Australia doesn’t have a gas supply problem; it has a gas export problem. As long as Australia remains dependent gas and coal, Australian consumers will be over the barrel of global fuel prices influenced by events beyond our control.
“Allowing global coal and gas companies to export vast quantities of our resources may have seemed like a good idea at the time, but it has locked us into exposure to volatile global prices, making Australian vulnerable to price shocks from global circumstances beyond our control.
“As a matter of urgency, the newly sworn in Minister for Climate & Energy should act to curtail gas exports to safeguard a sufficient affordable gas supply for Australians in the short term.
“In the medium term, this Government should look to do everything possible to speed up electrification, helping households get off expensive gas. This would not only save households from skyrocketing energy bills, but free up gas resources for industries that will take longer to transition.
“The Albanese Government should be commended for its policy to increase investment in transmission and storage in order to bring more low-cost renewble energy online.
“The only long-term solution to expensive fossil fuels is to get off them and that requires political leadership.”
