Why Australian electricity prices could soon be on the rise
South Australia's energy prices are more than triple those in eastern states.
Electricity costs in South Australia spiked in July as a result of the state's reliance upon sustainable energy sources, such as wind farms, highlighting the need for an industrious national campaign to develop and improve sustainable processes and policies.
Wind farms account for around 40% of the state's total electricity power.
South Australia's wholesale electricity prices averaged $230 per megawatt hour in July.
Prices peaked at almost $9,000 per megawatt hour. Costs were elevated by a lack of wind, the closure of two coal plants and a temporary shutdown of a back-up electricity connection.
Gas was used to generate almost all the state's energy needs.
However, a report by the Grattan Institute, Keeping the Lights On: Lessons from South Australia’s Power Shock, says criticisms of the sustainable electricity market are alarmist.
While these wholesale prices were extremely high - three and a half times as much as eastern states' costs - power was maintained and prices have since returned to more comparable levels.
"Most households and businesses in South Australia were not directly exposed to the spikes in the wholesale price," the report says.
"The prices they pay for electricity reflect pre-determined rates and charges in contracts they have with their electricity retailers."
The report says South Australia's climatic price rise underscores the need for a credible emissions reduction policy and a comprehensive review of the wholesale electricity market.
The Institute's report suggests the transition to a low-emissions future in Australia will be costly but is inevitable, therefore proper preparation is necessary.
"...The events have raised concerns that high levels of wind and solar power are being introduced too rapidly into our electricity supply with little consideration of the consequences for reliability, security of supply or price," the report says.
"If and when Australia adopts a stable and predictable climate change policy, the potential consequences for the electricity system must be understood and managed," the report says.
Last week, findings from an independent pricing report found the deregulation of NSW's electricity market has boosted competition, encouraged price discounts and inspired product innovation.
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