Aussie Households Face Power Price Hikes Amid Energy Boom

It seems like Australian households are bracing for another round of hefty power bill hikes. Over the past few years, skyrocketing electricity prices have been a huge contributor to inflation, adding more pressure to households already feeling the squeeze from rising interest rates.

While the price increases slowed down last year, we saw a staggering 40% rise in power bills over the previous two years. This year, prices are expected to go up again by 2 to 9%, depending on where you live.

In response, the government has been handing out energy rebates to cushion the blow on households, and with an election looming, it looks like these rebates will be extended in next week’s federal budget. But it's hard to ignore how ironic and frustrating this situation is. After all, Australia is one of the biggest energy exporters in the world, yet we’re facing these sky-high bills. It’s hard to ignore the elephant in the room: we export too much gas and leave ourselves with too little.

Gas Prices: The Real Culprit

Gas plays a massive role in setting electricity prices. Because gas can be quickly ramped up to cover power shortages, it ends up being the marginal cost supplier, meaning it helps set the price of electricity. Over the past decade, the price of gas on the east coast has tripled, thanks to decisions that allowed gas export companies to drain the domestic market of gas. These exporters were given permission to sell off large quantities of gas overseas without making sure enough was left for Australians. Despite government interventions, this issue hasn't been solved.

What Can We Do?

The Albanese government’s attempt to cap domestic gas prices worked for a while, but since then, gas prices have started to climb again, and electricity prices are following suit.

Meanwhile, the problem with our aging coal-fired power plants becomes more obvious.

They’re costly to run, unreliable, and can’t compete with cheaper renewable energy like solar and wind. The challenge is that renewables are intermittent, meaning they don’t always generate power when we need it, especially at night. This is where gas plants step in, filling the gap when renewables aren't online.

Gas Imports: A Potential Solution?

One suggestion being floated is to build gas import terminals so we can buy gas from overseas. But this comes with its own set of issues. The price of gas from offshore is currently double the local price, meaning importing gas could lead to a 40% hike in electricity bills. Not exactly an ideal solution for anyone.

Can Nuclear Power Save Us?

As the world moves away from fossil fuels, there’s been talk of nuclear power to help meet Australia’s energy needs. However, the reality is that nuclear power is extremely expensive and unlikely to compete with renewables, especially when those energy storage solutions are improved. The costs of building nuclear plants are massive, and it takes years to complete them — like the Hinkley Point C plant in the UK, which won’t be ready until 2031, 8 years later than originally planned, and possibly at three times the cost.

According to a global electricity cost report, nuclear power is currently the most expensive option, costing around $287 per megawatt hour. In comparison, onshore wind is much cheaper at $50 per megawatt hour, and solar comes in at $61. Over the past decade, the cost of wind energy has dropped 65%, and solar has decreased by 83%, while nuclear power costs have surged by 49%.

At the end of the day, it seems we’re caught in a bind. Our energy system is in need of serious reform, but finding a balance between sustainable, reliable, and affordable energy is proving to be a tough challenge.