Why power bills are falling despite the Iran war
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Why have Australian power bills increased significantly in recent years?
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It feels almost impossible for the cost of anything to come down. So how is it that our power bills are about to fall? Well, it has a huge amount to do with renewables and our growing love of batteries. Today, energy reporter Dan Mercer on the changing power dynamics. I'm Sam Hawley on Gadigal land in Sydney. This is ABC News Daily.
Dan, when it comes to power bills, Australians have had a pretty rough ride in the last few years. We have seen prices soar, haven't we?
We certainly have, Sam. I mean, conservatively, they've jumped about 40% or $600 for the typical household over the last five years. Now, it has to be said that much of that increase came immediately in the wake of Russia's invasion of Ukraine, which sent energy prices soaring all over the world.
skyrocketing gas prices. They've been pushed up internationally by the war in Ukraine. Wholesale electricity prices along the East Coast have soared from a daily average of less than $100 per megawatt hour to more than $700.
Insanely high coal and gas prices had a massive, massive effect on us at that time. And to be honest, we're still paying for it now because the contracting and hedging arrangements in the electricity market, they tend to take a while to wash through.
And of course, the government did try and come in and help for a bit, right, with a generous rebate. It made it easier, but you're still paying a lot of money.
Yeah, the federal government intervened in a few ways. First of all, it stepped into the gas market and put a cap on domestic prices, which is a really big deal. Beyond that, you're quite right. In the 2023 budget, the Commonwealth stumped up $1.5 billion in power bill relief for householders. And that was just the start. The feds extended that relief program a couple of times and ended up shelling out almost $7 billion by the time it finished last year. We probably shouldn't forget either, Sam, that some states doled out a fair bit of their own assistance as well. Queensland one year, I seem to recall, gave every household $1,000 off their power bills. So a lot of people, if not most people in that state, were actually paying less for power in the end than they had been before the crisis began.
Now, as you said, a really big factor for this big spike in power costs was the Ukraine war and the initial power shock that came with that. Now, Dan, of course, we have another war, the Iran war, but that's not having the same impact, is it? Why is that?
There are a couple of reasons for that, one of which we'll get to later. But another is simply that gas prices in Australia have stayed remarkably subdued this time around, Sam. Partly that's because we're not using as much gas to produce power. But arguably a bigger reason is the threat of a domestic gas reservation policy that's hanging over the producers. That wasn't a factor last time. It just wasn't. And there's a view that the exporters are playing very nicely in the local market to avoid aggravating the situation for themselves.
Gas reservation policy, that's a threat that the Albanese government has put on the table, right?
Indeed. Australians are being promised a new gas reservation scheme in the hope it'll drive down prices and avert looming shortages. All exporters will be forced to set aside 20% of their export volumes and sell that gas to the domestic market.
And, you know, it's been a little while coming in Western Australia. There's been one of these for 20 years now, but last year the Feds decided to push the button and go ahead with one at a national level.
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