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Gas exports the culprit for electricity price hikes


Source: The Australia Institute

The Australia Institute has released the Electricity Update of the National Energy Emissions Audit (The Audit*) for July 2017.

The report, by renowned energy analyst Dr Hugh Saddler, reveals a stunning correlation between domestic electricity prices and gas prices, despite gas making up only 10 percent of electricity generation.

Australian gas prices have risen significantly, as predicted, upon the development of export terminals and the linking of domestic gas to the Asian market.

“The correlation between the two data series is striking, confirming that higher wholesale electricity prices, and hence higher retail prices in SA are almost entirely caused by higher gas prices,” Dr Saddler said.

“The launch of the NEM in 1998 was followed by a rush of construction of gas turbine power stations in Queensland, NSW and Victoria, and even in Tasmania, accelerated in Queensland by a gas generation mandate policy introduced by the state Labor government. 

“So this is not a malfunction of the National Electricity Market, but precisely how it was expected to operate, when set up. What has changed is the price of gas, driven up by export contracts.”

The alternate narrative, that the electricity price rises is to do with increased renewable production, does not stand up to the data, where we see no correlation, even in the usual example given, South Australia. 

“It seems that the decision to allow so much of the gas resources of eastern Australia to be exported was made without considering the likely effects on the electricity market.

“Household and business consumers of electricity are now paying the price for this policy failure,” Dr. Saddler said.