Our energy supply is safe, but it will cost us more

Age
Friday 21/11/2008 Page: 2

AUSTRALIANS should brace for higher energy prices as ageing infrastructure is replaced and an emissions trading scheme is phased in, but the good news is that energy supply is reliable for now.

That is the message from the Australian Energy Regulator's 2008 State of the Energy Market report, to be released today, which states that while the global financial crisis continues to cripple some corners of the economy, investment in network transmission and distribution will continue to grow.

AER chairman Steve Edwell told BusinessDay that the 323-page report highlighted that Victoria had a mature energy market capable of dealing with policy shocks, such as the Federal Government's carbon pollution reduction scheme. He said Australia could not afford to be frugal on spending in the energy sector.

"We have seen a high level of investment on the network side of things: $1.2 billion a year in transmission and in distribution it is about $3 billion a year. In gas it is about $400 million a year. That is pretty significant and it is increasing," he said. "In Victories transmission we had about $600 million spent from 2003 to 2008 whereas going forward we have endorsed $950 million over the same period.

That will keep things moving." Mr Edwell said consumers would have to pay for that higher level of investment. "Consumers need to be aware that energy prices are clearly going to increase and that there is cost pressure right across the supply chain. That is most evident in the generation space because we have to replace lower-cost, high-emission intensity plants with higher cost, low-emission plants. That is going to increase the cost of generation possibly by about 15% or 20%," he said.

Link www.aer.gov.au