Power prices tipped to fall

Herald Sun
Friday 13/2/2009 Page: 86

WHOLESALE electricity prices will fall sharply when the national Renewable Energy Target is introduced next year, three separate reports conducted for industry groups show. The target will require electricity retailers to source 20% of their power from renewable energy by 2020. An independent study by consultants CRA International last year for the National Generators Forum concluded electricity pool prices would be reduced by 5% if "low cost, short run marginal cost renewables are forced into the generation mix".

Two other studies, by ROAM Consulting and ACIL Tasman, have also concluded that more renewable energy generation will put downward pressure on electricity prices. But these findings are at odds with modelling released by the Department of Climate Change this week that indicates wholesale power prices would rise by an average 0.5% from 2010 to 2020.

Modelling done by energy experts McLennan Magasanik Associates for the Federal Government concluded the expanded RET scheme would have "a modest impact" on wholesale power prices. "Retail prices, however, are expected to increase by around 3% in the period to 2020 and 3.7% in the period from 2021 to 2030," the MMA study says.

A spokeswoman for the Business Council of Australia said yesterday the group had not had sufficient time to analyse the MMA findings. "We will consider the MMA report as part of the process of responding to the government's exposure draft legislation for RET and its effects on energy intensive industries," BCA policy director Maria Tarrant told BusinessDaily.

But in an earlier report on climate change policy, the BCA included the CRA analysis which showed a forecast reduction in electricity prices following an increase in power from renewable energy. Using the CRA modelling, the cost to electricity retailers of RET in 2015 would be $910 million, according to an energy industry analyst, who could not be named. "However, the reduction in whole sale electricity prices of including more renewable energy would be $10.9 billion," he said.

"The conclusion is that the impost on retailers due to RET should be overwhelmed by the reduction in wholesale pool prices, in this case by a factor of 10 times." NGF chief executive John Boshier would not comment on the finding in the CRA report his group commissioned other than to say the renewable target would have "a profound influence on electricity supply in Australia and was unlikely to provide immediate least-cost emission abatement".

The Department of Climate Change was unable to comment yesterday on the conflicting findings of the several reports into the likely effects of its RET scheme. The deadline for submissions to the draft RET legislation, which had been set for tomorrow, has now been extended to February 20.