Power bills would fall significantly over the next decade if the federal government adopted a clean energy target.
And they would fall even further if a more aggressive target was adopted, a new analysis has found.
According to the modelling from respected energy market analysts RepuTex, sticking with business as usual would lead to wholesale electricity prices of more than $100 per megawatt hour by 2030, largely because of a heavy reliance on gas-fired power with high fuel prices.
A clean energy target as recommended by Chief Scientist Alan Finkel would encourage investment in new energy generation above the amount expected to close, leading to a more competitive market.
A CET in line with the Finkel report would lead to wholesale prices of $60/MWh.
With a tougher target more in line with an international agreement to limit global warming to two degrees, power prices would be just $40/MWh by 2030.
RepuTex’s energy and carbon market director Hugh Grossman has titled his report as a blunt message: “It’s the economics, stupid.”
He also says baseload-only generators – traditionally coal- and gas-fired power – will be too inflexible to compete in Australia’s future energy market.
Falling demand for electricity during the daytime and peaks in the evening mean generators that can cheaply and quickly ramp up production will be more competitive.
Traditionally newer gas generators have filled this demand but again, high gas prices have changed the equation, making wind or solar cheaper even with the added costs of storage.
“Renewables are a ‘lay down misere’ to out-compete traditionally fossil-fuel sources in Australia for the foreseeable future,” Mr Grossman said.
Under a clean energy target, generators create certificates based on how much below a threshold level of emissions their power is, with a number of certificates surrendered each year.
High-emitting generators can buy certificates from cleaner sources to surrender.
RepuTex says although there has been “much hand-wringing” over where that emissions threshold is set – to include coal or not – that was largely inconsequential because economics would ultimately drive the generation mix.
Even if all subsidies were removed from renewables, high-efficiency low-emissions coal power would still be uncompetitive.
“We do not envisage any appetite for HELE coal or other baseload-only facilities, such as nuclear, unless there is a major government distortion in the market,” Mr Grossman says.