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Energy Prices Will Keep Rising
These are not simple times to be involved in energy supply, either for business or governments.
Australia's electricity generation is projected to grow by nearly 50 per cent between now and 2030 to meet growth in demand.
The creation of the national energy market occurred at a time when surplus capacity existed, arising from previous government ownership.
That capacity has been absorbed and we now stand at a point where demand and supply are finely balanced.
Our ultimate challenge is to ensure we get the investment we need in networks and generation in the next decade to guarantee the high supply reliability the Australian community rightly expects.
At the same time, we need to invest in energy efficiency and clean energy technologies to meet our objectives in response to climate change.
Climate change has been a policy issue for nearly two decades but there is still no certainty about carbon pricing.
That means no breakthrough on new baseload investment in the foreseeable future.
If the Coalition will not come to the table and pass the Carbon Pollution Reduction Scheme, one thing is certain: the next parliament must solve this problem once and for all or we will have real supply reliability issues and the electorate will punish those responsible.
Renewable electricity generation is invariably location constrained because it can only go where the wind, solar, ocean, biomass or geothermal resources are available.
Network costs already make up about half the final electricity bill for households and small businesses in Australia.
These costs will come under further pressure as we confront the need to connect new renewable and gas generation regions to the existing electricity market and respond to more demanding technical and health and safety specifications, for example, to improve safety following the Victorian bushfires.
The reality is that all these costs will have to be reflected in consumer prices in the future.
There is already more than $42 billion of approved capital expenditure in the pipeline for the next five years.
Price regulation is necessary in the absence of competitive markets.
However, this only causes me concern if retail price caps are being used to disguise in market signals and dampen investment.
The fact is state and territory regulators are now fronting up to necessary price increases, most recently the Independent Pricing and Regulatory Tribunal in NSW last week, and earlier in Western Australia.
But there is still a reluctance to tell the truth about electricity prices.
During the past three years, prices have risen by about 35 per cent.
These price rises have nothing to do with the CPRS.
The biggest cause of higher electricity prices is the high capital cost of increased investment in electricity networks, investment that is critical to guarantee supply reliability.
While there is room for increased energy efficiency at home and at work, no one wants brown-outs or other restrictions on supply, such as those we have faced with water for many years.
That's why there must be investment in electricity supply infrastructure before reliability becomes an issue.
We cannot afford to repeat historical failures to invest in water supply infrastructure when it comes to energy.
State and territory governments of all political persuasions have sought from time to time to hold back necessary price increases and those decisions are now coming home to roost.
While the Australian government is concerned about the effect of these price increases on families and businesses, in many cases they are now unavoidable if we are to guarantee supply reliability.
I am pleased to see state and territory governments increasingly recognising the need to lift energy rebates for pensioners and low-income earners to offset the effects of higher electricity prices.
Through the Ministerial Council on Energy, which I chair, Australian governments will also legislate this year through the South Australian parliament a National Energy Customer Framework to improve protections for vulnerable customers.
The next decade will bring a real transformation of Australia's energy sector.
Australia now needs to invest at least $100bn in electricity infrastructure during the next decade just to meet growing demand and replace ageing infrastructure.
And the community also expects us to invest in response to climate change: energy efficiency measures, renewables and other clean energy technologies.
The federal government alone is investing $4.5bn in its Clean Energy Initiative.
While our objective is to drive down the costs of clean energy technologies for consumers through time, they are not cost-free today.
We must start telling the truth about electricity prices.
We simply cannot maintain supply reliability for households and businesses if we don't invest in electricity supply infrastructure.
That investment can be paid for only with higher electricity prices.
We need to remember the water supply restrictions of the past decade.
We didn't like them but we learned a lot from them and the Australian community is now very aware of the need to use water wisely.
Water use per capita declined significantly during the 1990s in a number of our big cities.
While I believe we can and we should make the same efforts to improve energy efficiency, I am certain that no Australian community would be prepared to live with electricity supply restrictions in the 21st century.
Article published in the Australian, 22nd March 2010
Source from: theaustralian.com.au
| No. | Subject | Date |
| 9 | Healthy ozone will help climate change | 2010/09/22 |
| 8 | This week, give yourself an eco-challenge and help raise money for your favourite charity | 2010/09/22 |
| 7 | Meet the politicians who will have a big say in our final government, including their position on 'green' policies | 2010/09/22 |
| 6 | Energy Prices Will Keep Rising | 2010/09/09 |
| 5 | Further details on Labor's renewable energy policies | 2010/09/08 |
| 4 | Labor Gains Power - What It Means For Solar Power | 2010/09/08 |
| 3 | 30,000 homes now signed up to EzyGreen | 2010/09/07 |
| 2 | MIT's Self Repairing Solar Cells | 2010/09/07 |
| 1 | 19 Australian Energy Retailers Back A Carbon Price | 2010/09/07 |