ACCC National Electricity Market Report Released

Residential electricity consumption jumped 10 per cent and bills increased by 7 per cent in 2020; but the ACCC is expecting to see lower household electricity bills in the NEM this year.

The Australian Competition and Consumer Commission’s latest electricity market reports notes while households may have been using more electricity last year – largely due to lockdown and other restrictions on movement – average wholesale spot prices fell by a whopping 50 per cent between mid-2019 and early 2021.

The ACCC says this has been partially offset by higher spot prices in May and June due to issues including a major generator outage in Queensland – the incident at the coal-fired Callide Power Station. However, the ACCC expects wholesale electricity costs to remain low relative to recent years.

“We expect 2021 to be a better year for households and small businesses as large reductions in the wholesale cost of electricity continue to flow through to people’s bills,” said ACCC Chair, Rod Sims.

Wholesale electricity costs were making up around thirty percent of an electricity bill and regardless of (apparently) increasing trust of electricity retailers among households and businesses, the ACCC is keeping an eye on retailers to ensure reductions are passed on.

Mr. Sims also expressed concern about the high number of small businesses that are still on standing offers – around 16 per cent. That’s more than double the proportion of households on standing offers, which are usually more expensive than market offers. Whether or not a household (or business) has solar panels installed, it really pays to compare electricity plans.

And on the topic of solar power..

Sims Still Suss About Solar Incentives

The report also reveals how households with solar power are cashing in with smaller electricity bills.

Taking into account feed-in tariffs, it states the average household with solar panels paid $94 less on their quarterly bill – and that’s despite using more energy from the grid. But solar panels can and do provide much greater savings – so what’s going on?

Other factors coming into play would be the many systems installed years ago that were only around the 1.5kW capacity. These days, “entry level” could be considered a 6.6kW system – so, more than four times the capacity. There would also be many households still not maximising solar energy self-consumption, which is more important now given feed in tariffs (not to be confused with the solar rebate) aren’t as generous as they once were.

Speaking of high feed-in tariffs and the rebate, Mr. Sims has never been a big fan of either. A few years ago, the ACCC (repeatedly) called for the rebate to be phased out by this year. While the ACCC have toned down their objections somewhat (flogging a dead horse and all that), Mr. Sims still managed to squeeze in a dig.

“Customers on hardship or payment plans have the lowest rates of solar, so you have to question how fair it is for these people to be subsiding the costs of solar customers,” he stated.

Part of the answer to this question was in the ACCC release:

“Major falls in wholesale electricity costs”

And that’s what helps makes things fair – the uptake of rooftop solar is reducing the cost of electricity for everyone, by bringing down wholesale prices.

However, Mr. Sims and the ACCC appear to be primarily concerned these days by legacy feed-in tariff schemes no longer available to new solar owners that offered a much higher rate to stimulate solar uptake.

According to ACCC analysis, “premium” FiT participants made up 23% of residential solar customers and 13% of small business solar customers in 2019–20. But as mentioned, these systems would generally be much smaller than those installed today – and adding panels sees participants knocked off schemes and onto what is currently offered.

These much higher legacy rates won’t go on forever – in the case of Victoria until 2024, in South Australia/Queensland, 2028 and in the ACT, 2031.

Perhaps incentives can be offered, particularly to ACT, SA and QLD participants, to get them off those schemes – I suspect many would be keen to upgrade their solar systems. But even without an additional incentive to ditch the higher feed-in tariffs, it can still pay to upgrade these small systems.

The ACCC’s Inquiry into the National Electricity Market – May 2021 report, which was released yesterday, can be accessed here. It should be noted that as report is in relation to NEM states, it doesn’t include Western Australia or the Northern Territory.