Rising Electricity Prices: It’s Time To Go Solar

Electricity bills - Australia

Higher retail electricity prices will add to household hip-pocket pain, but make installing solar panels an even more attractive prospect.

There’s been a lot of buzz in recent days regarding the Australian Energy Market Operator’s (AEMO’s) Quarterly Energy Dynamics Q1 2022 report. The report notes wholesale electricity prices in the National Electricity Market (NEM)1 jumped to an average $87 per megawatt-hour (MWh) for the first quarter of 2022 – up 67% from Q4 2021 and 141% on Q1 2021.

The culprits behind the increase according to the AEMO:

  • Increased demand
  • Coal generator outages (including blowing up)
  • Higher fossil fuel costs for electricity generation

The states faring the worst were those with the greatest dependence on black coal power – New South Wales and Queensland. It’s no coincidence that higher incidences of zero or negative wholesale prices occurred in the southern states, where renewables play a greater role.

The days of coal fired power generation in Australia are numbered. It beggars belief that even in the face of coal gasping its last, there are calls from certain corners for more of it. Some will be dragged kicking and screaming into a cleaner, cheaper renewable energy future backed by storage – and it’s this sort of rusted-on resistance that has and will continue to contribute to making a transition at times painful.

But as wholesale electricity prices and consequently power bills head north for many and for however long, more Australians will turn to self-generated solar energy to rein in or obliterate their bills. And that’s not just a very good thing for those households, but also the planet.

Higher wholesale power prices should also mean a nice little bonus for system owners in some states.

Higher Electricity Prices, But Better Solar Feed-in Tariffs

Wholesale electricity prices may have jumped 141% in Q1 in 2022 compared to the same quarter in 2021, but this doesn’t mean electricity bills will increase by the same amount. An electricity bill is made up of various components, and wholesale costs account for around a quarter. Still, there could be a significant effect.

The good news for solar system owners in the hardest hit states is feed-in tariffs – the rate paid for surplus solar energy exported to the mains grid – should also increase as these rates are largely tied to wholesale electricity prices.

While higher feed-in tariffs shouldn’t be counted on long-term and the focus should remain on solar energy self-consumption to maximise value from  a system, any boost will be handy. On a related note, solar owners should also bear in mind an electricity retailer offering a higher feed-in tariff isn’t necessarily the best overall deal – it really pays to compare electricity plans.

How Much Could You Save With Solar Panels?

Using the SolarQuotes solar calculator with its default settings indicates the following first year savings and simple payback periods in each capital city.

State/City First Year Savings
(6.6kW solar system)
Simple
Payback Period
QueenslandBrisbane $1,522 4 yrs, 9 mths
New South WalesSydney $1,425 5 yrs, 1 mth
ACTCanberra $1,686 4 yrs, 3 mths
VictoriaMelbourne $1,142 5 yrs, 3 mths
TasmaniaHobart $1,114 6 yrs, 2 mths
South AustraliaAdelaide $1,585 4 yrs, 6 mths
Western AustraliaPerth $1,071 5 yrs, 11 mths
Northern TerritoryDarwin $1,327 5 yrs, 4 mths

Note that the above is based on a 6.6kW solar system price of $6,600 fully installed for all the above, except for Victoria where the state’s rebate is also taken into account. We also noted in the most recent SolarQuotes Australian Solar Price report that system prices in March had dropped in most states, to average $5,910 nationally. Cheaper systems = faster payback.

To see an estimate of savings and payback in your specific circumstances, try SQ’s solar calculator. If you’re hungry to learn more about the bill-busting technology and how to ensure you get best system for your home, check out Finn’s very comprehensive guide to buying solar power.

And if your mind is made up to get cracking on blasting your power bills, get quotes from trusted, pre-vetted installers.

Footnotes

  1. The NEM consists of Queensland, New South Wales, the Australian Capital Territory, Victoria, South Australia and Tasmania.
About Michael Bloch

Michael caught the solar power bug after purchasing components to cobble together a small off-grid PV system in 2008. He's been reporting on Australian and international solar energy news ever since.

Comments

  1. So the AEMC says the average household in SA (with gas) uses 5MWh per year. Let’s increase that to 6MWh for all electric

    That would mean for SA an increase of $142 per year (If retailers used the actual cost of generation for the wholesale component of bills)

    $/MWh Wh/Yr
    FY2021 $44.83 6 $268.98
    FY2022 $68.50 6 $411.00

    $142.02

    Given the AEMC also says in 2021 the wholesale component was $475 per year I expect the increase will be even higher

  2. Geoff Miell says

    Michael,
    The days of coal fired power generation in Australia are numbered. It beggars belief that even in the face of coal gasping its last, there are calls from certain corners for more of it.

    Certain people keep repeating the lie that coal is cheap and reliable, but overwhelming evidence/data says otherwise.
    https://reneweconomy.com.au/its-time-we-stopped-kidding-ourselves-about-cheap-and-reliable-coal/

    “The coal generators are going broke. So those of you who are worried about coal retiring, please don’t. It’s happening, and it’s happening for commercial reasons,” Schott said.

    https://reneweconomy.com.au/theyre-going-broke-esb-chair-says-coal-plant-closures-now-unavoidable/

    I think the Federal Coalition Government has failed dismally to adequately deal with the:
    1) climate crisis;
    2) worsening energy security (especially liquid fuels), and thus food security;
    3) COVID-19 pandemic – IMO the Australian Government abrogated their constitutional duty for effective quarantine and put it onto the states/territories; demonstrated poor risk management and action leading to the vaccination “stroll-out”, and is displaying ongoing disregard for the increasing numbers of ‘long-COVID’ sufferers and escalating death toll.

    We can no longer afford (if we ever could) to support and vote for candidates and political parties that disregard scientific evidence/data and threaten our future wellbeing with woefully incompetent and dangerous policies.

  3. George Kaplan says

    “… there could be a significant effect … [FIT] should also increase …”.

    That’s a lot of qualified language. Rising FiTs will of course be enthusiastically embraced by solar owners, the question is, will they actually increase? I’m on an old contract expiring shortly, but the current version of my plan is offering a mere 5c/kWh, and I saw another plan recently dropped its FiT from 3c/kWh to 2c/kWh. I know there may be changes coming 1 July, but that’s a wee way away.

    SQ contend the focus should be on high self consumption, but how does that help generally low users? Often half my power usage is overnight – a time the sun don’t shine, and batteries aren’t yet a viable RoI. I’m a high exporter – often 80%+, not a high consumer. Yes my choice, but I do find the economics a tad irritating.

    As regards “… retailer[s] offering a higher feed-in tariff isn’t necessarily the best overall deal …” does anyone here have any experience with, or know anything about, 1st Energy or Sumo?

    • David Jackson says

      I moved to 1st Energy in mid-Jan (AusGrid area) on a flat rate plan (which makes the cals easy to compare), so time wise probably a bit early to tell…but so far so good…Single occupant household with a 13.2KW system

  4. George Kaplan says

    Just finished an interesting exercise. Using last year’s import and export figures, in conjunction with the rates and FiTs offered by the new version of my plan, I’m looking at a 3% saving on costs, and a 62.5% loss in FiT payments! Instead of a earning a ‘free’ return flight to Tokyo, I can maybe possibly hope to earn enough to cover a couple of meals at a buffet – assuming global cooling, a wet winter, and\or extra cloudy weather don’t strike, in which case I’d be paying out. 🙁

    Alternatively I could go with another company and pay a roughly 15% increase in costs – assuming only peak hour usage (8.5% savings assuming exclusively off-peak usage so mostly likely somewhere betwixt and between), and only a 21.5% loss in FiT.

    Might things change come July? We’ll see!

  5. peter falconer says

    I have a 1.5 kwh system which after 10 years died (probably of old age) I replaced it with another 1.5kwh system so as to retain my old 44c FIT from Qld gov’t, at a cost of $1900 to me but with a rebate to the retailer of just over $800.So I see all these rebates and wonder two things: who is paying them? and when I add these rebates back onto the electricity bill, is Solar really cheaper than fossil fuel produced electricity?
    Further, the coal producers seem to be doing very well selling their product overseas. Are the Chinese really dumber than us? And finally, if we get rid of all the fossil fuel power manufacturers will the planet be saved or will we simply feel better ourselves while China keeps on burning coal?

  6. BOB AUDSLEY says

    I put in a 6.6 kw system over three years ago and to start with it decreased my power bills signifigantly whilst i was getting 25 cents per KWH Feedin Tariff.
    Origin have now dropped that to 16 cents per KWH.and I had to fight to stop them reducing it further!!
    However my major concern is that although my system has generated
    14,451 KWH (14.45MWH) since install (I keep track of it and take regular readings).I have only used 1,298 kwh the rest 13,153 kwh (13.15MWH) has been exported to the grid.
    My question is= Is this a normal sort of breakdown or am i being ripped off by ORIGIN who installed a single phase system when the house is 3 phase ??

    • Ronald Brakels says

      Hi Bob

      You have only consumed 10% of the energy generated by your solar system. This is well below the average of around 20% for a 6.6 kilowatt solar system, but it’s not unusual for people who are normally out of the house for most of the day and/or have low electricity consumption. You can increase your solar self consumption by shifting electricity use to the day. If you have electric hot water you could put it on a timer or simply make an effort to run appliances when the sun is up.

      Having a single phase system with 3 phase power won’t affect your self consumption as your meter will net it out. As far as your meter is concerned, your home only consumes electricity if more energy is being drawn from the grid than the house is exporting to it. It doesn’t consider what’s happening on individual phases.

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