{"id":26339,"date":"2018-12-11T09:58:07","date_gmt":"2018-12-10T23:28:07","guid":{"rendered":"https:\/\/www.solarquotes.com.au\/blog\/?p=26339"},"modified":"2023-01-31T11:34:24","modified_gmt":"2023-01-31T01:04:24","slug":"electricity-price-increase-exaggeration","status":"publish","type":"post","link":"https:\/\/www.solarquotes.com.au\/blog\/electricity-price-increase-exaggeration\/","title":{"rendered":"Over Estimating Electricity Price Inflation For Fun And Evil Profit"},"content":{"rendered":"
\"Over-estimates

Beware Of Salespeople Making Ridiculous Electricity Price Increase Predictions<\/p><\/div>\n

A rooftop solar power system is an excellent investment for any home that isn’t at the bottom of a well or otherwise suffering from major shade problems.\u00a0 Earlier this year I wrote an article on payback times in Australian capitals but it’s already out of date as they pay themselves off even faster now.\u00a0 The sun didn’t get any sunnier but solar power did get cheaper.\u00a0 Actually the sun got less sunny<\/a>, but don’t worry, that’s just a normal part of its 11 year cycle.\u00a0 (It will be decades before solar panels drain enough energy from the sun for it to go out altogether.)<\/p>\n

Unfortunately, despite solar power<\/a> already having an excellent return, some solar and battery salespeople just can’t help gilding the lily by providing potential customers with estimates of savings that include huge increases in the future price of grid electricity.\u00a0 It’s common for these lily gilders to assume annual grid electricity price increases of 10%.\u00a0 There is a\u00a0 technical term for this kind of exaggeration and the term is bullshit.\u00a0 But I’ll leave it up to the experts to decide if it falls into the utter, complete, or pure categories.<\/p>\n

The reason it is bullshit is not because after just a few years it would be cheaper to use a diesel generator in South Australia than grid power, but because while Australia has suffered huge increases in grid electricity prices over the past 10 years they have been at an average annual rate of around 7.4% and not 10%.\u00a0 The only way to get a 10% figure is to pick a period of rapid electricity price increase and ignore what happened before and after.\u00a0 And that is not a statistically proper thing to do.\u00a0 It’s a case of lies, damned lies, and salespeople.1<\/a><\/sup><\/p>\n

I will explain why I think the most appropriate estimate to use for electricity price increase predictions is 0% real increase.\u00a0 This means it should be assumed electricity prices will simply keep pace with inflation.\u00a0 I’ll also explain what is likely to happen to solar feed-in tariffs<\/a> over the next few years.<\/p>\n

But before I go into this, I’m afraid my identical twin cousin, Donald, wants to talk to you.\u00a0 I didn’t want him bothering you, but he insisted.\u00a0 He’s hoping one of you can help him out, so I’ll turn the article over to him for a few paragraphs…<\/p>\n

Would You Like To Buy A Car?<\/em><\/h2>\n

Hey there!\u00a0 It’s great to not see you!\u00a0 The name’s Donald and have I got a fantastic offer for you!<\/em><\/p>\n

Today, for a very limited time, I have a beautiful Tesla electric sports car for sale.\u00a0 Let me tell you, I’ve driven a lot of great cars, but this car is the best.\u00a0 It’s almost brand new.\u00a0 Sure, I may have gently bumped it against a cow, but you can hardly see the mark and if you buy now I’ll throw in a free esky full of steak!\u00a0 It’s a steal at only $100,000.\u00a0 That’s far less than what it was when I stole… I mean, when I bought it new.<\/em><\/p>\n

Now I know what you’re probably thinking, $100,000 is a lot of money and maybe you’re not sure you want to spend that much.\u00a0 But trust me, I’m telling you, this car will save you money.\u00a0 It’s all electric.\u00a0 You’ll make your money back through savings on petrol in no time!\u00a0 You might say you only\u00a0 spend a couple of thousand dollars on petrol a year, but let me tell you, its price is about to go through the roof!\u00a0 And I can prove it to you with maths.\u00a0 Take a look at this graph of the price of oil:<\/em><\/p>\n

\"oil

Image: Oil Sands Magazine — But not the pony. (Don’t know how that got in there.)<\/p><\/div>\n

As you can clearly see, from 2007 to the middle of 2008 the price of oil more than doubled.\u00a0 If this trend continues, — and trust me that it will because my word is worth far more than real evidence ever could be — in one year the $2,000 you spend on petrol now will become $3,500.\u00a0 The year after that it will be $6,000.\u00a0 In five years time you’ll be spending $31,000 a year on petrol and in just 10 years you’ll be spending $473,000 on petrol annually.\u00a0 Clearly, you’d be nuts not to buy this beautiful car from me, along with an esky full of meat, for the low price of only $100,000.\u00a0 Cash.\u00a0 Preferably in a brown paper bag…<\/em><\/p>\n

Okay, you can stop right there, Donald.\u00a0 We’ve heard more than enough.\u00a0 I’m sure no one here wants to buy your cow killer.\u00a0 And what have you done with that graph?\u00a0 Here’s what it looks like in full without the pony:2<\/a><\/sup><\/p>\n

\"oil

Image: Oil Sands Magazine\u00a0 (No pony this time, but I hear the centrefold’s pretty slick.)<\/p><\/div>\n

Now people can see the full graph it’s clear the run up in price you mentioned was only temporary and you cherry-picked the dates to make the price rise that occurred appear as dramatic as possible.<\/p>\n

But since graphs have been brought up, I’ll show everyone some that are relevant to the topic of future electricity price increases.\u00a0 But first I’ll warn everyone this article isn’t for the faint-hearted.\u00a0 Things are going to get pretty graphic.<\/p>\n

Residential Electricity Price Increases<\/h2>\n

Here’s a graph I stole from ABC News.\u00a0 It shows the increase in residential electricity prices since the middle of 1990 but it only goes until the end of the 2016-2017 financial year.\u00a0 It would be nice if it was completely up to date but I couldn’t find a better one to steal and I have far too many cartoons to watch to take the raw data and make my own graph.\u00a0 It shows the real increase in household electricity prices.\u00a0 This means the effects of inflation have been removed:<\/p>\n

\"Residential

(Image: ABC News)<\/p><\/div>\n

The yellow line is the average for Adelaide and the eastern capitals and is called “National” despite leaving out Perth and Darwin.\u00a0 It shows that in the final 10 years of the graph the average electricity price increased by 63%<\/a>.\u00a0 That’s a hefty amount but it doesn’t mean the average annual increase was 6.3%.\u00a0 Instead it was only 5% on account of maths.3<\/a><\/sup><\/p>\n

But these figures have had the effects of inflation removed.\u00a0 During that period the annual average inflation rate<\/a> was 2.4%.\u00a0 This will make the average annual electricity increase including inflation 7.4%.\u00a0 I don’t care how hard you think maths is, you do not get to round that up to 10%.\u00a0 Only physicists<\/a> get to do that.<\/p>\n

10 Years Is Not A Magic Period<\/h2>\n

There is no particular reason for basing estimates of future electricity price increases on just the past 10 years.\u00a0 If we look at 20 years instead we get a very different answer.\u00a0 Instead of a 5% real annual increase it’s only 3%.\u00a0 Looking at the past 30 years gives an ever lower figure.\u00a0 If anyone wants to argue we should look at the past 10 years instead of 20 or 30 because the recent past is going to be a better indicator of the future then they need to explain why looking at just the final 4 years on the graph wouldn’t be even better — a period\u00a0in which electricity prices have declined in real terms.<\/p>\n

\"Electricity<\/p>\n

The period in which electricity prices soared for the sky like some kind of rocket man<\/a> has been over for years now.\u00a0 I’m in rural Queensland at the moment and Ergon’s per kilowatt-hour charge is two-thirds of a cent lower<\/a> than it was last year.\u00a0 While definitely not everyone has received a decrease, no one’s getting the crazy increases we were being hit with 7 years ago.4<\/a><\/sup>\u00a0 They are not likely to return because:<\/p>\n