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NSW and SA electricity prices to come down?

9th Oct 2012

Just a week after the energy pricing regulator in South Australia (SA) said it would be recommending a reduction in retail electricity costs, New South Wales (NSW) has also jumped on the bandwagon.

SA's regulator - the Energy Services Commission of South Australia (ESCOSA) - claimed that prices should come down by 8.1 per cent, with the organisation stating that renewable technologies in the state, including solar power, have lowered grid demand.

And while its counterpart in NSW - IPART - has needed a nudge from the state government to come to a similar conclusion, it would appear to be moving in that direction.

Writing for, Giles Parkinson said the announcement "recognises the game is changing", with utilities firms having less and less power over industry regulators.

"It is often forgotten under the screaming headlines of rising electricity bills that while retail prices have jumped sharply, wholesale energy prices ... have been at the lowest levels since the introduction of the National Electricity Market (NEM)," he explained.

According to Parkinson, regulators had previously allowed utilities firms to set their wholesale price allowance by taking into account the long run marginal cost of energy.

But in SA, for instance, companies were charging as much as three times the actual rate, he said.

"The wholesale cost falls have been driven by a combination of falling demand and the impact of renewable energy, which has been pushing down prices on the NEM because it has a very low short-term marginal cost, so it pushes higher-cost generators out of the market," Giles continued.

So what has been driving lower demand? Well, a range of factors - but the rapid uptake of solar PV has been a big help, the expert stated, as has lower industrial use and the effect of more people considering energy efficiency measures.

And it doesn't stop there. Parkinson cited recent University of Melbourne analysis of figures from the Australian Energy Market Operator that showed demand is continuing to fall.

In fact, electricity requirements sank 8.5 per cent in the September quarter compared with the 2008 peak in demand, he noted.

Furthermore, data from the REC Agents Association found that rooftop solar PV and solar hot water has resulted in a 1.2 per cent drop in power consumption across the NEM overall.

Solar penetration is only expected to increase in the coming years, Giles concluded, with its contribution to reducing demand set to double by 2015.

Posted by Mike Peacock

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