Electricity prices are set to fall across the country over the next two years, offsetting this year’s price increase.
The Australian Energy Market Commission said the price drop will happen as variable wind and solar generation comes online, which is paid for by the Government’s Renewable Energy Target.
Nationally, prices rose almost 11 per cent this year, but with the extra supply from wind and solar, the commission predicts that will be offset by a 12 per cent fall over the following two years.
The AEMC’s annual report on price trends provides an overall picture of factors driving electricity prices for households in each state and territory.
AEMC chairman John Pierce said this year’s report showed wholesale electricity costs were now the single biggest driver of change in residential electricity bills, unlike earlier price trends reports which found network costs were the main driver.
“Prices rose sharply this year by almost 11 per cent on a national basis as consumers felt the impact of Hazelwood and Northern coal-fired plants retiring and the lack of replacement investment, combined with high gas prices,” Mr Pierce said.
“But we expect these price rises will be reversed over the next two years as wind and solar generation enters the system.”
The report also found that over time, low wholesale prices contributed to the closure of coal-fired plants.
“Without investment in replacement dispatchable capacity, wholesale prices will go up again and remain volatile,” Mr Pierce said.
“And the rollercoaster will be repeated.”
The AEMC also warned of instability and blackouts if the new systems were not managed efficiently.
The commission said the price fall will begin from mid-2018.