Electricity prices in Australia are rising at an unsustainable rate – according to the 2016-2017 consumer price index from the Australian Bureau of Statistics, electricity prices rose 12.4 percent compared to a paltry 2 percent growth in wages.
Getting to the roots of the issue is important to help Australians find why their bills are becoming so unnecessarily bloated. We explore this more in-depth in this blog. As this is a follow on from our previous blog, make sure to read through Part 1 before reading on.
What is contributing to the price hike?
In the last blog we discussed the different aspects that made up energy prices. Now, we examine how these parts contribute to higher rates. Below Renew Energy list three of the key contributors to the out of control energy price hike Australians are putting up with.
Poor generation strategy
Ineffective management of generators by government bodies has very recently seen the prices of electricity rise. Up until 2015/2016, Australians were paying less than 2006/2007 for the wholesale production of electricity, but this has recently changed.
Investments in new energy generation has resulted in ageing coal plants having no real substitute when they are decommissioned. This in turn caused a shift in supply and demand. It is also in part due to a push for renewable energy that these plants have closed, but the government not providing the means for new energy investment has means that foresight is more to blame than anything.
Fumbling retail costs
Although market competition in the energy sector should be helping to push prices down, the opposite is in fact true. Instead of reducing costs to maximise profits, energy retailers are investing money in marketing to recruit and then retain customers.
It is therefore the competition between the retailers that can blow out costs unnecessarily, which inevitably is required to be made up for by consumers.
Overbuilding electricity networks around Australia over the past 10 or so years has been a large contributor to increased energy costs. This notable as while network infrastructure has been getting larger, electricity use has remained relatively consistent.
The additional costs associated with this flawed estimate of electricity demands are then passed onto the users of electricity – the consumer.
It isn’t too difficult to see our future is renewables. To learn more about making the move to solar, get in touch with the team at Renew Energy today.