Thursday, October 28, 2010

Why power bills are rising

The Brisbane launch of the Beyond zero emissions plan to transition Australia to 100% renewable energy by 2020 was a really interesting event with an almost full house of around ~800 people.

What was also interesting were the comments made by John Daley, the Grattan Institute's chief economist. From an economists point of view he described the BZE plan as requiring a lot of money but "doable". In conversation after the event he told me that the advantage of the plan was that it took a technological approach, asking: could current technology switch us over to 100% renewable energy by 2020? And if so how could it be done? Instead of immediately getting mired in questions about what conventional wisdom said was politically palatable and politically affordable.

John also gave a clear description of why we are currently experiencing steep power price rises, which unfortunately isn't well understood, but as a hint, it has little to do with government greenhouse policy.

Over the next 7 or 8 year we can expect power prices and therefore power bills to double, even if we take no action on global warming, because (as also reported in the courier mail):

"It is a not-well-understood political fact that within the next six or seven years that is likely to double as a result of investing in transmission because of rising airconditioner use and as gas prices are likely to double as Australian gas prices achieve parity with world prices," Mr Daley said.
The cost of transmitting electricity is about half of your electricity bill and the increased use of appliances like air conditioners (which can use several kilowatts of power) means that peak daily demand for power is increasing. To prevent brownouts you need enough wires to meet peak electricity demand and so lines companies are spending billions of dollars upgrading transmission lines, which of course, we have to pay for. There is also a sad piece of irony that a robust response to climate change (like the BZE plan) would also involve massive increases in energy efficiency, lowering peak demand and therefore decreasing the need for some grid upgrades and actually put some downwards pressure on prices (at least in this area).

So there you have it, power prices are rising because of infrastructure investments in an upgraded and expanded grid and the rising prices of fossil fuels.

PS: ENERGEX is starting up "Energy conservation communities" in an attempt to reduce peak demand. My guess is they think it will be cheaper to reduce household power usage at peak times than continually add more wires to the grid. If you live in the Centenary Suburbs (and surrounds) and have aircon or a pool filter you can sign up and they'll give you some goodies. See their website (linked above) for all the details.

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