The Effect of the Carbon Price on Electricity Prices
MCJ Posted on Tuesday, August 7, 2012 at 21:32 In an otherwise good article, Peter Martin today wrote that
[the TD Securities Melbourne Institute price index] reports a jump in electricity prices of 14.9 per cent and a jump in household gas prices of 10.3 per cent, almost all of which would have been due to the carbon tax. [emphasis mine]
This is incorrect, and, unfortunately, he is not the first journalist to make this mistaken claim. Evidence to the contrary be found in, for example, the reports from the relevant authorities in states that regulate their electricity prices:
New South Wales
IPART’s “Final Report – Changes in regulated electricity retail prices from 1 July 2012”
;)
; "Table 1.2 Drivers of the increase in average regulated retail electricity prices on 1 July 2012, by Standard Retailer (nominal, %)")
Over all NSW retailers, the carbon price is responsible for slightly less than half of the latest regulated price rise.
Queensland
QCA’s “Final Determination: Regulated Retail Electricity Prices 2012-13”
; "Table 3.2: Carbon Cost allowances for 2012-13 Excluding Losses")
; "Table 3.5: Total Energy Cost Allowances for 2012-13 by settlement class/tariff")
The regulated allowance for carbon costs was around 2c/kWh, of a 6-8c/kWh rise; 25-36%.
Western Australia
IMO – “2012 Energy Price Limits Review” (specifically the SKM MMA Final Report).
The maximum short term energy market price (STEM) rose by $9/MWh from $314/MWh to $323/MWh. In this case, the increase was entirely due to the carbon price:
; "Table 5-3 Impact of factors on the change in the Maximum STEM Price")
However, in the last five years, the maximum STEM price has risen from $159.84/MWh to its current level of $314/MWh, and the WA Department of Finance notes:
Although WA’s electricity prices have increased, the prices are still lower than the cost of supplying electricity. At the moment, the WA Government covers this difference – paying a subsidy of $367 million in the 2011–12 financial year.
As far as the trend of electricity prices rises go, the carbon price is a drop in the bucket.
I haven’t put in the effort to research the effects of the carbon price on electricity prices in states with deregulated industries (e.g. Victoria), but I’m sure they’re similar.
That final image of historical prices in NSW and QLD, by the way, is from a very good fact sheet [web archive version] by the Energy Supply Association of Australia showing where our electricity prices sit in an international comparison. Fingers crossed for an update.
In the meantime, go forth and blame not the carbon price for the sins of the network.
MCJ
A late addition for Victoria:
Dylan McConnell of the Melbourne Energy Instutite estimated in May 2013 that carbon costs added 2.2c/kWh to electricity prices in that state.
Also worth noting is the CEDEX® September 2013 [PDF] report from pitt&sherry, from which I draw this fascinating table:
Carbon costs (2012-13) and wholesale electricity price changes (2009-10 to 2012-13) per capitaFinally, and more of a bookmark than anything else, the University of Queensland had an interesting working paper estimating the Impact of Carbon Prices on Wholesale Electricity Prices, Carbon Pass-
Through Rates and Retails Electricity Tariffs in the NEM [PDF].
MCJ
The ABC’s Fact Checking unit asked Hugh Saddler, from Pitt & Sherry, to estimate the effect of the carbon price on electricity prices; his analysis gels with mine.
Reader Comments (2)
Well done. It was TD Securities that told me almost all of the July rise would have been due to the carbon price, but that can't be right.
We'll be rooned! Rooned I tells you!