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How could Australia exiting coal affect energy prices?

How could Australia exiting coal affect energy prices?

21 Feb, 2022 - 3 min read

How could Australia exiting coal affect energy prices?

AGL Energy recently turned down an offer by Atlassian co-founder Mike Cannon-Brookes and asset manager Brookfield to buy the energy provider in order to accelerate its exit from coal power stations. But hypothetically, how could a faster switch to greener energy affect your power bill?

One potential concern is that moving away from coal-fired power stations too rapidly could leave a gap in Australia’s energy grid, leaving Australians vulnerable to blackouts or higher power prices.

In a statement regarding Origin Energy’s recent decision to bring forward the closure of the Eraring Power Station in NSW from 2030-32 to mid-2025, Federal Energy Minister Angus Taylor cited the closure of the Hazelwood Power Station as an example of one of these gaps leading to an 85 per cent increase in prices and a less reliable grid.

“Dispatchable, on-demand capacity is critical to keep prices low and the grid reliable. Closure without like-for-like replacement puts affordability and reliability at risk.”

Grattan Institute director of energy policy, Tony Wood, has said that transitioning from coal power to renewables could lead to short-term increases in wholesale prices but probably not much of a change in short-term retail prices:

“I have no doubt we can fill the gap, but it does depend on getting in place the appropriate mix of wind and solar, more transmission and more storage.”

Additionally, Mr Cannon-Brookes has said that fast-tracking coal out of the grid in favour of renewables should actually lower power bills rather than raising them:

“I think we know that renewables are the cheapest source of power generation. What you require is the ability of capital to make that transition and to do it sensibly and rationally. That is, doing it inside one organisation. And I think we have the right partners in the consortium to do that.”

What can you do at home?

If your household power bills are higher than you’d like, it may be worth comparing offers from competing energy retailers. Not only might you find a more affordable deal, but a different energy retailer may also offer features and benefits that better suit your needs, such as more convenient customer service, bundled offers, or access to green power options.

Making some green changes to your property, such as adding solar panels and batteries to your home could potentially help your household manage an unstable power grid. This could also potentially help to lower your power bills, as your house could access more of its own solar power and rely less on the energy grid. In some cases, your household’s surplus solar energy could be fed back into the local grid to help stabilise your area’s power, which could allow you to benefit from feed-in tariffs (FiTs) from your energy retailer.

Making green changes to your property can be a significant expense, which you may need to budget for. You may have the option to refinance your home loan to access your equity as a line of credit, or you could compare green personal loans, which often have lower interest rates and fees and can be used to pay for green technologies.

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How could Australia exiting coal affect energy prices?

What can you do at home?

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