Australian power prices will increase due to the government’s National Energy Guarantee (Neg) initiative, according to a new study. It also encouraged the coalition to adopt a more ambitious emissions reduction target to instead reduce prices and cut CO2 production.
The modelling report was published by RepuTex, an energy analyst firm funded by Greenpeace, and adds to growing demands for the government’s introduction of more extreme targets to combat carbon emissions. Specifically, the report suggests an emission reduction target of 45% by 2030.
Under the current Neg, the proposed emissions reduction target sits at 26%. In the study, the impact of such a target was compared with the 45% goal proposed by federal Labor. It concludes that the higher target could cause wholesale power prices to decline by a quarter, dipping to $60/MWh by 2030. In contrast, under the current Neg, power prices would be at just over $80/MWh.
Energy prices would rise under the Australian coalition’s proposal as it would see coal and gas continue to dominate the market, with investment in renewables remaining stagnant. In contrast, Labor’s proposal would see renewable sources playing a larger role in the country’s energy mix.
RepuTex says a higher emissions reduction target would also impose a restraint on coal plant emissions and stimulate investment in renewables, with the potential of adding 22GW of solar and wind capacity to Australia’s energy mix.
The group’s analysis says that, “competitive pressure from higher solar and wind energy is modelled to push wholesale prices lower, eventually resulting in the closure of excess coal capacity”.
The report forecasts wholesale electricity prices to initially fall under the coalition’s scheme, before rising to more than $70/MWh following the closure of the Liddell coal plant in New South Wales in 2022. The retirement of Yallourn in Victoria in 2028 is also anticipated to boost prices, rising to $80/MWh.
Such predictions are based on the assumption that renewables will take the place of gas generation during the day, thus increasing the opportunity for excess renewable energy storage.
The Turnbull Government, alongside the Business Council of Australia, have labelled the 45% target reckless. Environmental groups are, however, continuing to lobby for the government to raise the ambition of its climate targets ahead of a coalition energy council meeting in August to determine whether or not to continue with the Neg scheme.