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Queensland braces for second energy shock as coal price pushes up power costs

Business

Queensland consumers are in for another energy shock with electricity prices likely to follow the same path as petrol and spike significantly higher in coming months.

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The climbing coal price – and Queensland’s dependence on it for electricity generation – as well as generation issues caused by the Callide C outage last year, are behind the spike as well as the slow down in renewable energy developments.

The hikes are likely to feed into the concerns about inflation.

July has been tipped as the likely timing for any increase, but how much prices will rise is dependent on whether companies have hedged against the increase.

The Australian Energy Regulator noted the wholesale electricity price in Queensland effectively doubled between January and February (from a peak hour $6798/MWh and $12179/MWh to $13,429/MWh and $14,682/MWh).

“These high-price events were caused by high demand, due to warm temperatures and reduced availability of low priced generation due to outages and network limits,’’ AER said. 

The Queensland Competition Authority has already paved the way for higher prices with a draft determination on regulated retail electricity prices for regional Queensland which tipped higher prices for most tariffs, including all the main residential and small business tariffs.

“The expected increase in draft prices is mainly due to a projected increase in energy costs, following several years of falling energy costs, which were a driver of price decreases for each of the last three years,” QCA deputy chair Madeline Brennan, QC, said.

“Overall, the draft prices would result in a 4.2 per cent increase in the annual bill for a typical customer on the main residential tariff (tariff 11) and a 4.5 per cent increase for the typical customer on the main small business tariff (tariff 20).”

“The annual bill for a typical customer on the main regulated residential tariff is projected to increase by $54, from $1290 to $1344. For the typical customer on the main regulated small business tariff, the annual bill is projected to increase by $95, from $2119 to $2213.

A report to the QCA from ACIL Allens said that the market was now expecting an increase in price outcomes because the amount of utility scale renewable investment coming on-line would slow down between 2021-22 and 2022-23.

It said the continued unavailability of Callide C Unit 4 for at least half of 2022-23, and stronger coal and gas prices, and the closure of Liddell in New South Wales were also a factor.

“The unavailability of Callide C Unit 4 is the result of a fire/explosion in May last year that had some major knock-on effects, both immediate and ongoing,’’ the report said. “As for large-scale renewable energy investment generally in Australia, the Clean Energy Council has previously identified grid connection and network constraints among the challenges, alongside “ongoing unpredictable and unhelpful government policy interventions and market reforms.”

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