Wind farms, hydro power and other renewable energy sources will actually cut household electricity bills, not push up bills as detractors have claimed, a new study suggests.
Research commissioned by wind farm owner Meridian Energy found the national renewable energy target – which requires electricity generators to provide at least 20 per cent of power from clean sources by 2020 – will ultimately force down wholesale power prices.
It found the renewable energy legislation would save Victorian households about $35 a year if the carbon price stayed, and $50 if it were abolished.
South Australia – which already gets more than 20 per cent of power from renewables – would save as much as $56 a year.
It is a different story in NSW and Queensland, where renewable energy has less impact on wholesale prices. Households in the northern states would pay up to $27 more because of the legislation.
The study found that nationally, households would be in front, saving as much as $12 a year – assuming the carbon price survived.
Meridian Energy Australia chief executive Ben Burge said the study, which was commissioned from consultants Sinclair Merz Knight, challenged claims that renewable energy was driving up power bills.
“The [target] has been mischaracterised as a direct tax on consumers,” said Mr Burge, who is also the chief executive of retailer Powershop.
“What this research proves is that wind is not the culprit. Wind reduces pressure on households.”
Generators’ view
The Energy Supply Association of Australia, which represents major fossil fuel-based generators, said the SKM research was ‘‘fundamentally flawed’’.
‘‘The Renewable Energy Target exists to force renewable generation into the grid because it is currently more expensive than conventional generation,’’ Matthew Warren, chief executive of the ESAA said.
‘‘The cost of building extra renewable generation will be in the order of $25 billion over the next decade,’’ Mr Warren said. ‘‘It is absurd to claim that none of this cost will be borne by energy consumers through higher prices.’’
RET pressure
The SKM study comes as some Coalition MPs and supporters call for the renewable target to be scrapped or weakened.
Maurice Newman, the chairman of the opposition’s proposed business advisory council, wants the target dumped because he does not accept climate change science and says renewable energy is pushing up prices.
Liberal senator Chris Bach and Nationals senator Ron Boswell spoke at an anti-wind farm rally in Canberra last week.
Senator Boswell said aid to the wind and solar energy sector was “fraudulent” and that leader Tony Abbott would face mounting pressure to alter the legislation.
Coalition climate action spokesman Greg Hunt said last week that the Coalition continued to back the policy.
“We support the Renewable Energy Target and we support the 20 per cent,” he said.
Owners of fossil-fuel power plants have called for the target to be cut.
The legislation requires 41,000 gigawatt-hours of electricity to come from clean sources by the end of the decade. With electricity demand falling, estimates have suggested this could equate to up 27 per cent of power.
Origin energy chief executive Grant King has called for a change to prevent a “significant overshoot” of the 20 per cent target.
Wealth transfer
The consultants’ report found that lower prices for consumers “could come at the expense of reduced revenues for generators”.
Wind energy reduces wholesale power prices on the spot market for electricity.
Every half hour, electricity generators bid to sell power. The cheapest electricity is sold first, and the price increases until demand from the grid is met. All generators that made a successful sale then receive the highest price paid to meet demand.
Renewable sources of energy such as wind and hydro differ from coal and gas because the fuel used is free. Fossil fuels come at a cost. Because of this, clean sources tend to drive down wholesale power prices.
The introduction of renewable energy sources tends to make peak-time prices lower than they otherwise would have been. Low-price periods also tend to last longer.
New Zealand-based Meridian Energy will benefit from the renewable energy target. It has invested about $1 billion in Australia and owns a half-share of the country’s largest wind farm at Macarthur in western Victoria.
With as much as $18 billion of further investment by 2020 hinging on the renewable energy target remaining as it is, renewable energy companies have warned politicians not to tinker.
Mr Burge says the study shows most households would also have cause to complain.
“Policies that look to scrap or diminish the target would in fact result in a transfer of wealth from consumers to coal-fired power stations,” he said.
