Australian households’ energy bills could shrink by a fifth over the next decade as more renewables cut power costs and help quicken the take-up of electric cars, according to the Australian Energy Markets Commission.
In its first residential electricity price trend report, released on Thursday, the electrification of homes, including ending the use of gas for cooking and heating, is projected to reduce average household energy costs by about $1,000 annually, or almost 20%, under the AEMC’s base case.
The AEMC found people living in the national electricity market (Nem) states, most of the country, would be enjoying power prices 13% lower in 10 years’ time
The projections hinge on new transmission lines and new large-scale generation such as windfarms progressing on schedule. Delays of big projects, such as the $12bn-plus Snowy 2.0 pumped hydro scheme, could also place upward pressure on energy prices.
“A household who fully electrifies could reduce their energy expenditure by 70%,” it said, although costs to buy an electric vehicle and new appliances are not included.
Policymakers had to ensure people living in apartments or otherwise unable to participate in the “wonderful potential upside of electrification” didn’t get left behind, said Anna Collyer, AEMC’s chair.
But critics say the energy market can be volatile, with Wednesday’s strains in the New South Wales power grid the latest episode. Government intervention and outside pressures – such as the global energy price hike after Russia invaded Ukraine in 2022 – also make long-term forecasts of costs challenging.
The AEMC report did not assume an extension of this year’s hefty electricity rebates. The federal subsidy of $75 per household each quarter – plus bigger handouts for residents in Queensland and Western Australia in particular – helped lower electricity prices in October by a record annual rate of 35.6%, the Australian Bureau of Statistics reported on Wednesday.
Similarly, the modelling did not envisage an extension of major energy efficiency support after the renewable energy target for large- and small-scale generators ends in 2030.
While the increasing take-up of rooftop solar, home batteries and increased availability of affordable EVs provide the opportunity for households to cut costs, better coordination, including greater use of smart meters, should be made a priority, the report said.
“If the electricity demand from [EVs] and other ‘consumer energy resources’ is not well coordinated, it could increase electricity bills for all households by almost $100 per year,” the report said.
Without the coordination, investments in networks would need to be higher and there would be a tighter demand-supply balance in the wholesale market, AEMC said.
Among the states, electricity prices would fall by at most 15% over the coming decade in Queensland and South Australia, the report said. NSW would follow the Nem trend closely, with a 14% drop, while Victoria’s would fall 9%.
ACT prices would lead declines, dropping 31% because of its generous feed-in-tariff scheme, while Tasmania’s prices would buck the trend and increase 6% over the decade, the report estimated.
