Electrician mounting solar panel on roof of modern house
Electrician mounting solar panel on roof of modern house

Power costs spike after government interventions

EXCLUSIVE: Australia spends $5 billion a year propping up renewable energy which "undermines" private investment in coal and substantially pushes up household electricity bills, a new research paper says.

In fact, every major intervention made by the federal government into the energy market has triggered electricity price hikes - with costs now 221 per cent higher than they were in 1997, an Institute of Public Affairs analysis reveals.

In contrast, the CPI prices have risen 70 per cent in the same period.


IPA research fellow Kurt Wallace said the expansion of government-backed renewable energy at the expense of coal-fired energy over the past 20 years had caused power prices to rise at more than three times the rate of inflation.

"Every major instance of government intervention into the energy market has coincided with increases to electricity prices, including the introduction of the RET (Renewable Energy Target) in 2000, the expansion of the RET in 2009, the introduction of the carbon tax in 2012, the signing of the Paris Climate Agreement in 2015, and the announcement of the National Energy Guarantee in 2017," he said.

"The only occasion in which there was a sharp drop to electricity prices was following the repeal of the carbon tax in July 2014."

The research paper, titled Technological Neutrality in Australia's Energy Market, said current policy settings of the federal government have hampered the adoption of cleaner more efficient HELE (high-efficiency low-emission) coal-fired power.

"Government subsidisation of renewable energy, red tape and restrictions on coal-fired power, and policy uncertainty, has dried up investment in new and efficient coal-fired power," Mr Wallace said.

"At the same time, government policy has actively encouraged more expensive, less reliable and inferior forms of energy generation onto the market from wind and solar energy generators.

"The government has assumed a bureaucratic management approach to energy that is far removed from a free market."

Having to respond to weather-dependent electricity production is straining existing coal-fired power stations.
Having to respond to weather-dependent electricity production is straining existing coal-fired power stations.

Mr Wallace said the government should adopt a policy of "technological neutrality", which would remove subsidies for renewables.

The $5 billion of taxpayer funded subsidies for renewable energy, combined with restrictions on gas and coal-fired power, had artificially increased the price of electricity and undermined the stability of the grid, he said.

"Existing gas and coal-fired power stations are forced to respond to fluctuations in electricity production coming from weather-dependent sources."

This meant they have to reduce capacity and then ramp it up in different conditions, straining coal-fired stations.

Renewables have increased from 8 per cent to 17 per cent over a decade, while coal-fired power declined to 60 per cent from 84 per cent in 1997.

"While many countries around the world are building new low-emission coal-fired power stations, investment in new coal-fired power units in Australia has come almost to a standstill," Mr Wallace said.