Australia’s power price problem will never be fixed, Grattan Institute report claims

[Ulquiorra]

AUSSIES might have to get used to power bill shock, with a new report suggesting high prices are here to stay.

Household bills jumped 20 per cent last year while the wholesale cost of electricity leapt 130 per cent between 2015 and 2017, a report by the Grattan Institute states.

It’s likely wholesale prices will remain above historic levels because of transition in the electricity market, the report’s author Tony Wood argues.

The Turnbull government is spruiking its National Energy Guarantee as a way to ensure market reliability and bring down prices.

But the report claims it’s impossible for governments to fix the problem because price rises have been caused by issues outside their control.

“Politicians should tell Australians the harsh truth: high wholesale electricity prices are the new normal,” Mr Wood said.

He said major electricity generators gaming the system are partly to blame because they create artificial scarcity of supply to force up prices.

“It’s been significant and it could get worse,” Mr Wood told ABC radio.

The institute said it has occurred in Queensland and South Australia, and there are signs Victoria and NSW could be next.

Mr Wood estimated it may have added $800 million to the price paid for electricity traded through the national electricity market.

Closing coal-fired power stations is also part of the problem, but he believed it was “simply a reality of life” that whatever new technology replaces them — whether renewables, gas or new coal plants — will be more expensive.

It found high prices for gas and black coal also contribute to bigger bills.

Energy Minister Josh Frydenberg rejected the report’s findings that energy prices were likely to remain high.

“The wholesale price of electricity has fallen by 30 per cent this year as a result of the actions by the Turnbull Government,” he told News Corp.

“Further falls are also expected with the National Energy Guarantee.

“Independent modelling by the Energy Security Board shows that wholesale electricity prices will fall on average by 23 per cent to 2030.”

Mr Frydenberg added that the Snowy 2.0 project, which would act as a battery to firm up intermittent renewables like wind and solar, would also help to reduce volatility in the wholesale market.

He also said that, as a result of the government’s intervention in the gas market, the price of gas for commercial and industrial users had decreased by 50 per cent this year.