During the first half of 2017, wholesale electricity prices in South Australia were up by 155% over the same period two years earlier. A further rise, of 36%, was predicted for 2017-18. This January, the average wholesale price was more than twice the figure a year ago.
Retail prices, too, have gone through the roof.
Of course, there’s a way to beat the rip-off. In Adelaide, the levelised (that is, all-up) cost of energy from rooftop solar is now less than 40% of the price of power from the grid. Making your own electricity is a very nice deal.
Provided you own your roof. And can shell out $5-7,000 for the panels, inverter and the rest. Sky-high prices for grid power hit hardest at particular sections of the community: renters, and low-income people (hands up if you’re both).
The better-off get the benefit of solar energy. Why not the poor?
Savings from solar
Potentially, low-income people could get cheap power from large-scale solar farms, delivered through the grid. Let’s look at the economics.
In South Australia, most household power charges are now in the range of 36-40 cents per kilowatt-hour (before GST). The average wholesale price paid by electricity retailers in 2017-2018 is projected to be 17.8 cents per kilowatt-hour. The difference will be made up by items such as marketing costs and retailers’ profits.
That figure of 17.8 cents for wholesale electricity in SA is the highest in Australia. It reflects the fact that most electricity in our state is generated from natural gas – prices for which have been jacked up by corporations that export liquefied natural gas to world markets.
Meanwhile, the cost of solar technology keeps plunging. In Mexico, the Italian firm Enel Green Power recently contracted to supply solar power to the grid for US1.77 cents per kilowatt-hour. That’s just 2.4 Australian cents!
In SA, our resources of solar and wind energy are world-class, and could bring electricity consumers huge savings. That’s even after the costs of back-up power (think batteries, and molten-salt or pumped-hydro storage) have been met.
For social ownership of the energy sector
Now, about today’s charges for grid power ‒ they include the profits of large corporations such as AGL, Origin and Energy Australia. According to the Grattan Institute, profit margins on some retail offers around Australia are as high as 30%.
For many decades, until privatised in 1999 by the Liberals (and Xenophon!), South Australia’s electricity system was in public hands. Privatisation was supposed to improve efficiency and bring lower prices. It’s done neither.
With just a handful of big generating firms, there’s little competition. Owners of gas-fired generating plants are able to “game” the system, withholding supply to force up prices in times of peak demand.
In mid-2017, the prices for electricity paid by SA consumers were the highest in the world, edging out Denmark. Renewables aren’t to blame ‒ their growth has restrained the rises.
With 100 per cent renewables plus energy storage, and with a rational distribution system run for people instead of profit, real prices could be cut to a fraction of present levels.
How to fight the price-gougers?
One line of action starts with our local communities. We can agitate to have them build and run their own renewable energy installations – as has been done in Germany and elsewhere.
We can call for incentives for landlords to install solar panels. Here, the SA Labor government’s “virtual power plant” scheme, under which 25,000 Housing Trust properties will be fitted with rooftop solar and a storage battery, is in the spirit of what’s needed.
But let’s not get starry-eyed. SA in 2016 had more than 100,000 households with incomes under $500 per week. Most will remain under acute energy-price stress.
The real blows against the power-price rip-offs will be struck by industrial-scale solar farms. These will need substantial funding.
A tax on excess profits in the energy sector, though, could meet the cost handily. To force governments to take such steps, political campaigning has to be front and centre.
Power-price justice needs a broad struggle, demanding that that the authorities put the interests of welfare recipients and low-paid workers first, over the objections of the energy profiteers.
And ultimately, power has to belong to the people. The energy grid, along with the large generating installations, should be under popular ownership and control.