High electricity prices could have more to do with the high wholesale price of gas than the renewable energy sector, a new report has found.
The energy report, published by The Australia Institute, looked at energy prices in South Australia and found a correlation between domestic electricity prices and gas prices, despite gas making up just 10 percent of electricity generation.
"It seems that the decision to allow so much of the gas resources of eastern Australia to be exported was made without considering the likely effects on the electricity market," report author and Australian National University Energy Analyst Dr Hugh Saddler said.
"Household and business consumers of electricity are now paying the price for this policy failure."
The launch of the National Energy Market in 1998 was followed by a rush of construction of gas turbine power stations in Queensland, NSW and Victoria and Tasmania, Saddler said.
"So this is not a malfunction of the National Electricity Market, but precisely how it was expected to operate, when set up. What has changed is the price of gas, driven up by export contracts," he said.
The report comes as government backbencher Craig Kelly warned Australians will die because of high power bills driven by renewables.
The backbencher and chair of the government's environment and energy committee said on Thursday some people cannot afford to heat their homes this winter.
The report found higher National Electricity Market (NEM) wholesale prices are responsible for large increases in retail energy prices from 1 July
- Large increases in retail electricity prices, starting from 1 July in NSW, Queensland, SA, Tasmania and the ACT are almost entirely the result of much higher wholesale prices in the National Electricity Market.
- These increases will make retail prices across the NEM the highest ever since the start of the NEM, in real 2017 dollar terms, and probably the highest in real terms since the 1970s, if not the 1960s.
- High electricity prices are caused by the high wholesale price of gas, in both SA and other states
"People will die," Kelly told the ABC on Thursday, repeating his previous claim.
Kelly's comments also come as the Federal government considers its position on Chief Scientist Alan Finkel's review into Australia's energy market.
Energy prices are on everyone's mind.
A Newspoll published for The Australian in June showed 60 per cent of respondents want action to keep energy prices down.
Australia Is Gassy
- Gassy as all get up. Australia is in the running to become the world's largest Liquified Natural Gas Exporter over the next three years.
- Despite this, domestic prices have sometimes been four or five times those on offer in the US.
- In 2016 Australian gas was being sold to Japan at 40 percent cheaper than it was at home, in part due to long term contracts signed by major gas providers.
Earlier this year Prime Minister Malcolm Turnbull announced a bid to intervene in the energy market, and said he wants to stop energy networks being able to appeal regulator rulings about what they can charge.
In May a Melbourne University report also linked high energy prices to the gas market, itself echoing earlier reports.
That report blamed the creation of an eastern Australian gas export industry for creating a jump in demand triple the size of the domestic market – and linking prices to international markets.