Why are electricity prices increasing in Australia by more than 20%, while stable/decreasing in the USA, UK, France etc? The difference is stark, especially in the context of a global economy where energy price futures (crude oil, natural gas, coal etc) have substantially declined this year.

Key factors influencing this divergence are (1) Inflation, (2) Environmental costs, and (3) Energy regulation.

1. High inflation is consistent with a larger increase in electricity prices. That is, the real electricity price increase is smaller, but it looks higher because the purchasing power of Australians has declined. As has the Australian dollar (see AUDUSD).
2. Australia faces higher environmental costs (due to lower carbon efficiency when producing electricity). High electricity prices will incentivise investments in renewable energy, and in this sense, regulated higher electricity prices are prudent for long-run economic and environmental outcomes for Australians.
3. In Australia, regulators smoothen energy prices to help households and businesses plan better. However, over time, this has the effect of reducing investment and competition in energy production, reducing electricity supply. It is concerning that in a deteriorating economic environment with declining energy prices, we face a supply shortage and regulators need to substantially increase electricity prices, putting additional stress on households and our economy. 

A significant number of households in Australia are feeling the financial pain of the increased cost of living. This has resulted in a growing percentage of households at, or near, fuel poverty and means that these households are not using sufficient energy to meet basic liveability requirements such as providing sufficient heating.

This is an issue not just in terms of comfort but can increase the risk of a number of health issues, especially for vulnerable households. Any increase in energy costs is likely to be hardest felt by low-income households who are already struggling.

We must do more to help improve the quality and performance of our new and existing housing to reduce energy consumption and improve affordability.

Additionally, there needs to be better oversight of energy companies to ensure that households are on the best available energy tariffs. Despite recent changes to improve this, too many households find themselves not on the cheapest energy plans.

The latest price determination by the AER and ESC represents a hefty burden on consumers in the current cost of living crisis. 

Network charges, increased natural gas prices and the inability of a market to suitably transition to a zero-carbon future are the underlying trends forcing consumers and small businesses to foot the bill. A >20% increase in retail prices for consumers signifies that we have to foot the bill for a network struggling to adapt to the new era of energy supply.

Australia must recapture the super profits from our natural gas to harden our energy system to withstand the consequences of a foreign war. Australia must transform its electricity market into one that relies on renewable energy and storage, which can only be achieved by investing in new technology and redesigning the electricity sector to be more equitable for consumers and small businesses. 

The consequences of this increase will drive the need to become more efficient in using energy. Australia needs to move more forcefully towards more significant efficiency gains than was ever considered possible during the world oil crises of the 1970s.

Australia needs to establish a multi-jurisdictional effort to abandon the use of gas for heating, improve efficiency standards in transportation and appliances and great an energy market that delivers reliable and cost-effective supply.

For as long as we've had fossil fuels, there have always been price spikes when supply has been interrupted. The war in Ukraine has sent fossil fuel prices skywards all over the world and Australia is not immune.

Every time this happens, businesses and consumers look to minimise their expenditure on energy by being more efficient or switching to an alternative energy source.

This time around the renewable energy sector is well placed to respond as now wind and solar are amongst the cheapest forms of generating electricity that we've ever seen. So as long as fossil fuel prices remain high, this will simply hasten the transition to clean green renewable energy. 

The good news is that the renewables are far less susceptible to price spikes, so this may possibly be the last energy price spike we see.

While the hikes in energy prices are not as dramatic as forecasted, the continuing energy crisis underscores the need to rapidly decarbonise energy systems.

Australia needs a portfolio of low emissions technologies that act in concert, supported by a clear research agenda and policy framework to provide an environment for industry to act with confidence.

Australia is the envy of the world in per capita deployment of solar and wind power. Solar is by far the leading contender to decarbonise global energy systems.
The critical technology mix for Australia includes solar power, wind, pumped hydro and batteries, electricity transmission infrastructure, and electrification of transport and heating.

Australia has the technologies today to avoid a deepening crisis, but we must act now to lay the foundation of a truly modern energy system.

Immediate investment in the deployment of mature technologies, demonstration of emerging technologies and development of grid infrastructure capable of running a renewable energy system is necessary to ensure Australia can meet its unique challenges.

Australia-wide, we already get 32% of our energy from renewables. It has doubled in five years, and we need to double it again.

Rising electricity costs are a significant concern amongst Australians' cost-of-living pressures. Consumers face a dilemma if they should stick with the current provider, search for better deals utilising self-help websites like Energy Made Easy (EME) or use third-party comparison services such as Canstar Blue, iSelect, Energy Finder, Compare the Market, etc. We need insights into how consumers utilise these services and what factors they consider when deciding who should supply their energy services. The other issue facing consumers is the readability and understandability of their bills, particularly those from low socioeconomic, indigenous, and refugee backgrounds. These communities are vulnerable as some third parties cold-call consumers and use pressure tactics so they can collect their commission and move to the next target.

We need to have a better understanding of how consumers utilise energy comparison sites and services. On EME, consumers upload their electricity and gas bills for the past 12 months, ending with overwhelming options and filters. There is no option to save the uploads so the pressure is on to make a quick decision. I went through the process myself. There is technical jargon concerning meters, load-based consumption, etc. We need to understand better how consumers use these websites and if the information presented helps or hinders consumers from switching.

The Energy Made Easy website/tool needs a major overhaul in my opinion. Regarding wholesale electricity, the problem is likely to get worse if we rush into the early closure of coal-fired energy/power stations.

The recent decision from the Australian Energy Regulator (AER) is disappointing but not unexpected. It’s determined by the energy market and sector regulatory frameworks designed in 1997 and 2005 and repeatedly recommitted to and tweaked by all federal and state energy ministers until this day.

What makes this particularly counterintuitive and frustrating is that while wholesale energy prices had come down in recent months, users will end up paying more based on wholesale hedge contracts locked in by retailers often 12 months ago or longer.

It should also be noted the DMO is not a price cap but just a reference price to use for the standing offers consumers end up on if they don’t ask for a competitive  “market offer” and what discounts can be quoted relative to. It is unclear then why there is evidence that some not insignificant number of customers end up paying more than the DMO (or the VDO in Victoria). I think this should be followed up more rigorously by regulators such as the ACCC and the AER.

On the bigger picture, we have to sort out excessive pricing in general as we need to put all available resources into reducing emissions and fighting climate change. We have 6 years of carbon budget left for the 1.5 degrees target. But are being hampered because overall the National Electricity and Gas Market reforms and deregulation and partial privatising of the electricity sector had failed consumers.

It is now imperative, and many of my colleagues agree, that we sit down and look at reworking the original reforms across the whole supply chain. This is really just a given since we have to incorporate some major technological changes and enable major policy imperatives like moving to a 100 per cent renewable grid before 2035 and Net Zero economy by 2050.