Raising the BARR – Week ending 30 June 2018

Raising the Barr

Power prices – and an unaffordable new Coal Fired Power Station

Every household knows that their electricity bills are going up and up.  Some homes that have invested in solar on their roof might be experiencing some relief from this increase in prices, but by and large, families and industries have been hit hard.  Over the past 7 years, electricity prices have risen by 60%.  In just the past 18 months, the prices have risen by 20%.

There can be absolutely no doubt that because NSW has sold off its electricity networks, the Government has handed over any control or influence in power prices.  In fact, just before the sale, the NSW Government went to court to make sure that power price rises were at their maximum, not their minimum.  In addition, the NSW Government introduced new laws to get rid of the price cap, the ceiling price, the maximum charge, on power.

As our coal fired power stations get older, they are being turned off.  Liddell will be next in 2022.  Over the past 10 years or more our old coal fired power stations have been the cheapest source of electricity at approximately $40MWh (per Mega-Watt hour).  Don’t worry too much about the MWh terminology – just think of our old coal fired power stations producing at $40.  This is possible because the cost of the old coal fired power station being built has already been repaid many times over, so it’s a bit like owning an old car that has already lost all of its value.

Going forward, as we look to replace the electricity lost when our old coal fired power stations shut down, and as our population increases and we need more electricity than ever before, we need to consider the electricity producing options and how much each will cost.  Solar and wind, if they are built brand new today, will produce electricity at approximately $60-$70MWh.  A brand new coal fired power station, if built today, will produce electricity at approximately $80-$100MWh.

Sure we can have a debate around reliability and base load, but that is an ever-changing space as new technologies are invented and improved.  But one thing is certain, people looking for a new coal fired power station to be built are actually asking for the price of electricity to, at least, double.