Saturday 26 February 2011

Energy prices set to climb

Age
21 February 2011, Page: 8

ELECTRICITY and gas prices are set to soar with or without a carbon price a study has found. The Australian Industry Group says by 2015 electricity will be more than double its 2008 price and that eastern states' gas prices will eventually climb to international levels after an initial drop. "One of the factors keeping Australian gas prices relatively low has been our isolation from world gas markets", the report says.

"However once the infrastructure is in place to liquefy gas for export, domestic wholesale prices will increasingly converge with global prices as has already happened in Western Australia". The report said there would be a large supply of gas on the domestic market while four large LNG export projects were being built in Queensland. "Thus while in the medium term LNG exports will raise domestic gas prices, in the short term prices may be depressed substantially".

The report finds coal fired power will become more expensive whether or not Australia gets a carbon price as international prices for Australian coal climb. Paradoxically, weak international climate change policies could push Australian coal prices still higher. An "investment drought" has made new investment in generators urgent, but without clarity about when or how Australia will get a carbon price, investors are likely to err on the short run, more expensive and less carbon efficient solutions.

In what it says is a "sobering" finding, the study reports that two thirds of Australian Industry Group (AI Group) members surveyed have made no improvements in their energy efficiency over the past five years. A further 7% have gone backwards. More than half expect to make no improvement in the two years ahead, a finding the group says suggests energy efficiency "is not currently a high priority". "This is a worrying result", said AI Group chief executive Heather Ridout.

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