Electricity should be cheap in Australia but is most expensive so Anything can be mismanaged

When the eastern states’ National Electricity Market was formed in the late 1990s, Australia had the lowest retail prices in the world along with the United States and Canada. South Australian households are now paying the highest prices in the world at 47.13¢ per kilowatt hour, more than Germany, Denmark and Italy which heavily tax energy, after the huge increases on July 1.

In July, the Elon Musk agreed to build the world’s largest lithium ion battery in order to secure South Australia’s power supply in the wake of a statewide blackout. In an interview on Channel 9’s 60 Minutes last night, Mr Musk said he was unaware of the politically-charged conflict and bickering between the states and the Commonwealth over Australia’s future energy sources and power costs that he was now caught in the middle of.

The pricing plans are complicated and there is little competition from the few suppliers. There was also the elimination of coal and other powerplants before the adequate renewables were in place.

25 thoughts on “Electricity should be cheap in Australia but is most expensive so Anything can be mismanaged”

  1. But what does “mismanaged” mean. It is not that anything can be mismanaged, it is the system that allows such kind of mismanagement. A vague term like this can obscure the root cause of the problem. And is political. It’s neoliberalism at its highest

  2. The reasons for high prices in Australia are outlined clearly in a specific report by the Australian Competition and Consumer Commission. The findings are summarised here:


    Most of the increased costs are due to “gold plated” networks while environmental schemes only contributed to 7% of the high price.

    Lets get things into perspective.

    • The government, who created the problem, creates a commission to determine the cause of the problem? Results are predictably; somebody else besides the government must have caused the problem.

  3. A South Australian here. My most recent bill (90 days) was $1,046.64AUD for 2,592 kWh (after pay on time discount). It was made up of 2,592 kWh at $0.38AUD /kWh + supply charge of 90 days x $0.83AUD per day – discount for pay on time. The most comforting part of this bill is the fact that it is nearly 40% renewable energy where the eastern states is nearly all coal (at almost the same cost). I think each state has a separate market and the interconnect plays in those markets transferring energy in the direction that makes sense (by $$ not by social good). The market rate is often $0.09AUD per kWh but can be very erratic.


    Is an interesting view of the pricing.


    Shows the mix of electricity. (SA uses a lot of natural gas when the sun isn’t shining and the wind isn’t blowing).

    As a South Australian I am happy about our lead in sustainable energy and I do not think that has anything to do with the issues were having with cost. I think it is more likely to be market gaming. The resulting instability is causing the lack of competition at the retail level and the lack of investment at the generation level.

    • Enjoy your lead in “sustainable energy”. We buy your uranium and keep the lights on cheaply with it. To say that “the market rate is often $0.09AUD/kWh” is like saying traffic in the vicinity of city X is often tolerable, when all that matters is how intolerable it is for the 6 commuting hours of the day.

  4. Currently we pay 33c per kWh PLUS 38c per day fixed charge. Lucky our climate is mild otherwise we’d be forking out $1k per month on heating bills through winter.

  5. The greentards have gone nuts there and closed down still reliable coal fired plants. Also the older plants that needed to be retired have gone with gas, which is fair enough, but the gas companies, who sell gas overseas at cheap prices, make up their profits by charging the locals much more, which makes the electricity much more expensive. The Green energy that has replaced the coal and gas is even more expensive because there is not enough back up for when the sun and wind is low or non existent and batteries are expensive. There is presently talk of giving rebates NOT to used power for air conditioning this coming summer (which is needed all night as well because of the heat) because there is not enough power to cover it. Good on Green power!

    • Coal plants asses are been kicked by natural gas. What’s the matter with you? You don’t believe in competition? Are you a socialist?

      • The issue is that
        1. A whole bunch of new gas was found, including coal seam gas and fracked gas.
        2. The gas companies looked at their resources and worked out how much they would get. Signing huge supply contracts for places like China and Japan.
        3. And everyone decided to go to gas instead of coal for any new plant.
        4.Various left wing state governments banned and put big restrictions on actually getting that gas. Because of reasons. Maybe.
        5. But the contracts were already signed to export the gas. So now there is a gas shortage in Australia and there are very high prices in Australia for both retail gas and the gas going to all the new gas power plants.
        6. Plus a bunch of additional problems with money needed to refurbish a lot of distribution infrastructure that was neglected for a couple of decades because of bad management.

    • I have a simple formula for the price of electricity:

      $0.12 / kWh for conventional generation, and
      $1.00 / kWh for wind + solar + biomass

      So for South Austraila 40% green power:

      South Austraila 40%*$1 + 60%*$0.12 = $0.46 per kWh.
      Germany 35%*$1 + 65%*0.12 = $0.42 per kWh
      Ontario Canada 20%*$1 + 80%*0.12 = $0.30 per kWh
      Denmark 50%*$1 + 50%*0.12 = $0.56 per kWh

      Quite simple and works in most any developed country that has ‘gone green’.

      Wind + Solar costs $1 per kWh, if you keep penetration below half. Above that is anyone’s guess since its never been done.

  6. Surprised more people down there don’t give the middle finger to the man and go off-grid with solar and batteries, sounds like the payback period will be a lot sooner than most.

      • Queensland is 3000 km long and 1600 km wide. It has climates ranging from tropical rain forests to dry savanna to stony deserts to near Mediterranean coastal farmland.

        You can’t make any comment about how many days of sunshine Qld has, any more than you could about “Europe”

    • Solar is compulsorily purchased by the grid. If you got in early, solar pays virtually all your electricity costs. This of course means the non-solar users, pay for any profit you make, all of the costs of your grid connection and back-up power, the inflated prices given to the gas producers (who sensibly managed to have underground gasification of coal banned to avoid horrid competition in the market), the costs of the extra transmission lines to the wind generators, the windmills themselves, the profit of the windmill operators, and the profits of the private companies that purchased the power grid. I’ve probably forgotten some. Naturally to cover all this, the price of electricity must rise drastically. Just to be different, my home state of Queensland didn’t sell off its power generation system. The present government, seeing what everyone else could get away with, raised prices also, saying that they’d pay off the states rapidly rising debt. I’ll let guess how much they’ve actually paid off!

  7. Are they comparing apples and oranges? The first statement is about all of Australia, the second is specific to South Australia. I don’t know if S.A. has always been higher than the rest of Australia or not. Why are the Eastern states apparently not as expensive, even though they’re in the same market? So many questions from such a short article.

    • Eastern states are not as bad as SA (though still pretty bad), because the link between the Eastern seaboard power grid and the SA grid is fairly tenuous and prone to failure. Especially on hot days, which is when the biggest air conditioning load is on, and which is also the hardest conditions to run old, dodgy transformers and power lines.

  8. There was also the elimination of coal and other powerplants before the adequate renewables were in place.

    And there you have it.

    Alternate headline: eliminating cheap, reliable power supplies before replacement with expensive intermittent power supplies and expensive previously unneeded batteries leads to price spike and blackouts.

    • I’m not sure that’s an accurate statement. Coal is still the dominant source of power in Australia, and a brief look at the National Energy Market didn’t show much in the way of a push to renewables, especially since carbon pricing was rolled back in 2014.

    • Alternate headline: eliminating cheap, reliable power supplies before replacement with expensive intermittent power supplies and
      expensive previously unneeded batteries leads to price spike and blackouts.

      Another variant of that: Greentard is as Greentard does.

  9. My electric bill in South Jersey says I am charged $0.11/kW-hr; when I divide the billed amount by the usage it actually comes out to about $0.18/kW-hr. My simple brain doesn’t separate the accounting of the dozen surcharges associated with regulation, transmission and the welfare state, so… looks like I pay $0.43/day to keep a 100W bulb lit, whereas the Aussie pays $1.13 for the same light (assuming they don’t have the same nickel&dime accounting separating generation from transmission and taxes). Ah well, whatever the market will bear.

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