Why electricity prices have gone up and 4 ways to protect yourself

The Australian Energy Regulator, in its Annual Wholesale market performance report, said wholesale electricity costs more than doubled in all states and almost tripled in Queensland between 2021 and 2022. This is the major reason household energy bills are continuing to rise.

”These inflationary pressures have resulted in energy retailers passing cost increases on to households, contributing to an even higher cost of living,” says Stephen Cranch, General Manager of Solahart Australia. “Increases in electricity prices create even more problems for consumers who don’t have solar and rely solely on the grid for their energy.”

Why have electricity prices gone up in Australia?

The real wholesale price pressures were felt in 2022 where there were two key reasons for electricity price rises:

  • Unplanned outages of large generators: Generation supply has been restricted by aging coal-fired power stations being closed for unplanned maintenance.
  • Russia-Ukraine war: The war resulted in a dramatic price increase for both black coal and gas.  Even with increasing levels of lower cost renewables, gas fired power often sets the wholesale price in peak demand periods.   “The high fuel prices even resulted in some generators withdrawing from the market,” says Stephen.

“In June 2022, the Australian Energy Market Operator (AEMO) suspended the wholesale spot market for a week in all regions covered by the National Energy Market (NEM), which is unprecedented in Australia.”

How much have electricity prices gone up in Australia?

The corresponding rise in retail electricity prices varies from state to state. The Australian Energy Regulator (AER) has the responsibility of setting the Default Market Rate in New South Wales, South Australia and South-East Queensland, with other states and territories setting their own default rate.

Below are details on the increase in electricity prices in each state since July 1:

  • New South Wales has seen the biggest rise. The default market offer has increased by a maximum approximately 19% to 25% , depending on the distribution zone. This is equivalent to an increase of approximately $315 to $487 annually.
  • Queensland has also experienced a sharp rise. South-East Queensland has seen an increase of 21% (approximately $350 a year). For the rest of the state, electricity prices were even higher at around 28%.
  • Tasmania’s default market offer has risen by almost 10%which equates to about $200 a year.
  • South Australia’s default market offer has increased by about 23%, or approximately $450 per year.
  • According to the Essential Services Commission, Victoria price rise was approximately 25% on average depending on the provider.
  • In the 2023-24 budget, the Western Australia government announced a 2.5% rise from July 1.
  • The ACT has increased by about 4%, or $75 annually.
  • Northern Territory has increased by 2.7%.

4 ways to protect yourself against rising energy prices

If you are solely relying on the grid to power your home, switching to a renewable energy source like the sun is a smart choice. Over 3.3 million households in Australia have chosen to install solar on their rooftops to reduce their grid-energy consumption, with our nation leading the world in solar uptake, per capita.

“We have a fantastic opportunity here in Australia,” Stephen said. “We can lead the way in transitioning effectively to green energy, and the world is watching how we deal with a high influx of renewables onto the grid due to our significant uptake of solar.”

Here are 4 smart ways you can protect yourself from rising energy costs:

 1. Get some certainty with solar power

A typical family with a 6kW system can save up to $1,500 on their annual energy bills with solar power. Also, research shows that, on average, households with solar power have energy bills that are up 20 per cent lower than those without.¹[TD1] 

“The bigger the system, the better for you as we move to electrify everything in the future,” said Stephen. “For example, if you’re thinking of getting an electric vehicle (EV) in the next five years, it makes sense to get a larger system now so you can draw on the sun’s natural energy to power your car and the rest of your household appliances.”

2. Consider both solar power and solar hot water

Installing solar hot water is a smart choice as water heating typically makes up around 25% of an Australian household’s energy consumption. Compared to an electric water heater, a solar hot water system could help you save up to 65% of your water-heating energy consumption.²

Installing both solar power and solar hot water helps reduce your reliance on fossil fuels in favour of one of the most abundant, consistent sources of energy we have available: the Australian sun. Both systems work hand-in-hand to deliver maximum savings for you and your family.

3. Energy storage is crucial in overcoming higher energy prices

While Australia has the highest solar uptake in the world, there remains an untapped opportunity for many homeowners to store excess solar power for later use. If not used immediately, a proportion of the energy produced by your solar panels may be sent back to the grid.

Thus, there is a shift towards total home energy solutions to use energy free from the sun at all times of the day. This also helps the grid transition from coal-fired power to renewables so it can effectively handle the variability of more solar, and wind power.

“With the shift towards renewables, the grid now has to deal with excess solar in the middle of the day when the demand is low,” says Stephen. “Consumers are paid a feed-in tariff for any excess solar energy. However, these feed-in tariffs have been reducing due to the surge in excess solar.”

To solve this problem, consumers can store this excess energy for later use rather than send it back to the grid. In conjunction with your solar system, a home battery solution is another smart way to maximise solar energy usage and minimise reliance on the grid.

“As we become more electrified in the future, particularly with the uptake of EVs, it is a smart decision to use energy from the sun and reduce our grid energy consumption and energy costs,” said Stephen.

Also read: Find out more about which battery could be right for you

There is also an opportunity to use your water heater like a battery. This type of storage solution can help you significantly reduce your reliance on grid energy for hot water.

Designed and built in Australia, Solahart PowerStore constantly changes its input power to match excess power from solar panels and uses it to heat water. Like a battery, it stores energy (in the form of hot water), only it’s a lot more affordable.

Also read: Find out more about Solahart PowerStore

4. Keep track of your energy usage and optimise how you power your appliances with a Home Energy Management System (HEMS)

For a whole of home experience, choose Solahart’s Home Energy Management Solution with a Solahart Home Energy Management System (HEMS). HEMS brings your connected appliances and energy-generating devices together under one monitoring and control platform. This platform automatically optimises and controls key connected appliances so they operate when solar production is at its highest. It also reduces how much power you send back to the grid, which is important considering the low feed-in-tariffs your energy retailer provides.

With Australia ranking as one of the most expensive nations in the world, [TD3] switching to a total home energy solution is a smart choice to keep more money in your pocket.

For more information or to set up a free, in-home consultation, contact Solahart today and your local Dealer will identify a solution that is right for you.

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The following errors were found:

Disclaimers:

1: Solar Citizens, (2018). Using electricity bills to shine a light on rooftop solar photovoltaics in Australia. [online] Available at: https://drive.google.com/file/d/19U5nhop6H-vR2RTke9geHOkUsw6r7qzA/view [Accessed 30 November 2020].

2: Energy savings of up to 65% shown is based on Australian Government approved TRNSYS simulation modelling of a Solahart 302L and using a medium load in Zone 3 and apply when replacing an electric water heater. Any savings will vary depending upon your location, type of Solahart system installed, orientation and inclination of the solar collectors, type of water heater being replaced, hot water consumption and fuel tariff. Maximum financial savings off your hot water bill are achievable when replacing an electric water heater on continuous tariff. Refer to solahart.com.au for further information.