Australia’s electricity sector is in crisis, with soaring fossil fuel prices pushing wholesale electricity prices to unprecedented levels, prompting a growing number of electricity retailers to try to unload their clients.
But energy users in a jurisdiction can expect to be a bit more relaxed about their electricity costs – those living in the ACT – and that’s thanks to renewables.
As part of efforts to reduce ACT’s greenhouse gas emissions, the ACT Government has adopted an ambitious program to upgrade the nation’s capital’s electricity supply to 100% renewable energy. renewable.
To secure new wind and solar electricity supplies, the ACT government has entered into power purchase agreements with a series of new wind and solar farms, agreeing to buy the projects’ electricity and renewable energy certificates. .
The last of these projects went live in late 2019, and ACT has effectively been powered by 100% renewable energy since that milestone – buying as many wind and solar plants over a year as are used by its homes and businesses.
And the approach ACT is using to achieve this goal will effectively protect ACT households and businesses from soaring wholesale electricity prices – which have more than tripled in New South Wales over the past few years. last three months.
Power purchase agreements signed by the ACT government on a contract for difference — meaning projects receive a fixed level of revenue per megawatt-hour they produce — average about $90 per megawatt-hour.
If the wholesale market price falls below the price set by the contract, then ACT consumers effectively pay to make up the difference.
Read a more detailed breakdown of how ACT’s renewable energy target works: Dive into ACT’s 100% renewable energy goal
According to data released by the ACT government, consumers made a total of $96.8 million in top-up payments in 2021 for a total of 1.9 million megawatt hours of electricity. This was an average premium of about $50 per MWh, a fairly generous premium for renewable energy.
This arrangement provides revenue certainty for wind and solar projects, as it provides a fixed and predictable source of revenue that significantly reduces risk to projects and their financiers.
But the benefits go both ways, with ACT consumers effectively capping the amount they will pay for wholesale electricity.
Basically, if the wholesale market price exceeds the contract price, as they will this year, wind and solar projects are required to refund the excess to ACT consumers.
Canberra electricity users pay no more (or less) than the average price of $90 per megawatt hour for their wholesale electricity.
In a period when wholesale electricity market prices have topped $320 per megawatt hour – as they did in May – this is delivering huge economic benefits to Canberra’s electricity users.
This could provide refunds amounting to tens of millions of dollars each month, if wholesale electricity prices remain at current levels – and will help limit the magnitude of any possible increase in electricity prices.
The ACT has already received reimbursements on its wholesale electricity costs, with wind and solar projects paying a total of $4.3 million in reimbursements in the last three months of 2019.
Last week, Australia’s energy regulator announced it would raise the benchmark electricity price in New South Wales, Queensland and South Australia by 7.2-14.1%.
The regulator cited soaring coal and gas costs, which were in turn driven up by the disruption in global markets, as the main cause of the rise in wholesale prices, along with several power plant outages. coal-fired electrics.
High prices have put significant pressure on electricity prices, with several small retailers struggling to keep customer supply at affordable levels.
Several retailers, including ReAmped Energy, Amber Electric and Diamond Energy, have turned away potential customers, saying they had better choose one of the larger electricity retailers better protected against high wholesale prices.
Michael Mazengarb is a Sydney-based journalist with RenewEconomy, writing on climate change, clean energy, electric vehicles and politics. Prior to joining RenewEconomy, Michael worked in climate and energy policy for over a decade.