Skyrocketing energy prices in the UK have led to recent protests and social unrest, and Australia should be heeding the warning before it’s too late with visionary government policy, writes Gavin Dennett.
Having just emerged from the northern hemisphere winter, the UK is currently facing an energy dilemma with steeply rising power bills hitting consumers hard. On the back of the coldest months when domestic electricity bills are highest, some households are paying an extra £700 ($1245) per year to keep the lights on.
There are several reasons for the skyrocketing prices, but in a nutshell, bills are going up because the energy price cap – the maximum price suppliers can charge households – is rising. There are several factors influencing this, including the ongoing war in Ukraine and the UK’s transition to renewables.
“What’s happening in the UK is a combination of things,” says Jasper Boyschau, chief operating officer at Australian solar energy company Smart Energy. “Europe is facing an energy crisis, but the UK leaving the EU hasn’t made things easier. Right now, with the war in Ukraine and sanctions on Russia, the global energy market is in a tough position. Russia is one of the biggest exporters of oil and gas in the world and there are constraints on supply of those energy commodities.”
A compounding factor is the world moving towards net-zero emissions, and as increasing numbers of fossil fuel plants close, it puts pressure on the price of energy and the grid in Europe.
“Many countries are taking this very seriously and Australia should be taking it far more seriously than we are,” says Boyschau. “The shutting down of fossil fuel generation adds pressure to prices and the grid, but it’s something we need to move towards. It’s a sign of things to come as there is a delayed response in prices so if Australia doesn’t bring in proactive renewable policy early, it will hit hard here, too.
“The war in Ukraine is driving up energy prices everywhere – we have seen prices go through the roof in Australia, and we are seeing the wholesale price go up significantly – and looking at the futures price of energy in Australia, they have doubled. Consumers aren’t feeling that yet, but they will in the third quarter of this year. Many retailers are not able to operate on those margins with the wholesale price that high.
“Australia could be in for something very similar to the UK and if we don’t act now, the energy market is going to be in strife. Smaller retailers such as Smart Energy are offering competition in the market and offering renewables, and trying to promote carbon offset energy, but when major price changes in the wholesale market happen and the government doesn’t react in time, we’ll see smaller players pushed out.
“In the UK, some retailers recently went under as a result of the rising cost of wholesale power because they didn’t adjust the default market offer, which is the most you are allowed to charge a customer. Energy prices are going up across the board and it’s just the tip of the iceberg.
“What aids consumers is a competitive landscape and if smaller players get pushed out of the market, the competition gets pulled apart and the market gets dominated by the bigger retailers. That’s when you get price gouging. We are hoping Australian regulators can take stock of what has happened in the UK recently and be proactive in their approach.”
Australia dragging the chain in its transition to renewables, thanks to a Federal Government seemingly in denial of the need for urgent action – note the spending reductions on climate change action in this year’s Federal Budget for proof – is only going to exacerbate the bill shock when the inevitable rises come.
“We are all going to pay for the decision to stick with coal for this long and not transition to renewables sooner, or have really strong renewables policy in place,” says Boyschau. “As seen in the Federal Budget with the lack of support for EVs and basic requirements to move to a renewable society, the government is just not supporting it.
“But the longer we put it off, the more pain we will be in. We don’t want this to turn into a bloodbath so we need to stay ahead of the problem. It’s so frustrating in Australia as we have so much land and sun which is ripe for the taking, but we just need the right policy.”
Boyschau says a solar battery and EV scheme is needed in Australia, in the same way the solar rebate scheme has provided incentives for households to purchase PV panels for their rooftops.
“By 2050, something like 30 to 40 per cent of energy in Australia will be from distributed energy sources such as solar and battery systems,” he says.
“Without the STC [small-scale technology certificate] rebate in Australia, we wouldn’t have the highest uptake of solar per capita in the world. Now we need to match that with a battery scheme to take advantage of all the excess solar being generated during the day. It would take pressure off the grid, reduce energy bills for consumers and put us in a great position globally as a leader in renewable technology.
“An electric vehicle battery is five to 10 times bigger than a home battery so EVs can support the grid at times of peak load. We are installing a lot of solar in Australia but without support for other initiatives we are not going to have the complete picture. We are in an amazing position in Australia where we could be leading the world in renewables, with some of the cheapest power in the world, if we play this right.
“We need as much storage as possible. By having solar and a battery solution, consumers are securing their energy future and not being impacted by world geopolitics, and the decisions of government and big energy retailers. Some of Australia’s biggest businesses are onto this, but we are still waiting for the government to catch up.”