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Report on impact of the Renewable Energy Target on power prices

19 Feb 2014

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The Small-scale Renewable Energy Scheme (SRES) will have a zero net cost impact on household power bills, according to an analysis released today by the REC Agents Association (RAA), a national industry body representing companies that trade in renewable energy certificates.

The cost of the SRES, which helps families install solar panels and solar hot water systems, is expected to halve over the next two years to less than 1% of a power bill. The reduction in wholesale electricity prices delivered by the SRES cancels out any related cost increase that gets passed through to customers.

“This analysis destroys the myth that the Renewable Energy Target is a major driver of soaring power bills”, said Ric Brazzale, President of RAA. “The Renewable Energy Target is low cost and high achieving. It must be maintained to finish its job.”

“The Small-scale Renewable Energy Scheme deserves a gold medal”, said Fiona O’Hehir, Vice-President of RAA. “It has helped 5 million Australians cut their power bills by installing solar and has created 15,000 jobs and will do so at zero cost to households or the Federal Budget. That is an extraordinary achievement.”

The RAA analysis, undertaken by Green Energy Markets, uses Australian Energy Market Commission data to show the make up of power bills and the contribution of the two parts of the RET, the SRES and the Large-scale Renewable Energy Target (LRET). The analysis is a significant, early contribution to the RET Review, announced by the Government on Monday. Cost will be a major focus of the RET Review.

Key findings from the RAA analysis are:

     The cost of the Renewable Energy Target that gets passed through to residential customers currently amounts to a modest 1.12 cents per kilowatt hour (kWh) or 4 per cent of the average residential electricity bill.

  •      The cost of the SRES currently accounts for 0.54 cents per kWh or 2 per cent of a customer’s bill and is expected to more than halve over the next two years to account for less than 1 per cent.
  •      The RET puts downward pressure on wholesale electricity prices and as a result wholesale prices are considerably lower than expected. The reduction in the wholesale price due to the RET is estimated to be 0.67 cents per kWh.
  •      In the case of the SRES the reduction in the wholesale price cancels out the future cost increase that gets passed through to customers.

“RAA’s analysis shows regulated transmission and distribution cost has been the biggest driver of rising power prices to date and is expected to be the major contributor to rising power prices in the future”, said Mr Brazzale.

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