Why electricity is going up

Michael Stutchbury gives an account of why electricity prices have been going up, and why a carbon tax would not add to that process as much as people think. Here’s a key section:

Sims's key point is a carbon price won't lift household electricity bills as much as typically figured. A modest carbon price has been estimated to push up wholesale prices by 60 per cent or so, translating into a 24 per cent or so rise in household retail bills.

But a carbon price world shouldn't be contrasted with the old status quo world. Instead, it should be compared with the actual alternative of carbon price uncertainty and the high-cost renewable schemes that are driving electricity bills higher anyway.

A carbon price could actually ease pressure on household electricity bills, assuming we're serious about hitting our target of cutting emissions by 30 per cent on business-as-usual levels by 2020. "A carbon price will see electricity prices increase by less than they would by pursuing a given greenhouse gas reduction target by the current greenhouse schemes," Sims told the committee.

This of course requires the Greens to accept that expensive renewables should no longer be mandated because they cost more than a carbon price to do the same emissions-reduction job. This extends to Gillard's own expensive $400 million "cash for clunkers" scheme which, like the Coalition's greenhouse direct action, shifts the problem on to the budget.

I was also interested to note this earlier part:

The recent surge is mostly driven by "network costs", which will account for two-thirds of the rise in regulated NSW power prices in the five years to 2012-13.

These distribution costs are rising in line with increasing peak demand, such as on hot days, and reflect our vigorous population growth and modern prosperity. Three out of every four Brisbane homes have air conditioners, compared with one in four only a dozen years ago.