If the price of electricity rises…

electric tram wires in Melbourne …use less electricity.

The daily Perth newspaper has been running lots of articles about the projected rise in electricity prices in the next few years. At the start of April the price increase was thought to be

10% in 2009-10, with similar annual increases to be phased in over the following six to eight years. [1]

In mid April it was reported that a future emissions trading scheme would increase the price of coal fired electricity generation by about 15%, still cheaper than the current high export price of natural gas (LNG) [2]. This wouldn’t change coal as the fuel of choice for future electricity generation.

Last week the price rise was predicted to be 25%, calculated from an estimate of $30 a tonne for carbon (lower than the current $37 a tonne in the European Union Greenhouse Gas Emission Trading Scheme) [3]. One of WA’s electricity companies, Verve (which is losing money even before a carbon tax), wants

the federal government to compensate power generators or to provide an upfront allocation of permits to cover 30% of emissions. [3]

Economist Ross Garnaut has been commissioned by the federal government to report on how an emissions trading scheme would work. Fortunately he will not be recommending compensation or free permits [3]. Either of these would counteract the point of a tax on emissions. An emissions trading scheme is necessary so that conventional electricity generation which emits the most greenhouse gases becomes more expensive and people will look to other options such natural gas (with 60% less emissions than coal [4]), renewable energy sources, and currently prohibitively expensive carbon capture and storage [5].

At current prices NaturalPower, Perth’s (only) renewable energy option, is 16.67 cents per kilowatt hour for residential customers. Coal/natural gas generated electricity is about 13.9c/kwh, a difference of 20%. Wow, renewable energy cheaper than coal/natural gas generated electricity? If this happened it would mean success from an emissions trading scheme.

Of course these price increases could be avoided by increased energy efficiency, recommended by the Australian Conservation Foundation as the first step in reducing greenhouse gas emissions [6]. The added bonus of reduced monetary costs from energy efficiency doesn’t seem to occur to many. As a student it’s the first thing I think of. The main environmental benefit of going from full-time work to living on a scholarship was I can’t afford all that stuff I used to buy, and sometimes I still miss wanton spending :)

People on lower incomes would be worse off under an emissions trading scheme, they can’t afford renewable energy now, so they won’t be able to in the future. The solution to this is the government reimburse the increase in the cost of electricity to those on lower incomes. A wholesale concession that covers everyone, people on high and middle incomes and business/industry, is not equitable. We need to start paying for the damage we do to the environment, otherwise there will be no environment left.

=^.^=

References

  1. Hodge, Karen (2008) “Price hikes to see cost of power skyrocketThe West Australian, 4 April.
  2. Jerrard & Drummond (2008) “Plan to build more coal power stations” The West Australian, 17 April, p.1.
  3. MacDonald, Kim (2008) “Carbon tax will add 25pc to electricity bills: Verve” The West Australian, 30 April, p.1.
  4. McNeil, Ben (2007) “An addiction that fouls the airThe Sydney Morning Herald, 16 January.
  5. Warren, Matthew (2007) “BP eyes $2bn clean coal plantThe Australian, 21 May.
  6. Australian Conservation Foundation (2007) Consumers’ Guide to Going Carbon Neutral. Melbourne: ACF.

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