Shutting down Australia’s dirtiest coal-fired power plants as soon as 2017 would have a “negligible” effect on electricity prices, a new report has found.
The analysis, by energy and emissions market advisory firm RepuTex, models the introduction of new legislation which would see emissions-intensive generators – like Victoria’s Hazelwood, Loy Yang A, Loy Yang B, and Yallourn – bid competitively for the cost of closure of their plant.
This cost would then be paid for by power stations that remained in operation, proportional to their carbon emissions.
The report found that removing a brown coal generator in 2017-18 would lead to just a 3 per cent increase in the average annual wholesale pool price for electricity, or just $2.20/MWh to $3.00/MWh, depending on the size of the generator retired.
For residential electricity bills, falling network costs may completely offset any cost impact of the new policy, with retail energy prices expected to fall out to 2020.
The policy plan – initially proposed by ANU academics Frank Jotzo and Salim Mazouz, and potentially adopted by Labor under its new policy – would help to cut emissions from the electricity sector, but would do so without the use of public funds, and without a carbon price.
Incentivising the closure of brown coal power plants would also help drive the decarbonisation of the NEM to meet the government’s 2030 emissions reduction target, and to address the oversupply of generation capacity in the market.
“Unlike the period of climate policy development from 2007 to 2013, which took place while distribution and transmission costs were increasing, we are now likely to see downward price pressure and greater competition over the next 12 months,” said RepuTex’s associate director of research, Bret Harper.
“That dynamic means it is a good time for new policy – policymakers have a window of opportunity to drive reform with minimal cost to consumers,” he said.
© 2016 Solar Choice Pty Ltd