It almost sounds like a paradox. Australia is the world’s fifth largest gas exporter and second largest coal exporter. Despite this, the country is currently experiencing massive problems in securing its own electricity supply. It is winter in Australia and temperatures on the south-east coast have fallen to their lowest level in decades. But in many homes, the heaters are still off. The price of electricity has skyrocketed in Australia and many Australians can no longer pay their electricity bills. Now there are also shortages of electricity. The energy suppliers can no longer rule out large-scale power cuts.
Electricity price in Australia rises 115 per cent above previous peak
On the generation side, electricity prices have risen about 115 per cent above the historically highest wholesale price to date. In the state of New South Wales, where Sydney is located, the price in the second quarter was already 300 Australian dollars per megawatt hour. That is the equivalent of about 200 euros. “Australia is experiencing astronomical energy prices right now,” said Johanna Bowyer, an analyst at an energy economics and financial analysis institute.
Supply bottleneck despite own coal and gas reserves
The war in Ukraine and the associated sanctions are driving up the price of coal and gas worldwide. Australia generates a large part of its electricity from these energy sources. Therefore, the high world market prices have a direct impact there as well. However, several coal-fired power plants in the densely populated south-east of Australia failed at the same time during the cold spell. Therefore, despite the extremely high gas prices, gas-fired power plants had to step in to bridge the gap on the generation side. This should not really be a problem in Australia, which has large reserves of both coal and gas.
Most of the coal and gas production sold abroad
Katja Ignatieva, energy expert at the University of New South Wales in Sydney, explains why prices are nevertheless rising massively. “Australia produces enough coal and gas to cover its own needs. But much of the production is sold to foreign buyers through long-term supply contracts and is thus tied up.” That is why exports cannot simply be revoked or significantly reduced. Thus, despite shortages at home, a large part of the production goes abroad.
No solution in sight. Australian Greens reject more coal power
Politicians are arguing about a solution to the problem. Ted O’Brien, energy expert for the Liberal Conservatives, has proposed feeding more coal-fired electricity into the grid in the short term. The Greens, however, oppose this, arguing that it would allow fossil fuel producers to profit from the crisis. Australian Greens leader Adam Bandt said. “Supporting coal-fired power stations is like throwing good money after bad: no amount of repairing these dirty plants will solve the problem.” Instead, the Greens argue for accelerating government investment in new wind and solar plants and creating more storage capacity for them. However, this is not a quick to the acute problem. Australians will have to continue paying high electricity prices until politicians agree on a solution.
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