Australia's eastern seaboard is in the grip of an energy crisis, with wholesale electricity prices soaring and supply shortages becoming frequent. Federal Energy Minister Chris Bowen has blamed the previous Coalition government for leaving an energy system "ill-prepared" for today's challenges, while the Coalition in turn criticises the "inexperienced" Labor administration.
The market's complexity adds to the problem. Wholesale electricity prices are published every five minutes, but the gas market remains opaque. Generation costs account for only about a quarter of an average household bill, according to the Australian Energy Regulator's benchmark, the default market offer. Two bodies set standard prices: the Victorian government for its state, and the Australian Energy Regulator for south-east Queensland, New South Wales and South Australia. Consumers paying above the default offer can switch retailers for a better deal.
Last month, the regulator indicated the default market offer would rise by up to 18 per cent in some regions. New South Wales households could face increases of between A$119 and A$227 over the year, South Australia around A$124 more on average, with Queensland in between. Other states may see hikes closer to 8 per cent.
Several factors have combined to create the "perfect storm". Energy prices have been climbing since September 2021 as economies reopened from Covid restrictions, boosting demand while supply remained constrained. Russia's invasion of Ukraine and subsequent sanctions on its oil and gas forced European buyers to scramble for alternative sources, pushing up global prices. At home, Australia's ageing coal fleet – still the largest source of electricity – has suffered breakdowns and reduced maintenance, with about a third of capacity offline in recent weeks. Flooding has also hit coal supply. Winter has further increased demand, particularly in Victoria, where gas heating is widespread.
The convergence of these pressures has left governments and regulators scrambling to shield consumers from the worst of the fallout, though the immediate outlook remains uncertain.
