It has been more than a century since Australia began supplying electricity to its local populace. Melbourne was the first city to build a power station, illuminating the city’s streets. At the turn of the century, nearly all streets in Australia were supplied with electric power. And by 1927, Australian households were finally connected to an electric power grid, to step out of the darkness, so to speak, and into the light.
Today, Australians rely on electricity not only for lighting but to power nearly every aspect of their daily lives.
Electricity Price Determinants
The Queensland Competition Authority (QCA), who is responsible for setting electricity prices in Queensland, uses the Benchmark Retail Cost Index (BRCI) mechanism to calculate the regulated retail cost of electricity prices. The yearly BRCI is a function of the change in electricity supply costs over the load costs for the State. Translated to actual consumer electricity prices, this means that consumers pay for four (4) electricity price components:
- The cost to create electricity
- The cost to build and maintain the power lines (transmission cost)
- The cost to build and maintain the network of poles and wires for electricity delivery to consumers (delivery cost)
- The cost to connect, bill, and manage electricity consumers’ accounts (retail cost).
Industry Challenges
Today, the power sector is facing unique challenges. Global fuel prices are at a record high.
The demand for electricity is growing by leaps and bounds. Add to that the increasing environmental adversities faced not only by the nation but by the entire planet. These factors easily compound an industry already beset by capacity demands exacerbated by energy hogs, infrastructure reliability, transmission and distribution requirements, and better environmental performance.
In 2019, Ergon Energy Corporation Limited (Ergon) and ENERGEX Limited (ENERGEX), Queensland’s two distribution companies, had indicated their plan to increase their infrastructure investments over the next five years. They propose to invest around $11.9 billion to upgrade their distribution network infrastructures to meet current and future demands.
Approximately $3.7 billion more will be invested to maintain the existing networks and other operational expenditures. These new investments will maintain the security and reliability of power supply and delivery to customers.
Increase in population
By the end of 2020, Queensland’s population is expected to see a sustained growth rate of 2.4%. Overseas migration will account for 50% of the population growth, natural population increase will be 37%, and interstate migration will account for the rest. The trend will be on the rise over the succeeding years.
Change in customer preferences
Customers nowadays prefer the use of energy-intensive electronic appliances such as mobile cellular phones, water heating systems, air-conditioning units, to name a few. On the other hand, they don’t want to make a deficit deal when it comes to shopping for the best rates and compare electricity providers on different online platforms. The adoption rate of information technologies in the household has increased by 5.9% in the past year. It’s expected to continue its upward trend as more and more households gain access to Internet broadband connections.
Photo Credit: urawa
Never been to Australia, but I’d love to go there one day!
Me too, Kenny!
Dear Tex Freitag, This seems to start out with a statement of dubious veracity: “Global fuel prices are at a record high.” Actually global fuel prices appear to be at an all time low. Gasoline in our part of NJ is $1.77 a gallon and they pump it for you. This is after all the punitive taxes heaped on our gas cost by a rapacious state government. There’s a glut of crude oil world wide. So I beg to differ with the first “Industry challenge.” “OPEC was the major cause of cheap oil, as it refused to cut oil production, leading to the tumble in prices. In the Spring of 2020, oil prices collapsed amid the COVID-19 pandemic and economic slowdown. OPEC and its allies agreed to historic production cuts to stabilize prices, but they dropped to 20-year lows. Apr 21, 2020”. If the first “Industry Challenge” is such a patent falsehood (That’s a “lie” dressed up pretty for for public consumption.) how can I believe the rest of the article? This strikes me as a bit of PR to bamboozle the Aussies about a coming catastrophic increase which will enable the electric service to hire more of their relatives for no show jobs and give executives higher salaries, more benefits. You Aussies ought to look into this before you meekly start handing over more money for the same amount of electric. If one “reason” is a flagrant lie, how about the rest of them? Let’s give a quick glance at the last cost to supply electricity: “The cost to connect, bill, and manage electricity consumers accounts (retail cost).” Theoretically this should be going DOWN because with the advent of computers one staffer can do many times more work than pre computer. Also the new meters are operated from central headquarters, they can be shut off and turned on without having to send a body into the field. I would think technology has REDUCED the number of office employees required and reduced the cost of accomplishing field work like turning on and off meters.