Business Electricity Prices in Perth & Western Australia; What Can Industry Expect?

Thursday, May 16th, 2024

As WA’s largest electricity grid and market undergoes upgrades and restructuring respectively, businesses across many industries are feeling the bill shock of higher electricity rates. Exacerbated by one of the highest demand periods for electricity in WA’s history, the state’s wholesale electricity prices have doubled the national average. Struggling sectors such as agriculture, food processing, hospitality, manufacturing and small business owners operating on slim margins have been at risk of business failure due to this increased cost of doing business.

What are the local reasons for the increase in business electricity prices?

Electricity supply affected by coal shortages

Globally, coal makes up around 27% of energy supply and 27.4% of WA’s largest energy grid, the South West Interconnected System (SWIS). Coal supply shortages directly influence the wholesale cost of electricity and taxpayers have already contributed to the $40 million bail-out of coal mines in Collie. A total of $220 million has been pledged to further prop up these foreign-owned mines until 2026 to provide a stable and reliable electricity supply.

Increased demand for electricity and renewables

Driving electricity prices higher, demand is projected to soar and with the integration of renewables, the SWIS requires an urgent upgrade. The Australian Energy Market Operator (AEMO) has forecasted electricity demand to increase by at least 5.7 TW hours and potentially up to 12.2 TW hours over the next 10 years, requiring 51.1 GW of new generation and capacity. Electricity prices include transmission and distribution plus market operating costs. With around 4000 kilometres of additional transmission to be erected by Western Power and more solar battery storage coming online, electricity consumers are helping to foot the bill for long-term stability.

Lack of effective energy policy and investment

As the cost of decarbonisation and the growing pains of providing a secure energy supply are taking a toll on WA businesses, many believe the Government have passed on the cost without effective transition policies and a lack of investment in green solutions. With the plan to shut down coal by 2029, the consensus is that WA will need more capacity from renewable energy projects to replace coal. This presents a serious problem for energy security, reliability and affordability that consumers have been promised.

What can industry and consumers expect in the future for business electricity prices?

Despite the gloomy forecast, significant renewable energy projects are projected to help with decarbonisation and provide reliable and affordable electricity. The 2023-2024 budget pledged $2.8 billion to help upgrade the electricity network and fund renewable energy projects. Collie is planned to be the home to one of the world’s largest solar battery storage systems, supplying 500 Megawatts (MW) and an additional 200 MW of battery energy storage in Kwinana. Also, privately funded projects such as the Merredin solar battery project with 400MW capacity and the Kojonup Wind Farm with 150MW capacity have received approval. Most of these projects are expected to be online by the end of 2025/2026, provided Western Power has the capacity and resources to facilitate the expected timeframes. The coal supply also looks more positive for 2025/2026 with stockpiles expected to meet consumer demand. Hopefully, this translates to cheaper business electricity rates in 2025/2026 and provides some relief.

SOURCES