Increasing renewables will reshape electricity prices
With more variable renewable energy (VRE), we expect electricity prices to rise in the short term.
Your electricity bill includes the cost of buying energy from producers (wholesale costs), the costs to operate and balance the grids and deliver that energy to you (network costs), as well as costs added by the government to help pay for certain policies and initiatives (government levies). The wholesale price often determines the lion’s share of the retail price, while network costs are a small fraction, but this will change.
The increasing role of renewable energy will have a profound impact on electricity prices, as energy supply becomes intermittent, harder to forecast, and more decentralised. This is a stark deviation from traditional fossil fuel-based capacity, which is easily dispatchable and centralised.
What you will learn:
- The wholesale price often determines the lion’s share of the retail price, while network costs are a small fraction, but this will change.
- Increasing variable renewable energy (VRE) – mostly solar and wind – will reduce the role of wholesale prices, potentially increase government levies, and raise network costs.
- With more VRE, we expect electricity prices to rise in the short term.
- In the long term, there are upside and downside risks to prices, but it would be in the government’s best interest to keep prices low to facilitate the clean energy transition.
Download the full report to learn more.
