Australians are being urged to renegotiate their electricity deals over the next three years to make the most of an expected fall in prices.
The Australian Energy Market Commission (AEMC) said on Thursday that electricity prices will fall 6 per cent ($77 a year) by 2024, as a surge in renewables and the adoption of rooftop solar makes our energy cheaper.
But households will only reap the biggest savings if they call their retailer and renegotiate their deal more often, because there’s typically a big difference between the wholesale cost of electricity and what households end up paying for it.
Shopping around becomes even more important when prices are falling, because consumer prices tend to fall more slowly than wholesale prices.
And those who remain on the default market offer will always be the worst off, as this is the highest price that retailers can charge customers.
“Retailers put out really great deals – people sign up but then often don’t renegotiate or find a new deal,” said Jesse Lawson, utilities product manager at Canstar.
“A lot of people at the end of the day end up on a deal that’s not great.”
Why electricity prices are falling
Electricity prices will fall in two of the next three years, according to the AEMC.
Average annual prices will fall $4 over the next year and then rise $19 to $1338 in 2022-23, as the Liddell coal power station in New South Wales shuts down.
But then a surge in renewables generation and large storage projects coming online will push down annual prices by $92 in 2023-24.
“While we have just under 2500MW of generation expected to exit the grid over the next three years, there are almost 5500MW of committed new large-scale generation and storage projects coming online over the same time period,” AEMC chair Anna Collyer said on Thursday.
“This is in addition to 4130MW of new rooftop solar PV capacity, which will also influence prices by lowering demand and through exports.”
That’s good news, because it means the faster-than-anticipated closure of coal plants in Australia isn’t expected to lock in higher prices.
Frontier Economics director Andrew Harpham said the forecasts are reasonable, provided there are no big shocks to the electricity grid.
“The big uncertainty at the moment is that shocks to the system have a bigger effect than they used to,” Mr Harpham told The New Daily.
“When we saw Callide blow up earlier this year, that had a bigger impact on prices than it would have if it happened five years ago.”
Mr Harpham said the “big unknown” for the electricity market is whether the surge in renewables will put the system in a riskier position because there are fewer coal generators to support the grid when things go awry.
But he said prices should continue to fall after 2024 as renewables continue to grow as a percentage of Australia’s overall electricity grid.
How to make the most of lower prices
Canstar’s Mr Lawson said only households that regularly renegotiate their electricity deal will make the most of these lower prices, though.
He told The New Daily customers should aim to renegotiate their deal at least once a year.
“Shop around first before you look to renegotiate,” Mr Lawson said.
“If your current provider can’t match what someone else is doing, then move to a new provider – it’s a really easy process.”
If requested, retailers are required to move customers to new providers within 48 hours.
And households should not experience a power outage in that period.
The government’s comparison website should help you identify the best deals on the market.