Chalmers ‘really worried’ soaring power prices will drive businesses to wall

Treasurer Jim Chalmers admits he’s concerned some manufacturers could close in a matter of months as soaring energy prices heap pressure on Australian industry.

Oct 27, 2022, updated Oct 27, 2022
Treasurer Jim Chalmers fears rising power prices, particularly gas, will send many businesses to the wall. (File image)

Treasurer Jim Chalmers fears rising power prices, particularly gas, will send many businesses to the wall. (File image)

National Electricity Market wholesale electricity prices have tripled compared to a year ago as record September quarter rates reached $216 per megawatt-hour, the latest Quarterly Energy Dynamics report shows.

But that figure is down from $264/MWh in the prior three months, when the Australian Energy Market Operator (AEMO) intervened to rein in soaring costs and the Victorian government imposed its own price cap.

Tuesday’s budget warned retail power prices were expected to rise by 56 per cent over the next two years while gas prices would also increase sharply, adding to producer and consumer price inflation.

Chalmers said he understood the pressure faced by Australian industry, adding his government would consider taking further steps to support it.

“I am concerned the pressure on some of our local industries and some of our manufacturers in particular will be too much,” he told ABC Radio on Thursday.

“I am really worried about the impact of high gas prices and high energy prices, on Australians broadly, but particularly on Australian industry – we are seeing local manufacturers and local industry under an extreme amount of pressure.”

But Chalmers stood by the lack of energy price relief in the budget despite calls for the government to pass on some of the money it’s banked from soaring export earnings.

He instead flagged further intervention from industry regulators as being on the cards.

Deputy Liberal leader Sussan Ley said price caps and injecting more supply into the market were measures the government could take.

“There are a whole range of levers that the government has access to, and has had by the way for over five months since coming into government, where they knew this situation was facing them,” she told Sky News.

“I can’t believe that we’re still talking about it now.”

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Greens leader Adam Bandt said a price cap was necessary as the market approach to electricity had failed.

“Even if the government put a limit on gas prices now it would be unaffordable for many businesses, what we need to do is make these big gas corporations that are enjoying huge windfall profits (pay tax),” he told the ABC.

As the economy restarts after the pandemic, rising energy demand is being met by gas-fired power plants and renewable sources – wind, hydro, solar farms and rooftop solar – with coal-fired generation in decline, the AEMO report shows.

An all-time instantaneous renewable generation record of 64.1 per cent was struck on September 18 and grid-scale solar and wind generation reached a new quarterly average record at 4465 megawatts.

But war in Europe and price spikes for coal and gas are firing up electricity prices in an Australian energy grid that’s still dependent on fossil fuels.

East coast gas prices have surged 142 per cent on a year earlier, averaging $26 per gigajoule over the quarter although that figure was below an average of $28.40/GJ in the three months to June.

Victoria’s gas production surged 12 per cent as Longford – which supplies 20 per cent of east coast gas – hit a five-year record for the quarter.

Signalling no respite for energy users, AEMO said market activity showed a generally higher cost of energy rather than short-term extreme prices driven by scarcity.

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