The 2022 Energy Crisis: horizontal and vertical impacts of policy interventions in Australia’s National Electricity Market

Working Paper
Change log
Simshauser, P. 

The war in Ukraine and the associated 2022 energy crisis has had far-reaching effects with seaborne prices for coal and gas reaching multiples (5-6x) of their historic averages. While Europe was the epicentre, countries as far away as Australia were impacted. As a major exporter of coal and gas, domestic markets are linked to seaborne prices. Consequently, forward prices for 2023 delivery in Australia’s National Electricity Market surged from ~$48 in 2021 to $156/MWh in 2022 at one point peaking at $247/MWh. Household electricity tariffs were set to in-crease by 11% in 2023 and 35% in 2024. In late-2022, the Commonwealth Government intervened by setting fuel price caps of $125/t and $12/GJ for coal and gas, respectively. Given an estimated market heat rate of ~8.2GJ/MWh, forward prices reduced to ~$105/MWh. In this article, price increases before- and after- policy interventions are analysed. 2024 tariff increases after policy intervention are forecast to increase by 16.5% (cf.35%), benefiting all customers. State Government hardship policy remains vitally important, however. Underlying levels of fuel poverty in 2024 are forecast at 12.1% pre-policy, and 6.7% after policy intervention, with State-level hardship policies making the larger (3.2 percentage point) contribution to this result.

Electricity markets, energy policy, fuel poverty
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