The increase in electricity prices in NSW and across the national electricity market (NEM) caused by the closure of Hunter Valley’s Liddell Power Station in April 2023 is a lesson the government must learn about the future of Australia’s energy market. The next coal-fired power plant scheduled to end operations, Eraring, must not be allowed to close without a like-for-like baseload replacement in place.
The federal government has proposed the following referendum question for voters to answer:
Liddell’s closure increased power prices
Towards the end of its life, Liddell was still producing the equivalent of 6,000 gigawatt-hours (GWh) of electricity per annum: enough to power around 750,000 homes in NSW. Institute of Public Affairs research has warned that removing this supply from the market will ‘result in higher power prices and lower generation reliability’ and:
will not only create sustained higher prices for New South Wales households and businesses, but the contagion effect will increase demand and prices in Queensland in particular.
A July 2023 report by the Australian Energy Regulator (AER) confirmed the IPA’s analysis when it stated:
Average NEM prices did increase from the preceding quarter in mainland regions. This reflected higher demand, a seasonal decrease in solar generation, and a reduction in total coal capacity offered – partly due to the exit of Liddell power station in April.
In the June quarter of 2023, average wholesale electricity prices increased by 38% in NSW and 21% in Queensland. Due to the interconnectivity of the NEM, the price implication of Liddell’s closure is not limited to just the state of NSW.