Queensland’s electricity prices doubled between 2007-08 and 2013-14, predominantly driven by increases in network charges which increased six-fold from 2004-05 to 2014-15; accounting for over 95% of the total electricity price increases during the period.

Network charges now account for over half of Queensland’s retail electricity prices. In 2004-05, they only accounted for around 20%. By contrast, generation and retail costs remained relatively stable over that period – but even that is now changing.

In the last two years, Queensland’s average wholesale prices have doubled from $52/MWh to $95/MWh, resulting in the second highest average wholesale prices in the National Electricity Market. Governments do not have a good record forecasting these market changes. In 2016, Queensland’s Productivity Commission review failed to predict these increases, assuming only a 2.1% increase to wholesale prices, rather than the actual 40% increase.

Our electricity networks are amazingly profitable, realising significant returns that outstrip private corporations and generate a hidden tax for the government. By contrast, profitability for many businesses across Queensland is being challenged, frequently as a direct result of spiralling electricity costs.

According to the Australian Energy Regulator (AER), 556 small businesses disconnected in the ‘Ergon area’ alone during the first three quarters of 2016-17. This is on track to more than double the 384 disconnections recorded in 2015-16.

In response to these price increases, farming businesses have been installing energy efficiency measures and renewable energy, and in many cases simply reducing demand. However, energy efficiency gains have been diminished by the increasing costs while demand reduction has also come at a cost – reduced productivity through to farmers simply choosing not to plant a new crop.

Many farmers are now weighing-up options to leave the grid, taking opportunities in advancing technologies and their reducing costs. However, due to irrigation demands, through to the need for continuous power to refrigerate produce, many are looking at hybrids of renewables and new diesel generation. While diesel presents an attractive picture now given its value and reliability, there is future uncertainty on how diesel may be impacted by Australia’s obligation to manage carbon. Not to mention where this leaves consumers who are unable to leave the grid.

The price of uncertainty on agricultural businesses is damaging the sector and the current ‘business as usual’ approach is unsustainable. Queensland’s electricity prices must be set at an efficient level now to promote business growth and employment, and to protect the value in existing electricity generation and network assets.

This article was compiled by QFF as part of its four-part series looking in to how the state’s electricity network can be improved to better service and support the agricultural sector.