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Rising energy costs caused by government regulations

Sydney, 22 November 2010

Government efforts to keep Australian energy prices under control are not as effective as they should be, because utilities have no incentive to charge consumers less for their energy usage. This is one of the findings in the new report by Connection Research, Residential Energy Management in Australia 2010. The report uses data obtained from a survey of 2700 Australian households, combined with comprehensive research into energy industry imperatives.

When compared to other developed countries, residential energy prices in Australia are higher than they need to be. Australia until recently had some of the lowest electricity prices in the world, but now has some of the highest. Many are asking why this is so – much of China’s energy is generated with Australian coal, but residential electricity prices there are only one third as high as Australia’s.

Connection Research believes a significant reason for this is the way in which the Australian Government provides capital incentives to energy providers. Energy suppliers, distributors and utilities in Australia are permitted to make profits based on capital investment in their infrastructure. In other words, they have no motivation to reduce cost. This in turn increases residential expenditure. The more they spend, the more households pay.

The Prime Minister’s Task Group on Energy Efficiency is adamant that more investment in the energy sector is exactly what the country needs to combat rising energy prices. While some of the expenditure may go to improving technologies and researching more resourceful methods of distributing power, it is unclear what further incentives will be given to the utilities. When the government says it plans to invest in the infrastructure, it is unclear exactly where it means.

Max Philipson is co-author of Residential Energy Management in Australia 2010, and believes Australian residents are getting a raw deal. “Australian householders are the real battlers in the war on energy consumption,” he says. “Thanks to regulations put in place by the government, they are paying more than they need to, and things don’t look likely to change with all the money being thrown at energy efficiency” Mr Philipson says. The report found that residential electricity usage comprises only 28% of the total consumption in Australia, but the pricing model ensures that the residential sector pays more than 50% the total electrical energy bill for the nation.

The government has announced that it will allocate $100 million to establish a Renewable Energy Venture Capital (REVC) fund, to be administered by the Australian Centre for Renewable Energy (ACRE). At recent public consultation meetings held in Sydney and Melbourne, ACRE was seeking opinion from businesses in how to best invest the fund.

Mr Philipson attended the Sydney session. “There is little understanding on what direction the government needs to move in order to help Australia become a nation that can use energy efficiently, while still affording to do so,” says Mr Philipson. “More of these public forums are definitely needed, and the government needs to listen to the average householder to understand how a solution for everyone can be found.”

For more information about the Residential Energy Management in Australia report contact Cassandra Phillips on +61 2 9467 9833


Connection Research is an Australian market research and analysis company with a focus on corporate and consumer usage of sustainable and digital technologies. Its primary methodology is demand-side research, surveying consumers of technology about usage patterns, attitudes and plans. It operates across four practice areas: Green IT, Carbon and Compliance, Building Industry and Trades, and Community Sustainability.