Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia
Australia’s east coast has been plunged into an energy crisis just as winter takes hold, which will see many people struggle to heat their homes due to soaring gas bills.
Meanwhile, Origin Energy this week confirmed it could not source enough black coal to power Australia’s largest coal plant at full capacity, deepening shocks to the energy market.
The electricity price surge is so dire, small energy retailers such as ReAmped Energy are advising customers to switch energy providers or be hit with much higher bills.
So what on Earth is going on? It has a lot to do with Russia’s war on Ukraine, which has disrupted the global energy market. Sanctions on Russian coal and gas exports mean there’s simply not enough supply to meet demand. As a consequence, the global price of gas and coal has soared.
Why are energy prices are getting so high?
Australia is a net exporter of gas and coal. This means we export most of our fossil fuels overseas. As the global price of coal increases, the cost of generating domestic electricity from coal is increasing.
What’s more, many of Australia’s coal generators are ageing, which means they fail more often. At present, nearly 30% of our coal generation is offline.
The price spike comes as coal plant owners look for the exit. Australia’s largest coal plant, Eraring, has been operating for 35 years. In February, Origin announced it would shut Eraring seven years ahead of schedule in 2025 because renewable energy was impacting profitability.
Origin’s new challenge is securing enough coal to run Eraring at its full 2.8 gigawatt capacity. The problem is set to persist into 2023.
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