What Electricity Price Rise Should I Enter?

What Electricity Price Rise Should I Enter?

How do I specify electricity price rises (and what electricity price rises do you recommend)? is an article that goes into more detail about entering prices into PVsell. As you can see from the image below, its really easy to enter electricity price rises in PVsell!

We commonly get asked what electricity price rises should be entered.

Our first piece of advice is, by default, assume a 3% p.a. electricity price rise – effectively CPI.

Don’t increase electricity prices by a large amount ongoingly, because if you do you’ll find power prices reach $2.50/kWh – at which point it may become cheaper to light a fire for its light and warmth than to switch on a light and heater! Or more realistically, a PV system would pay for itself in months at those prices, which would effectively mean daytime electricity would become free – i.e. there would be a market response that lowered the price of electricity.

At an absolute maximum, we strongly recommend you keep electricity price rises at or below 5% p.a. in the ‘subsequent years’ input.

Entering a higher rate in the first three years may be appropriate in customer-specific circumstances.

The answer that will result in most sales is to ask your customer “what electricity prices have you experienced recently“? Though the past isn’t necessarily a predictor of the future, it is an engaging question that helps press the ‘pain points’  for customers, and which enables you to honestly enter in a reasonably high value.

We encourage you to enter conservative increases in electricity price rises, AND tell your customer you’ve entered conservative electricity price rises. They are likely to inflate in their mind the savings you’re presenting to them, most likely inflate them to a higher level than they actually are.

In 2017, there was a step-change in electricity prices, largely because of the increase in natural gas prices as a result of Queensland’s new LNG facility. However, some electricity prices are actually expected to fall in coming years, as the market responds by bringing on more generation.

Here’s some extracts of some modelling perfomed by Jacobs: Retail Electricity Price history and projections.

The following chart illustrates that residential electricity price rises are expected to average 6% per year for 4 years in NSW and TAS, 11% in VIC, 7.5% in SA, but only 1% in QLD. However the electricity price decreases over the 2020-2030 decade.

The chart below shows the year-by-year electricity price by state, with reference to 2016 pricing. The important thing to observe here is the predicted steady reduction in electricity prices commencing 2020, before resuming their rise in 2025.

The following chart shows the same information, for a range of customer types. It shows:

  1. SME price rises are very similar to residential price rises, if about 1% p.a. higher in 2017-2020
  2. Commercial elctricitity price rises are significantly higher than residential price rises over the period 2017-2020, and average 4% p.a. in Queensland, 9% p.a. in NSW, 10% p.a. in SA, 14% p.a. in Tasmania, and 15% p.a. in VIC
  3. Industrial electricity price rises are higher again in Queensland, though about the same as commercial price rises in the other states
  4. The price falls will also be larger across the 2020-2030 period for commercial and industrial

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