South Australians Urged to Consider Blackouts for Cheaper Power Amid Rising Utility Costs

With yet another power price hike in the works this year, an energy technology expert warns South Australians may need to consider tolerating the occasional blackout for the sake of cheaper power.

The ABC reported over the weekend that a SA government energy scheme, designed to shore up supply during moments of critical demand, will add new costs to household bills as it collects about $44 million this financial year.

But Australian power prices this century have already skyrocketed well beyond affordable levels for many. After generally tracking close to consumer price trends from the 1980s to the mid-2000s, they leapt 117 per cent between 2008 and 2018 alone and have continued to rise despite a recent fall in the default market offer.

Price hikes have been mostly due to network costs, or the cost of transporting power, with operators investing heavily in infrastructure — sometimes over-investing — which boosts a network's value and what owners can charge customers.

Daniel Rossetto is an expert in global environmental and energy commodity markets at Adelaide University.

He called upon Australians to have a conversation about accepting less reliable energy, or making concessions elsewhere, if it wants to bring down utility prices with any meaningful impact.

He said there were "basically three major policy priorities" when it came to energy, and it was currently impossible to achieve all three for electricity.

"One is affordability, another is sustainability and third is security, or reliability," he said.

"One of the most important reasons why electricity bills continue to go up and people just can't seem to find a way to get them to go down is essentially because we demand the highest standards of reliability.

"Nobody in Australia, with the exception of maybe a few rural communities and so forth, is prepared to tolerate any downtime."

This means money has been poured into the network so it can withstand short periods each year when supply needs are at their peak, for example, during extended heatwaves.

These significant investment costs are paid for by consumers because a grid operator's income comes from earnings linked to the value of its network, with tariffs approved by official regulators.

"We end up prioritising reliability by default, and sometimes also sustainability with renewables and things like that, without necessarily thinking about affordability," Dr Rossetto said.

"But are we prepared to tolerate a slightly slower pace of decarbonisation on electricity in the name of less expensive energy? Or are we prepared to take little more outage time in exchange for lower prices?"

FERM in effect

SA's new Firm Energy Reliability Mechanism (FERM) came into effect on July 1 and is designed to deliver extra electricity into the grid when required and stop wholesale prices spiking during periods of peak demand.

The ABC understands it will add $23 to the average household bill in 2026-27.

Energy Minister Tom Koutsantonis said $20 million raised by FERM would underwrite six new battery projects worth $2.2 billion that would provide eight hours of storage.

He said other money would go towards keeping AGL's Torrens Island 386-megawatt gas-powered generator online to at least mid-2028 despite it originally being scheduled for closure mid-2026.

This was because the EnergyConnect project to add another interconnector between SA and the eastern states in New South Wales had been delayed.

"If we didn't have this system in place and Torrens Island closed, or it wasn't underwriting the batteries, you would have shortfalls in generation," Mr Koutsantonis told 891 ABC Adelaide.

"You'd either have brownouts, or extraordinarily high prices to be incented into the market to get more generation in."

Default market offers, or the benchmark price for retailers charging customers, are set by the Australian Energy Regulator and come with a ceiling.

SA Water hiking bills

South Australians are also facing a $112 hike in their government-owned SA Water bills this financial year due to what Housing Infrastructure Minister Nick Champion described as a network investment.

SA Water's water and sewerage bill for the average metropolitan household will increase by 3.5 per cent plus Consumer Price Index (CPI) from July 1, or about $28 per quarter.

Average household bills already rose by 232 per cent between 2001-02 and 2017-18, with the former Labor government attributing increased costs to infrastructure spending, although an inquiry found they had been artificially inflated because assets had been overestimated by the government in 2013.

Mr Champion said the state had to keep investing in the water network for it to remain functional, especially with new housing builds.

"The last thing I want is for people to have water pressure issues, or for them to not be able to get a sewer connection for new housing," he said.

Dr Rossetto, who also hosts the Climate Mundial YouTube channel, said it was "all well and good to say we've got a big infrastructure build so therefore water prices have to go up".

"But there ought to be a question about trade-offs, because we don't often hear a politician say, 'If the community expects there to be a reliable, inexpensive water supply, we need to compromise on a couple of other areas, and are we all ready for that?'."