Why Are Energy Prices Going Up In 2023?

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Energy prices remain sky-high, and bills are a major concern for households and businesses across Australia and Europe as a result of rising demand, constrained supplies, a lack of storage space, and the conflict in Ukraine.

Supply problems are a significant factor, particularly in light of Nord Stream 1’s complete closure, the massive pipeline that transports gas from Russia to Germany. This has significantly decreased the amount of gas that can be transported to Europe, which has contributed to a significant increase in natural gas prices to their highest levels since early March.

In addition to this issue with the supply, Freeport LNG’s Texas facility suffered fire damage, which has reduced the amount of liquified natural gas imported into Europe. 

These supply shortages, combined with the high global demand for energy, are driving up prices for Australian businesses and households. As a result, inflation is on the rise, and recession fears are on the rise.

Increase in the energy prices

The price of wholesale energy has changed over the past few months, following a significant increase in December 2021, prices have been especially unstable in 2022. However, the general trend is upwards.

According to the Australian Energy Market Operator (AEMO), wholesale electricity prices in Australia have increased by a record 141% in the last year. Uncertainty in energy policy and high gas prices are the causes of the increase.

The following factors account for the rise in electricity prices across Australia:

Russian-Ukrainian War

For Australia, the situation in Russia is bad news because of the ongoing conflict between Russia and Ukraine. Russia is most affected by the war’s effects because it is a significant global energy supplier. Numerous international nations, including Australia, have stopped importing Russian gas and oil. Prices for coal and gas have risen recently because of the competitive supply of oil and gas from other nations.

Given that coal accounts for 70% of Australia’s electricity, price increases will impact Australian households and the country’s economy.

Higher cost of transportation

Coal and gas are two of the main fossil fuels exported from Australia. The price of transportation is rising across Australia. These fossil fuels raise the cost of electricity because they must be transported to produce electricity from coal, gas, and oil. The cost of domestic wholesale energy has risen as a result, as depicted by iSelect electricity providers Melbourne.

Unscheduled outages at coal- and gas-fired power plants

There are some unplanned outages caused by maintenance on aging facilities, and some coal-fired and gas plants aren’t operating at full capacity as a result.

Harsh weather conditions

The most recent flooding in Queensland and New South Wales had an impact on the supply of coal. The ripple effects of interruptions are lowering output and raising prices. These supply problems have increased the price of coal, but not as much as the oversupply-related price increase in gas.

The cost of electricity per unit has increased because of rising coal and oil prices. This will automatically deter homeowners from using excessive amounts of electricity. Since parts of Australia are experiencing cold waves and it is impossible to survive without electric heaters, the entire winter will be a test.

As a result of its low cost and abundance, coal is a major component of Australia’s energy supply and is regarded as a dependable choice. Even though almost a third of Australian households now cook and heat their homes with electricity, their costs have increased significantly as a result of high gas prices. Their expenses will be affected by this rise in energy prices.

The demand for oil, coal and natural gas worldwide is rising due to a growing population and a limited supply. Prices for oil and natural gas have risen to all-time highs, severely affecting Australian households and businesses. What should we do in this situation to counter this price rise?

Ways to counter rising energy price

Changing our daily routines at home is the first step in the process. Our daily routines have a significant impact on how much electricity we use. Furthermore, by using renewable energy sources in place of conventional ones, we can reduce our reliance on traditional electricity generation processes. Will using renewable energy and changing our electricity consumption habits be a viable solution? Check out how our modest energy-saving initiatives may help to reduce Australia’s high electricity prices.

Energy STAR appliances can help homeowners save thousands of dollars throughout the appliance’s lifetime by using less energy than high-energy alternatives.

Switch to LED lights in place of your old incandescent bulbs

Compared to CFLs and incandescent bulbs, LED lights use up to 75% less energy and have a 25-times longer lifespan.

Plant trees for energy conservation

Reduce your carbon footprint and protect the environment by planting trees and shrubs. Your home receives shade from trees, which lets in less light. It will increase comfort while consuming less energy.

Cut back on your energy usage

You can improve your daily routine to use less energy. One way to reduce energy consumption is to turn off lights and fans when not in use.

Set up solar panels

The best option is solar energy for a variety of reasons. It costs less than coal. Due to the significantly lower cost of solar energy compared to coal and gas, many homeowners are switching to it. Since solar energy is renewable and derives from the sun, we will always have access to it. In contrast, coal is a finite resource that will eventually exhaust itself. Once installed, solar panels produce free, clean energy for you!

Final Words

There are various business energy tariffs available; if you choose the wrong one, your company will overpay for gas and electricity. Additionally, you may be overpaying for up to five years if you sign a business energy contract that locks you in for the duration of the agreement. So it’s worthwhile to compare business gas and business electricity deals online before going for any particular supplier or plan based on the need.