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Rising coal prices ‘biggest’ contributor to lifting power prices: report

Around 80 per cent of Australia’s thermal coal is exported, with this level rising seasonally.

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“Black coal generators are producing more power following the closure of several brown coal plants in 2016 and 2017, forcing operators to source more fuel at spot market prices that have risen ‘sharply’,” the report’s lead author Ali Ashgar said.

The benchmark thermal coal price rose to a six-year high of $US120 ($164) a tonne in the July quarter before falling to around $US117 per tonne in the September quarter.

It stated that these prices were boosted by Chinese imports due to a hot summer lifting power demand in the country.

Mr Ashgar said the result of this unexpected jump in thermal coal prices “is that they have to charge more for their power”.

Major generators have lifted their output levels to meet rising peak energy demands.

Major generators have lifted their output levels to meet rising peak energy demands.Credit:Photo: Peter Stoop

Major generators AGL, Origin, EnergyAustralia and Alinta were approached for comment.

The current average household power bill across the east coast is $1636.

“Thousands of megawatts of coal capacity that was offered at $20 to $40 per megawatt-hour of electricity during most of 2016 is now made available for $40 to $60 per megawatt-hour.”

“Since black coal makes up such a large portion of the energy mix, this change in the cost of coal generation is perhaps the most important reason behind the 60 to 100 per cent hike in average wholesale power prices over the last two years,” Mr Ashgar said.

The wholesale power price, the cost of electricity directly from the generators, accounts for around a third of household power bills.

Despite the current high prices, power bills are expected to come down after another spike in the first quarter of 2019. It comes as the government launches its Powering Forward campaign, highlighting its efforts to reduce household power bills, including a standard default power price.

According to the Department of Industry, Innovation and Science September Resources and Energy Quarterly, between 2016-17 and 2018-19, the value of Australian thermal coal exports rose from $22.6 billion to $25.5 billion.

“Australian thermal coal prices have been unexpectedly strong,” the Australian government report said.

Covering energy and policy at Fairfax Media.

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